SGX Lists 25kg Gold Contract
Expected to go ‘live’ as early as September 2014, the Contract will introduce centralised trading and clearing of a physically-delivered gold contract in Singapore. With this Contract, global suppliers of gold are able to connect more effectively with their Asian clientele. The Contract comprises a series of six daily contracts, which will give physical users access to competitively-priced kilobars. The Contract is the result of a successful collaboration between International Enterprise (IE) Singapore, Singapore Bullion Market Association (SBMA), Singapore Exchange (SGX) and the World Gold Council. Representing the SBMA in this collaboration are four bullion banks, namely J.P. Morgan, Standard Chartered Bank, Standard Merchant Bank (Asia) Limited and The Bank of Nova Scotia. (Please see Annex for factsheet with details of the Contract).
Commenting on the significance of the announcement, Minister Lim said, “With our close proximity to both demand and supply in Asia, I believe that Singapore is wellplaced to support the bullion industry, with substantive mutual benefits. Our vision is that Asia can be a driving force to continue the growth of the bullion industry, and be a global leader in areas fundamental to the demand and trade in this region.”
Asia’s strong demand for physical gold is the key driver for the implementation of the Contract. The World Gold Council reports that, while global consumer demand for gold has increased nearly 50% over the last decade or so, demand for gold in South East Asia has increased by over 250% during the same period. The Contract is another significant development for Singapore following its exemption of Goods and Services Tax (GST) on investment precious metals (IPM) in October 2012. Metalor Technologies Singapore Pte Ltd (Metalor Technologies) is also officially opening its world class bullion manufacturing and refining facility in Singapore tomorrow, 26 June 2014. These initiatives are key building blocks in the country’s drive to become a regional precious metals trading hub.
Albert Cheng, Far East Managing Director at the World Gold Council said, “The global gold market continues to shift from west to east and Singapore’s ambitions to become a gold hub reflect this trend. Since its inception, the World Gold Council has worked with key market participants to drive the development of this market. We believe this innovation will contribute substantially to the creation of a more efficient market capable of satisfying growing local demand for gold in a transparent and trusted manner – it will provide the foundation for further development of the gold market throughout South East Asia.”
Gina Lim, Trade Services and Policy Group Director, IE Singapore, said, “It has been a most rewarding journey with the gold industry, from when IE Singapore first engaged with them in 2011. Starting with the exemption of GST on investment precious metals and attracting Metalor to set up its refinery in Singapore, this unique wholesale kilobar gold contract is another milestone achieved in collaboration with the industry. IE Singapore had the privilege of working with key players like the World Gold Council, SBMA, the major bullion banks and SGX to enable this outcome. This Contract will provide the industry with a more efficient and transparent market, and enhance Singapore’s infrastructure for precious metals trading.”
Ng Cheng Thye, President, SBMA, added, “This Contract will help to develop the gold market in South East Asia by creating greater liquidity and opportunities for growth. With a stock and flow of bars guaranteed by the major bullion banks, as well as an exchange open to the key buy-side participants, we believe this will encourage further products to be developed in South East Asia, which are based on this kilobar contract model.”
Muthukrishnan Ramaswami, President, SGX shared, “SGX is pleased to support the consortium’s efforts to develop Singapore as a global trading hub for gold. SGX’s market place will enable the trading and clearing of the Singapore Kilobar Gold Contract and establish a fully transparent price discovery mechanism for gold in this region. The new contract illustrates SGX’s ongoing commitment in fostering greater market transparency in a well-governed and regulated framework within the Asian time-zone. ”
Since the exemption of GST on IPM in October 2012, trade in gold has risen by 94% year-on-year between 2012 and 2013 from S$18 billion to S$35 billion.