Singapore Opens Central Bank Gold Vault With Room for 500 Tons

The Monetary Authority of Singapore rolled out a gold vaulting service for foreign central banks and sovereign entities on Tuesday, with an initial capacity of 500 metric tons. Unlike the commercial vaults already operating in the city-state, including one at the high-security freeport near Changi Airport, this one is run by the central bank itself. It gives foreign monetary authorities a sovereign custodian option for their bullion.

Singapore is stacking incentives behind the push. It plans tax exemptions for wholesale gold services including vaulting, refining, recasting, testing and broking. Back in June it unveiled plans for a physical gold clearing system to settle bullion transactions locally, with operations targeted for the first quarter of 2027.

The competition is steep. London vaults held about 9,850 metric tons of gold at the end of October, counting commercial and central bank storage, and rival Hong Kong is expanding its own gold storage and clearing infrastructure with China next door. Juerg Kiener, chief investment officer at Swiss Asia Capital, told CNBC that Singapore is not well-positioned to take on Hong Kong in gold-backed trade, since China is the biggest gold market and Hong Kong is its window to the world. He suggested Singapore carve out a niche in physical storage for financial institutions instead.

Central banks are the target audience, and they've been rethinking where their gold sits. Shaokai Fan, global head of central banks at the World Gold Council, said a sovereign-run vault is rare in the gold market and central bank community, and noted that over the past 12 months several countries have diversified their gold storage, with many more planning to, according to a council report published in September. He pointed to Singapore's political stability, legal framework and air connectivity as selling points.

Nikolas Kavalis, managing director at Metals Focus, called the sovereign vaulting service an important addition to Singapore's gold infrastructure but said storage alone won't build a functioning bullion market. The real hurdle is liquidity and trading activity against London, the dominant global over-the-counter gold market, and neither Singapore nor Hong Kong has yet built that depth, he said. Gold flows have already shifted over the past decade, with Asian refineries and regional demand letting bullion move directly between Asian markets instead of routing through London and Switzerland.

Officials aren't framing it as a fight. Deputy Prime Minister Gan Kim Yong said Tuesday that it's not a zero-sum game between Singapore and Hong Kong, and that the vaulting service gives central banks another place to diversify reserves. Fan said he sees the two centers complementing rather than competing with each other. Fan also summed up the bind: attracting volume takes liquidity, and getting liquidity takes volume.