The flow of gold from West to East has been well documented in the last year as ETF outflows left holdings at levels not seen since 2008, whilst physical demand in the East continued to break records.
However, one area in which it has not been well-documented is the flow of gold from Western gold investors to storage in East Asia, or specifically, Singapore.
In 2012 we ran a poll asking you where you would like to store your gold. An overwhelming number of you told us that you wanted to store your gold in Singapore.
As I wrote all that time ago:
When we originally posted the survey we unanimously expected Switzerland to be chosen by the majority those surveyed as the location of choice. However this wasn’t the case, Singapore took nearly 39% of the votes, followed by Switzerland with just over 35%. Lagging behind, the US and Hong Kong took around 11% each whilst the UK brought up the rear with 5%.
Whilst Singapore took nearly 40% of the votes. It now accounts for 57% of the gold owned by The Real Asset Company’s gold investors.
Since opening our gold vault in Singapore, several competitors and banks have also woken up to the benefits of offering gold bullion storage in the sovereign-city state. Not only is the country well positioned for the major gold markets of India and China, but the West wants in as well.
For instance, last year a slurry of big banks announced that they too were large vault operations in Singapore. Most notably was Deutsche Bank’s opening of a 200-tonne vault for gold bullion storage.
Why is it increasing in popularity?
Unlike other countries which also offer physical gold storage and trade, the country aims to capitalise on the growing bull-market for sound investments and safe-havens away from fiat money. They have identified an increasing demand and intend to capitalise on it.
At the time of writing the tiny country holds approximately 1-2% of the world’s physical bullion. The government has made it clear that they wish to increase this to 10% over the next few years.
They intend to this by giving gold investors what they want, that other countries are simply unable to.
For many of our clients the appeal of Singapore comes from the fact that it is a stable and safe jurisdiction that is currently taking a positive approach to economic freedom.
As I explained back in 2012:
Banking in Singapore offers the highest confidentiality, with laws protecting individuals’ privacy whilst allowing for banking information to be provided to foreign authorities where crimes are being investigated.
Changes in banking secrecy are likely to continue and get more complicated thanks to the US’ FATCA – the Foreign Account Tax Compliance Act. The Act requires foreign financial institutions to send details to the IRS of US clients who hold more than $50,000 in a foreign bank.
Should the foreign financial institution choose to not disclose details to the IRS, then they will suffer a 30% US withholding tax on its and clients’ income and gains, as of January 2014. Rumour has it that other countries such as China and Switzerland are looking to ‘piggy-back’ onto the back of the Act.
The fact is, for Switzerland and many other countries, the US is the scary bully who you give your lunch money to. Singapore is the nerdy kid who’s too bright for the bully and can outwit him.
Singapore does not tax its citizens and companies on foreign earnings on a worldwide basis; therefore it pays little attention to their companies’ bank accounts in foreign lands. The motivation for the Singaporean authorities to disclose bank accounts in their domain is, therefore, non-existent.
Countries are also not allowed to launch ‘fishing expeditions’ into account holders’ details in Singapore, foreign authorities must have apparent links and good (suspected criminal activity) reasons to want to investigate someone’s account holdings.
As your investment business increasingly becomes the government’s business it is understandable that individuals are looking for alternatives. But the Singaporean government are onto a niche here and are fully embracing their new-found ‘Swissness’, they seem to care very little if the bully in the playground wants their lunch money, because he ‘aint getting it.
Singapore’s Freeport free-trade zone allows non-residents to store the gold bullion without paying tax or signing customs forms. This offering of client confidentiality is an attractive prospect for those wishing to hold their gold out of their country’s jurisdiction, particularly countries whose governments are slowly driving themselves bankrupt and looking to find sources of income elsewhere.
In October 2012, as we looked into launching our Singapore gold vault, the government eliminated the 7% tax that had previously been placed on all bullion purchases. Whilst one wouldn’t have paid that when storing gold in the Singapore Freezone anyway, this step taken by the government indicates how open they are to gold investment and the gold market as a whole.
Further the above, Singpore’s government does not ask questions about your gold when you decide to take it in and out of the country. According to the Sovereign Man blog, ‘customs doesn’t even require to know the beneficial owner of your precious metals when they pass through the airport. Try pulling that off in a place like the United States.’
We store our gold with Malca Amit in Singapore. They are one of the oldest logistics and vaulting companies in the world. They are known for their professional approach to transporting and storing precious goods in the most secure facilities possible. For instance, armoured vehicles are apparently used to transport gold from the airport to their segregated vault in the Freeport facility.
Singapore’s success is personal
Whilst we might have been surprised by the initial success of Singapore when we ran our poll all those months ago, we have not been surprised since.
The reasons outlined above make Singapore, when compared to other jurisdiction are clear winner when it comes to respect for investors, savers and companies trying to get on with their business.
Don’t get me wrong, I also thing London and Geneva have their benefits for gold storage. But it is obvious why Singapore is the most popular choice on our gold investment platform.
Ultimately where you store your gold comes down to preference. For some clients I speak to, they prefer to store closer to home – which is often London and occasionally Geneva. I would suggest, as I would with your investments, diversification.
The main thing to remember when you are choosing which vault location you would like to store your gold in is that the fact that you have decided to invest in gold, already sets you head-and-shoulders above the majority of Western investors. After that, it comes down to personal preference.
Enjoy our comment? Get it all delivered to you in our fortnightly newsletter…
