Singapore to establish over-the-counter gold clearing system, central bank vaulting by end-2026

[SINGAPORE] An over-the-counter (OTC) gold clearing system is among initiatives that will be rolled out this year to boost Singapore’s role as a trusted global node for capital, investment and physical trade flows.

The Monetary Authority of Singapore (MAS) will also introduce central bank gold vaulting services by October, said Deputy Prime Minister Gan Kim Yong on Monday (Jun 15) at the Asia-Pacific Precious Metals Conference.

DPM Gan noted that beyond MAS’ vaulting services, some foreign central banks and sovereign entities may be keen to actively manage their gold holdings.

Therefore, MAS will extend gold accounts to a select group of Singapore-based bullion banks to better provide gold-related services and liquidity to these entities, he said.

Separately, the central bank will remove the 5 per cent cap on physical investment precious metals under the tax incentive schemes for funds, with further details to be shared by September, noted DPM Gan.

“This will allow eligible funds and family offices to diversify their portfolios more flexibly, and support greater capital deployment into physical gold in Singapore,” he said.

The measures unveiled by DPM Gan follow MAS and the Singapore Bullion Market Association’s announcement in March that they are working to deepen the Republic’s gold-trading infrastructure.

Gold’s breakneck rally last year was underpinned by continued central bank buying and geopolitical risk hedging. The yellow metal peaked near US$5,500 an ounce in January before retreating in March, as its safe-haven appeal gave way to liquidity needs amid the Middle East conflict.

Building market infrastructure and capabilities

Asia accounts for around 70 per cent of annual consumer gold demand and is a key driver of consumption and investment flows. DPM Gan however noted that the region’s gold market infrastructure “has not fully kept pace with the shift in demand”.

He added that trading, liquidity and price discovery remain concentrated in established markets such as London and New York.

“This creates a practical gap in the Asian time zone,” said the deputy prime minister. “Market participants are seeking more efficient ways to access liquidity, manage risk and settle transactions during Asian trading hours.”

He noted that beyond yield and liquidity, investors are searching for locations where assets can be held “safely, transacted reliably and governed transparently”.

The Republic’s OTC gold clearing system will be established by the Singapore Exchange (SGX) this year, with interbank trading expected to build up from 2027, noted DPM Gan. OTC clearing and settlement refers to capturing, netting and settling trades on a ledger system.

He added that the clearing system will support both large bars and kilobars for standardised settlement during Asian trading hours.

DBS, Deutsche Bank, ICBC Standard Bank, JPMorgan, OCBC and UOB signed a memorandum of understanding with SGX on Monday to participate as clearing members.

Amid the city-state’s gold hub push, DPM Gan noted that Singapore will align its market practices with relevant global standards to “reduce friction for participants across markets, while preserving flexibility to accommodate differences in market structures”.

These include standards under the LBMA Good Delivery framework for large bars, as well as delivery and settlement standards adopted by major exchanges such as the Chicago Mercantile Exchange and Shanghai Gold Exchange for kilobars.

He added that banks and market intermediaries “play an important role” in bridging markets through products and services that enable participants to transact efficiently across locations and bar formats.

Gold-related capital market products

The development of gold-related capital market products has the potential to “deepen liquidity, strengthen price discovery and improve the efficiency of gold as a tradable financial asset,” noted DPM Gan.

In the light of this, SGX is exploring a physically deliverable gold futures contract to enhance price discovery and risk management, he said.

SGX had previously launched a 25-kilobar gold futures contract in October 2014 but this was subsequently withdrawn in 2018, due to low trading interest.

DPM Gan said that banks are also keen to develop the use of tokenised gold within Singapore’s market. This follows DBS’ announcement on Jun 11 that it will launch tokenised gold for retail customers in the second half of this year.

“We are not seeking to replace established centres of gold trading and liquidity,” said the deputy prime minister. “Instead, Singapore can serve as a trusted node in the global gold ecosystem – connecting regional demand with global liquidity, and supporting market activity during Asian hours.”