(Mike Maharrey, Money Metals News Service) A Singapore-based startup hopes to challenge New York and London’s dominance of the gold market.
Abaxx Exchange recently launched a physical 1-kilo gold contract. It will be denominated in dollars and deliverable in Singapore. It will be the first and only physical gold futures contract in Asia.
Singapore Bullion Market Association head Albert Cheng told the Financial Times that the country has the potential to compete with London.
“But we need the infrastructure to bring in more flows and the physical gold contract can help with that.”
Abaxx Exchange reportedly wants to eventually offer 24/7 trading pending regulatory approval.
The startup company has raised over $100 million from investors, including BlackRock and CBOE Global Markets.
Abaxx Exchange CEO Josh Crumb called the gold market, with London serving as the center for physical trading and New York as the futures hub, “dysfunctional,” telling the Financial Times that infrastructure hasn’t kept pace with how gold is traded.
“Our view is that Asia ex-China needs a gold market, to manage the physical gold, that is not reliant on New York and London,” Crumb told the FT, citing “geopolitical” risks in the U.S. and UK.
He also pointed to the need for a more robust physical gold market in Singapore to meet the needs of commercial gold consumers, including jewelry manufacturers.
“In Singapore, people feel like they are not well served by the existing market. The actual real physical demand is kilo bars going into Asia.”
Last year at the Asia Pacific Precious Metals Conference, World Gold Council head of Asia-Pacific and global head of central banks Shaokai Fan, noted that the “center of gravity” of the gold market has shifted to the East. Gold consumption by emerging market economies is rapidly rising, and the majority is concentrated in Asia. Singapore’s proximity to this growing market sets the city up to become the “fulcrum of this new balance.”
“Singapore is poised to lead the gold market in the future.”
Singapore is also close to 25 percent of the world’s gold mining supply. China, Australia, Indonesia, the Philippines, Papua New Guinea, and Laos are all significant gold producers.
Fan said there is a need for an official gold reserve center in the East, especially with growing concern over geopolitical tensions and the West’s propensity to use economic sanctions as a weapon. This makes some countries wary of storing their gold in New York or London, where it could be frozen or seized if their governments raise the ire of Western leaders. Fan said Singapore could become a “truly viable alternative” to those cities as a hub for gold vaulting.
Singapore has a stable government and a friendly tax environment. Fan said it has also taken several steps that increase its attractiveness as a gold hub, including tax reforms.
“The removal of GST on investment gold in Singapore, the establishment of good delivery refineries here, has bolstered Singapore as a leading hub for gold trading.”
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
