Singapore opens gold vaults for central banks in bullion hub push

Singapore’s central bank launched a gold vaulting service for foreign monetary authorities and sovereign entities on Tuesday, with an initial capacity of 500 metric tons, CNBC reported.

The Monetary Authority of Singapore also plans to introduce tax exemptions for wholesale gold-related services including vaulting, refining, recasting, testing, and broking. In June, Singapore unveiled plans for a physical gold clearing system to facilitate the settlement of bullion transactions in the city-state, with operations expected to begin in the first quarter of 2027.

The moves mark Singapore’s most aggressive push yet to establish itself as a major bullion hub alongside London and Switzerland, as more gold trading activity shifts toward Asia. The question is whether it is too late.

The competitive landscape

London is the undisputed king of the gold market. London vaults held about 9,850 metric tons of gold at the end of October, including both commercial and central bank storage. That is nearly 20 times Singapore’s initial capacity. London’s dominance is built on centuries of trading infrastructure, a deep ecosystem of refiners, assayers, and dealers, and the London Bullion Market Association’s pricing benchmarks, which are the reference price for gold transactions worldwide.

Hong Kong is also expanding its gold storage and clearing infrastructure, leveraging its proximity to China, the world’s largest gold market. Hong Kong has the advantage of being the primary window for Chinese gold flows, and it has been building out its physical settlement infrastructure in parallel with Singapore.

Juerg Kiener, chief investment officer at Swiss Asia Capital, was blunt about Singapore’s prospects. “Singapore is very late to the party as building up a physical hub requires volume when it comes to trade backed structures,” he told CNBC. “The largest gold market is China and its window to the rest of the world is Hong Kong.” He said Singapore is not well-positioned to compete with Hong Kong in gold-backed trade, though it could carve out a niche in physical gold storage for financial institutions.

Why central bank custody matters

The new facility is different from Singapore’s existing commercial vaults, including the high-security freeport near Changi Airport. It will be operated by the central bank itself, offering foreign monetary authorities a sovereign custodian for their gold.

Shaokai Fan, global head of central banks at the World Gold Council, said this is unusual. “It’s not something that we see happening all that often in the gold market or in the central bank community,” he said. The move comes as central banks increasingly reassess where they store their bullion amid geopolitical tensions. Over the past 12 months, several countries have diversified their gold storage, with many planning to do so, according to a World Gold Council report published in September.

The geopolitical context is hard to miss. The war in Iran has disrupted Middle East trade routes. The conflict in Ukraine has led to the freezing of Russian central bank reserves. Countries that store their gold in Western financial centers are thinking about whether those assets could be seized in a sanctions regime. Singapore, with its political stability, strong legal framework, and extensive air connectivity, offers an alternative that is neither Western nor Chinese. For central banks looking to diversify custody, that neutrality is the selling point.

The chicken-and-egg problem

Nikolas Kavalis, managing director at Metals Focus, said the sovereign vaulting service is an important addition to Singapore’s existing gold infrastructure, but cautioned that storage alone is not sufficient to establish a fully functioning bullion market. The bigger challenge is building sufficient liquidity and trading activity to compete with London, which remains the dominant global over-the-counter gold market.

Fan put it more directly. “It’s a bit chicken and egg because to attract volumes you want liquidity, but to get liquidity you need volumes,” he said. Singapore needs central banks to store gold with it to build liquidity. But central banks will not store gold with Singapore unless there is already enough liquidity to make the gold useful for transactions. The MAS is trying to break this cycle by offering custody services that are attractive on their own merits, independent of trading volume.

Both Singapore and Hong Kong are still developing their local clearing infrastructure, Kavalis noted. Neither has yet established the kind of deep trading ecosystem that underpins London’s dominance. Attracting central bank gold could help Singapore build that liquidity, particularly if bullion stored locally can be mobilized for transactions rather than simply held in custody.

The shift in gold flows

The global gold market has already been changing. Historically, much of the world’s bullion moved through London and Switzerland, where large gold bars were traded or refined before being shipped to Asian markets. The expansion of Asian refineries and growing regional demand have increasingly allowed gold to move directly between Asian markets, reducing dependence on European trading centers.

Gold prices have been on a strong run. Spot gold has gained more than 30% this year, driven by central bank buying, geopolitical uncertainty, and expectations of Federal Reserve rate cuts. The gold market is one of the few asset classes that has consistently risen through the volatility of 2026, and the competition to be the trading hub for that gold is intensifying.

Kavalis said Hong Kong might have an edge in serving central banks and institutions whose financial activities are closely tied to China, while Singapore could appeal to those already active in its banking and financial markets. Fan sees room for both. “We see the two centers complementing each other and not really competing with each other,” he said.

Singapore’s Deputy Prime Minister Gan Kim Yong similarly dismissed the idea that the two financial hubs were fighting over the same pie. “It’s not a zero-sum game,” Gan said. He added that Singapore’s vaulting service would provide central banks with another option for diversifying where they hold their reserves.

What I think

The Singapore gold vault story is really a story about the fragmentation of the global financial system. For decades, gold custody was simple. You stored it in London or New York. If you were adventurous, you stored it in Switzerland. The system was centralized, and the centralized system worked because the Western financial centers were trusted by everyone.

That trust is eroding. The freezing of Russian reserves in 2022 was a turning point. Central banks around the world watched the G7 freeze $300 billion of Russian central bank assets and thought: that could happen to us. The rush to diversify gold storage is a direct consequence of that moment. Countries want their gold in places that are not subject to Western sanctions regimes, but they also want it in places that are not subject to Chinese or Russian pressure either.

Singapore is the neutral option. It is not a Western ally in the NATO sense, but it is a stable democracy with a rule-of-law tradition. It is not a Chinese vassal, but it has deep trade ties with China. It is politically stable, financially sophisticated, and geographically positioned between the Indian and Pacific Oceans. For a central bank looking for a safe place to park gold that is neither Washington nor Beijing, Singapore is the answer.

The chicken-and-egg problem is real, but the MAS has the balance sheet to solve it. Singapore’s central bank is one of the best-capitalized monetary authorities in the world. It can afford to build vault capacity and wait for the deposits to come. And the deposits will come, because the demand for neutral custody is growing. Every country that is not firmly in the Western or Chinese camp is thinking about where its gold is stored, and Singapore just made itself a credible option.

London will remain the dominant gold trading hub for a long time. But custody and trading are different businesses, and Singapore is going after custody first. It is a smart strategy, and it is one that could work. The gold market is shifting to Asia, and Singapore is building the infrastructure to catch it.