Deutsche Bank AG started a gold storage facility at the Singapore FreePort with a capacity to hold as much as 200 metric tons, its largest vault outside London, the bank said.
Other locations are Zurich and Hong Kong, according to the bank, Germany’s top lender. The Singapore vault caters primarily for investors wanting to store bullion under the bank’s custody, said Mark Smallwood, head of wealth planning at the asset and wealth management unit in the Asia-Pacific region.
Gold sank into a bear market in April, after rallying for 12 years, as an improving U.S. economy spurred a rally in equities amid speculation the Federal Reserve may taper stimulus. While investors have withdrawn assets from exchange-traded products at a record pace this year, the 18 percent slump in prices has prompted a buying frenzy for coins, bars and jewelry from Hong Kong to Mumbai.
“We have strong demand from existing clients who are looking to diversify their physical gold assets to Singapore” from traditional locations such as London, Zurich and New York, Smallwood said today in a phone interview. Clients can also use the holdings as collateral against loans, he said.
JPMorgan Chase & Co. also opened a bullion vault at the Singapore FreePort in 2010. The country is seeking to establish itself as a regional gold trading hub and removed sales taxes from investment-grade precious metals last year. Metalor Technologies SA, the Neuchatel, Switzerland-based refiner, is starting a facility on the island.
While the 14 percent plunge in the two days to April 15 triggered a surge in demand in the Asia-Pacific region and pushed up premiums over London prices, holdings in exchange-traded products plunged 496 metric tons in 2013, more than the combined inflows in the past two years.
“We’re going through a corrective trend after 12 years of a bull run,” said Smallwood. “In the short term prices may fall a little further, but in the long term now is a good time to be phasing in.”
Gold tumbled to $1,321.95 an ounce on April 16, the lowest level in more than two years, and traded at $1,381.28 today. The price is still 28 percent below the record $1,921.15 in 2011.
Deutsche Bank is one of the six clearing members of the London Bullion Market Association, which includes JPMorgan and UBS AG, according to the LBMA website. The Frankfurt-based bank also has exchange-traded funds backed by gold, which totaled 1.51 million ounces as of June 6.
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