UBS AG (UBSN), Switzerland’s biggest bank, started storing gold for wealth-management clients at a facility in Singapore, citing interest from investors in the region even after the metal slumped into a bear market.
The leased vault in the Singapore FreePort is available for clients in the city-state and Hong Kong, according to Peter Kok, regional market manager for wealth management in Singapore and Malaysia. While bullion is heading for the first annual drop in 13 years, client interest persists, Kok said.
UBS joins Deutsche Bank AG and JPMorgan Chase & Co. in offering storage services in Asia, where China may surpass India as the largest user this year. Bullion fell to a 34-month low on June 28 in a rout that’s erased $66 billion from the value of investor holdings. Goldman Sachs Group Inc. forecasts further declines as the U.S. Federal Reserve may withdraw stimulus.
“Notwithstanding the drop in gold prices, we are still receiving queries on the offering from clients who are keen to reap the benefits of asset and geographical diversification,” Kok said in an e-mailed reply to questions.
The Singapore government has been promoting the country as a bullion-trading hub, removing a 7 percent sales tax from investment-grade precious metals last year. Millionaires in Asia outside Japan will create $7 trillion in new wealth by 2016, boosting the share of global riches from emerging markets to about 37 percent by that year from 24 percent at the end of 2008, according to McKinsey & Co.
Spot gold climbed as much as 1.2 percent to $1,267.68 an ounce, rallying for a third day, and was at $1,264.03 at 4:48 p.m. in Singapore. That’s a 7.1 percent rebound from $1,180.50, the June 28 low. Still, prices slumped 23 percent in the second quarter, the biggest decline since at least 1920.
Holdings in the SPDR Gold Trust, the largest bullion-backed exchange-traded fund, fell 1.2 metric tons to 968.30 metric tons yesterday, data on the SPDR website show. The holdings have dropped 28 percent this year to the lowest level since 2009.
Goldman Sachs Group Inc. says bullion will reach $1,050 by the end of 2014 and Credit Suisse Group AG forecasts $1,150 in about 12 months. Still, not everyone is bearish. Gold may have seen its trough as prices are near production costs, according to David Fergusson, chief investment officer of Singapore-based Woodside Holdings Investment Management Pte.
“Physical demand can’t be satisfied at the moment and at the current prices, mine production is not sustainable,” said Fergusson, whose Asian Wealth Fund allocates about 9 percent of assets to physical bullion and gold miners. “That will be fairly supportive.”
The average production cost of gold-mining companies is $1,201 an ounce, according to Bloomberg Industries, which tracks seven of the world’s top 10 producing companies.
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