A silver vault that can hold 200 metric tons opens in Singapore this week to cater for increasing demand for physical precious metals among Asia’s wealthy even as the commodity leads declines this year.
The new facility is 30 percent booked at the opening, said Joshua Rotbart, precious-metals general manager at owner Malca-Amit Global Ltd. The storage will add to the firm’s five vaults at the Singapore FreePort, which are fully reserved for gold, he said in an interview. The repository can hold $128 million of silver at today’s prices. Gold is about 67 times more expensive.
While silver has lost 34 percent in 2013 on concern the U.S. Federal Reserve will taper stimulus, holdings in exchange-traded products have held steady. The number of high-net-worth individuals in the Asia-Pacific region expanded 9.4 percent last year, according to Cap Gemini SA (CAP) and Royal Bank of Canada. Deutsche Bank AG, UBS (UBSN) AG and JPMorgan Chase & Co. are among banks operating metals storage in Singapore.
“Our existing vaults at the FreePort are highly secured and the rate is too expensive to store silver there,” said Rotbart, who declined to say where the new facility is sited. “We need to find a solution, and we also see a strong demand.”
Silver is the biggest loser on the Standard & Poor’s GSCI Index of 24 raw materials this year, beating declines in corn, gold and nickel. Futures, which dropped to $18.17 an ounce in June, the lowest since August 2010, traded at $19.9045 today. Gold has slumped 21 percent to $1,330.34 an ounce.
Silver holdings in ETPs stood at 19,222 tons on July 26, 1.6 percent higher this year, according to data compiled by Bloomberg. Assets in gold-backed ETPs have contracted at a record pace, shrinking 25 percent to 1,970 tons. ETPs allow investors to trade assets without taking delivery, while physical holders require storage, such as a vault.
Investors in silver are mostly private individuals, while the majority of gold holders are institutions, said Rotbart. Malca-Amit is looking to build another silver vault in Hong Kong, and may add more gold vaults in Singapore as there is no more availability in the FreePort, he said. The FreePort is located near Changi Airport in the east of the city-state.
The number of individuals with $1 million or more in investible assets climbed to 3.68 million in the Asia-Pacific region in 2012, boosted by additions in Singapore and Hong Kong, according to a report from Cap Gemini and Royal Bank of Canada. China accounted for 43 percent of worldwide economic growth from 2007 to 2012, according to an estimate from Barclays Plc.
UBS, Switzerland’s biggest bank, started storing gold for clients in a leased facility in Singapore, an executive said this month. JPMorgan Chase opened a bullion vault at the Singapore FreePort in 2010. Jeremy Hughes, a Deutsche Bank spokesman in Singapore, said that the bank had leased space for its 100-ton gold vault at the FreePort from Malca-Amit.
Goldman Sachs Group Inc. forecasts further declines in precious metals, with a 12-month target of $19.60 for silver and $1,175 for gold. The Fed is likely to start tapering its $85 billion a month of asset purchases in September, Jan Hatzius, the New York-based bank’s chief economist, said in a report.
About 50 percent of silver is used in industry, compared with 10 percent for gold, data from the Silver Institute and World Gold Council show. Industrial applications for silver include photography and electronics.
Malca-Amit’s vaults in Hong Kong and Singapore have a precious-metals capacity of 1,000 tons each, and the company also has facilities in New York, Zurich, Geneva, London and Bangkok. The company leases vault space to banks, and stores items for its own customers.
The Singapore government has been promoting the country as a bullion-trading hub, removing a 7 percent sales tax on investment-grade precious metals in 2012. About 2 percent of world gold demand flows through Singapore, and the government aims to increase that to as much as 15 percent.
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