Gold trading in Singapore set to get boost

SINGAPORE: Gold trading is set to find new glitter in Singapore.

The government's move to exempt the 7 per cent goods and services tax (GST) on gold trading is expected to boost competitiveness globally.

However, market players said more can be done to turn Singapore into a gold trading hub.

For investors, the exemption of GST on investment grade gold will level the playing field for the precious metal.

From October, gold will stand at par with other financial instruments like stocks and bonds which are also exempt from GST.

Gold is also being held as an alternative to cash.

And experts said the government's latest move may boost gold trading among retail investors.

Nicholas Trevethan, senior commodities strategist, ANZ, said: "GST on money, or on what is essentially money, removing that is a sensible and practical idea. I think it's a good way to encourage in particular, retail investment demand amongst Singaporeans. You want that solid base within the country in order to help it develop as a trading hub and as an international trading centre."

Analysts estimate the value of gold traded in Singapore to be worth about US$282 billion over the last year.

Gold traders said the GST exemption will lower the barriers to entry for investors and will further boost interest in the precious metal.

World Gold Council managing director Albert Chang said: "The tax exemption on bullion is an indispensable initial step to boosting the dynamics of the gold trading market."

And the council expects a greater volume of physical gold transactions to take place from October 2012 when the new tax exemption will be in place.

However, market players said more needs to be done before Singapore can take on other gold trading hubs such as Hong Kong and Dubai.

Lee Song Teck, CEO, The Gold Guarantee, said: "First of all, an equivalent of the London Bullion Market Association needs to be set up, to encourage the market and government. What this body can do is to help gold-related industries such as refineries... if more are around, it would help boost the gold industry in Singapore."

Since the budget announcement last Friday, spot gold price has increased 1.6 per cent to US$1,755 on Wednesday.

And local traders said that they have seen about 5 to 10 per cent increase in sales.