Intensifying geopolitical tensions and financial market volatility are behind the strong demand for gold among Asian investors, Singapore Bullion Market Association tells finews.asia.
Last week, the World Gold Council published its Gold Demand Trends report for 2018, noting that central bank demand was the highest since Nixon closed the gold window in 1971, with central banks adding 651 tons of the precious metal to their holdings, an increase of 74 percent year-on-year.
A weak global economic outlook, heightened geopolitical tensions and financial market instability are factors supporting gold demand, especially in Asia, where investors have long used the precious metal as a hedge against volatility.
Escalating Trade Tensions
«Gold jewellery and bar demand in Vietnam, Indonesia and Thailand showed high single-digit growth due to the weakening of regional currencies, the safe haven argument for gold in a volatile environment, and low unemployment rate. Going forward, these economies should continue to be resilient, and we should see strong single-digit gold demand growth in Southeast Asian countries in 2019,» Singapore Bullion Market Association (SBMA) CEO Albert Cheng told finews.asia.
Cheng however, pointed out the risks posed by escalating trade tensions, highlighting that while gold investment has benefitted from financial market volatility, physical gold demand in Southeast Asia slowed down significantly in Q4 last year due to headwinds caused by a volatile equities market and trade disputes between China and the U.S.
Singapore as a Gold Hub
Strong gold demand in Southeast Asia bodes well for Singapore, which has in recent years positioned itself as the region’s gold hub, attracting precious metals participants with government initiatives to develop the country’s investment precious metals (IPM) sector.
«Singapore’s well-established infrastructure, advanced technology, mature legal system and triple-A sovereign credit rating make the city-state an ideal gold trading hub in Asia, and provide distinct connectivity for the industrialists in the region,» SBMA Deputy Chief Executive Gordon Cheung said.
Investment banks with a presence in Singapore that are active in the gold market here include ICBC Standard Bank, the Bank of Nova Scotia, Standard Chartered, UBS and JP Morgan.
