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600-tonne vault for silver opens amid robust demand

The Safe House in Chai Chee also has a vault to store 30 tonnes of gold

[SINGAPORE] In a sign of continued strong demand for physical bullion here, bullion retailer Silver Bullion yesterday opened a 600-tonne silver vault.

The facility in Chai Chee, called The Safe House, will hold an amount of silver equivalent to one per cent of all silver reserves above ground when full; these holdings would be worth US$390 million.

The Safe House also has a vault on the premises for up to 30 tonnes of gold.

Its opening marks a first for a bullion retailer here. Others have chosen to tie up with established security firms; for example, online bullion retailer Goldmoney offers storage options for gold and silver at storage providers Brink's and Malca-Amit.

Silver Bullion also had an arrangement with Certis Cisco to use its safe deposit boxes, but with its own vault now, it will become a one-stop shop for its customers.

Its founder Gregor Gregersen said: "From an investor point of view, it's a great deal because you don't have any intermediary."

Customers will be the legal title owners of precious metals stored there.

Mr Gregersen said that, as a newcomer to secured storage, Silver Bullion has had to work harder at ensuring the robustness of its security features. A security check is required upon entering the building, and another to enter the facility itself; motion sensors and vibration sensors have been installed, as has a 2.5-tonne vault door.

"The way we set this up was secure enough for the insurance company to trust us," Mr Gregersen said.

Bullion owners will be covered by insurance for up to US$100 million for each loss. The insurer is the Ireland-headquartered XL Group, a member of the specialised insurance market Lloyd's of London.

The facility is now open only to Silver Bullion's customers, but could count institutional investors such as fund managers among its users in the future.

Some 40 per cent of Silver Bullion's customers are Americans, who are worried about the long-term trend of growing US government debt, said Mr Gregersen.

"In our customers' minds, it's only a matter of time before the US dollar is not accepted anymore," he said.

Bloomberg has reported that marketable US government debt now stands at a record US$12 trillion, up from US$4.5 billion in 2007.

The move by Silver Bullion comes as other secured storage providers see their silver vaults bursting at the seams.

Malca-Amit Global, which set up a 200-tonne silver vault here in July, said that it is now full.

Its general manager Joshua Rotbart told The Business Times last week: "We're looking into other solutions. We are looking into utilising the space we currently rent at the Freeport, and also to look for other options that are out there."

Secured-storage firm Brink's, which stopped accepting silver for storage in December 2012 after demand for silver ballooned, said that it is now able to accommodate more bullion after adding new space at its Freeport location here.

The US-based company, which has vaults in two other locations here, opened its first precious-metals vault in the Freeport in 2012. It completed a second vault just this month. Its general manager Baskaran Narayanan said that the amount of silver stored with it has grown 6.5 times since mid-2012.

Demand for precious metals in Singapore spiked after the government removed a 7 per cent sales tax on investment-grade precious metals in October 2012. Since then, a number of bullion retailers have set up shop, and banks such as Deutsche Bank, UBS and ANZ have opened vaults here.

Swiss refinery Metalor is building a greenfield refinery in Jurong.

With a surge in demand for precious metals in Asia as well as Singapore's emergence as a precious metals hub, Brink's Mr Narayanan said that he expects "exciting times in the next few months".