Gold rush at Singapore’s precious metal vaults as rich scoop up physical gold

DEMAND for special storage facilities for precious metals is on the rise in Singapore, as wealthy individuals stock up on physical bullions – gold or silver in the form of bars or ingots – as instruments to preserve their generational wealth amid macroeconomic uncertainties.

Singapore-based BullionStar, which is involved in the trading and storing of precious metals, told The Business Times that the quantity of gold and silver housed in its vault has approximately doubled from the end of 2019 to 2023.

On the back of rising storage demand, another major vaulting player, Silver Bullion, recently opened a six-storey facility near Changi Airport.

The new warehouse, dubbed The Reserve, is designed to hold 500 tonnes of gold and 10,000 tonnes of silver. When fully loaded, the precious metal bullions in the facility could be worth S$67.5 billion, based on spot gold and silver prices as at 3 pm on Wednesday (Oct 2).

Gold prices have been registering new highs since early this year, driven by central banks’ purchases and geopolitical turmoil.

After the US Federal Reserve’s recent 50-basis-point interest rate cut on Sep 18, spot gold logged a new all-time high at US$2,672.77 per ounce on Sep 26. Prices were hovering at around US$2,650 as at 3 pm on Wednesday.

Spot silver prices, on the other hand, have been more turbulent despite an upward trend. They also peaked on Sep 26 at US$32.43 per ounce, and dropped slightly to US$31.20 per ounce as at 3 pm on Wednesday.

Long-term wealth preservation

However, Silver Bullion founder Gregor Gregersen noted that the clients who choose to vault their precious metals are not buying bullions for investment. Instead, they see it as “long-term wealth insurance”, he said.

“Around 80 per cent of our clients have never sold their gold or silver,” Gregersen said. “And the ones who did sell had kept (their bullions) for an average of about four-and-a-half years.”

He noted that having holdable, liquid assets such as physical bullions provides these wealthy individuals with a sense of security, and also acts as a hedge against crises and counterparty risks.

“People are realising that often-times, when you’re buying (a) paper gold position, there’s actually very little physical gold behind it, and you’re not the owner of that gold. If any of the institutions which are involved in this chain of counterparties goes bankrupt, you might end up not having anything,” he said.

BullionStar also reported a rising demand for wealth preservation among its clients.

“People are investing in the metal – either gold or silver – they currently see as good value, rather than the one with more upside potential,” a BullionStar spokesperson said.

Amid ongoing market uncertainties, the longer-term view is also drawing investors away from more volatile instruments.

“We have noticed a trend of customers moving a portion of their assets from cryptocurrencies to precious metals as part of their wealth strategy or to solidify their gains from prior crypto investments,” the spokesperson added.

Thomas Rupf, chief investment officer for Asia at VP Bank’s Singapore branch, noted that physical gold is preferred for “safety with a long-term horizon”.

“Among high-net-worth individuals and ultra-high-net-worth (UHNW) individuals, there is still significant demand for physical gold for wealth preservation, especially in times of economic uncertainty,” said Rupf.

Safe haven

Silver Bullion’s Gregersen noted that most of its clients are “sophisticated individuals” from overseas who are attracted by Singapore’s stable, neutral jurisdiction for long-term gold storage.

“Maybe 10 per cent of our clients are from Singapore. So the vast majority are, I’d say, from the United States, Europe and Australia,” said Gregersen.

He highlighted that the next step of The Reserve, equipped with private vaults, is to attract more institutional investors – from family offices to sovereign clients.

Some of the hedge funds which have shown interest in Silver Bullion’s services are looking into materialising the large amount of paper gold they currently hold, and potentially store over S$1 billion worth of gold in The Reserve, said Gregersen.

He added that wealth management companies make up another group of Silver Bullion’s clients.

“The feedback we’ve been receiving from these institutions is that their clients are increasingly asking for physical gold.”

Sylvia Yu Friedman, director of private equity firm Zab Capital that provides advisory services to family offices, said the firm has experienced a surge in inquiries on precious metal bullions from its clients, driven by their concerns over geopolitical tensions and the results of the upcoming US presidential election.

“Investors turn to bullions to safeguard and increase wealth over time, as they have a low correlation to inflation,” she noted, adding that a secure storage facility with full liability coverage is key.

SME succession advisory Avary Group, in particular, has seen an increase in its clients purchasing gold and silver bullions since 2023, via private vaults or the firm’s custodial services, its co-founder Alan Mak noted.

“Multi-generational wealth preservation” is particularly important for the firm’s family office and UHNW clients looking to safeguard wealth across generations, said Mak.