BT Explains: Singapore's non-monetary gold trade
SINGAPORE’S non-oil domestic exports (NODX) stayed positive in March with the help of non-monetary gold shipments, which grew by 86.5 per cent year on year.
The United States was a significant end-market for non-monetary gold for the month, according to data from Enterprise Singapore (ESG) released on Monday (Apr 18).
And “non-monetary gold seems to be keeping headline NODX to China positive, with miscellaneous transactions jumping by nearly 10 times from last year” as well, Maybank economist Lee Ju Ye added.
Meanwhile, Malaysia and Indonesia were some other major destinations for non-monetary gold NODX in 2021, and non-monetary gold was also a contributor to growth of non-oil re-exports that year.
What is non-monetary gold?
Monetary gold refers to gold exchanged among central banks worldwide, and makes up about 8 per cent of annual demand for gold, according to the World Gold Council. The Monetary Authority of Singapore topped up its gold reserves in 2021 as a hedge against inflation.
In contrast, non-monetary gold refers to all other types of gold in circulation. It can exist in forms such as gold powder, wafers, ingots, cast bars, and coins.
Refineries in Singapore gather raw material from scrap gold or nearby gold-producing countries and “we upgrade, refine it back into kilobars and put it back into the market”, Albert Cheng, chief executive of the Singapore Bullion Market Association (SBMA), told The Business Times.
Where does the gold go?
Enterprise Singapore does not break down demand for Singapore’s gold exports between industries and consumers. But World Gold Council figures show that about 10 per cent of annual demand for gold is from the technology sector - compared with more than 50 per cent for jewellery.
Still, gold’s ability to conduct electricity lends itself to two key uses in the electronics industry: to coat connectors in circuits, and - in wire form - to connect integrated circuits for semiconductors.
Tiny amounts of gold are also used in diagnostic kits like the antigen rapid tests that have become a familiar household item during the Covid-19 pandemic. The gold bonds with particles in the sample to help produce the distinctive lines that indicate test results.
Why are exports up?
One company that mainly ships to regional wholesale bullion merchants in South-east Asia told BT that volumes have held steady in recent months. But the value of gold has been climbing lately, with prices nearing the psychological threshold of US$2,000 an ounce amid global developments and geopolitical tensions.
“Overall exports of non-monetary gold grew from a low base in 2021. According to media reports, gold prices rose in March 2022 amid inflation concerns driving demand for gold as a safe-haven asset,” Enterprise Singapore said, in response to BT queries.
Cheng from the SBMA added that March saw “a substantial amount” of gold move from Singapore to the US to settle futures trades with physical deliveries, especially as a premium of up to US$10 an ounce on the arbitrage market “is sufficient to warrant shipping of the physical gold” internationally.
