Singapore is a safe haven for gold investors

Section:

By Andrea Soh
The Straits Times, Singapore
Monday, December 12, 2016

SINGAPORE -- Two years after the Great Financial Crisis, Michael Tan (not his real name) took his life savings and converted 70 percent of it into precious metals.

As the world picked through the debris of the post-Lehman era, the 38-year-old liquidated several insurance policies so that he could buy the bullion, never mind the penalty for early withdrawals.

His reason for this radical move?

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A deep distrust of the financial system.

"The crisis got me thinking," the private educator said.

"It's not because (the banks) don't do a good job, but if everything is online there's no way it's foolproof compared to your wealth held in your own hands."

These are unsettling times.

A recession looms. Extremist parties are on the ascent globally.

One of the oldest banks in the world is on the brink of collapse in Italy.

A sense of unease is on the rise, but with it, Singapore's safe-haven status has soared.

As investors the world over seek refuge in precious metals, they need somewhere to put all of it, and that somewhere, for many of them, is Singapore.

Commercial vaults on the island have quietly begun to bulge with gold and silver.

Even as the price of gold rose 11 percent to about US$1,177 (S$1,685) an ounce this year, the amount of gold and silver stored with Malca-Amit in the city-state has jumped some 45 percent in tonnage in the past year.

The secured logistics company's three facilities in Singapore totalling 1,240 square meters are now about three-quarters full, said the managing director of Malca Amit Singapore, Ariel Kohelet.

At The Safe House, operated by precious metal dealer Silver Bullion, the amount of silver has soared by 130 percent, or 2.3 million tonnes, on an annualised basis from last year.

The amount of gold stored there has increased by half from last year, or 20,000 troy ounces, according to Gregor Gregersen, founder of Silver Bullion.

Independent secured storage companies like these two are making hay as investors, increasingly wary of the banking system, move their precious metal out of private banks.

Joshua Rotbart, who owns an eponymous business helping customers worldwide to buy, sell, store, and transport gold, silver, platinum, and palladium, said 70 percent of his clients want private storage solutions so they can have direct access to their precious metals.

"They don't want to be subject to the bank's regulations, or the government telling them yes, you can, or no, you cannot," he said.

"They want to be able to go to the vault and if needed, take it, or make sure it's there.

"It's a trust issue with the financial system."

Similarly, Gregersen sees increasingly more customers transferring existing precious metals from other vaults outside the country.

Some 90 percent of these customers are from the West, with half of them from the United States and the rest from Australia and Europe.

British customers are also increasing in number after Brexit, he said.

While Switzerland was a popular destination for precious metal storage in the past, many Swiss banks and vault operators stopped accepting individual American customers three to four years ago, because of an American law that attempts to curb tax evasion by its citizens.

Singapore and American banks, on the other hand, are more likely to take on U.S. customers.

Meanwhile, another common destination for the glittering metal, Hong Kong, has run up against its own set of challenges.

"Increasingly people are afraid that Hong Kong is ultimately under Chinese control and the 'one country, two systems' (governance framework) is becoming weaker," Gregersen explained.

Throw in the political unrest in the city and customers are becoming jittery enough to start transferring their precious metals from Hong Kong to Singapore.

"Every location for long-term storage is really losing its appeal for many of the customers," he said.

"Singapore is standing out as a jurisdiction that has been shown to be trustworthy and stable" and "slowly being recognised as the single best storage place for bullion."

While wealthy families from North America and Europe make up the bulk of those buying and storing physical gold and silver for investment purposes, the trend is starting to take off in Southeast Asia as well, Rotbart said.

Requests for large amounts of bullion, reaching as high as US$5 million (S$7.1 million) in one go, started trickling in last year, though he adds that such cases remain in the minority.

"The majority still buy and keep it in their house or office. And they buy as they go, when they have a child or anniversary," he said.

Southeast Asians have a history of investing in gemstones, so they are familiar with the concept of storing wealth in tangible assets such as gold.

Tan, who put nearly three-quarters of his liquid assets into gold and silver, said there are two ways to store bullion: either with Cisco's storage facility or at home in a safe or hiding spot.

"To steal bullion is not that easy because it's heavy," he said.

He stresses that if one is buying precious metals to avoid exposure to the banking sector, then one should not store them with the banks.

"Because if the banks go bust and get nationalised, everything within it will be taken away. It will not be yours."

But as companies such as Silver Bullion offer innovative services such as peer-to-peer lending backed by precious metals, Singapore-based investors are starting to bring their bullion out of their homes.

"We see customers who bring the gold from home ... especially silver, which is more bulky, because they want to get a loan for 3 percent," said Gregersen, who emphasises that Silver Bullion ensures that investors have legal ownership of the precious metals stored with the company.

For investors who buy gold and silver bullion, a common concern is having legal ownership of the precious metal in storage, also known as allocated metal.

Under this system, investors normally have serial numbers or identification marks that tie the bars or coins to them, as opposed to unallocated gold or silver that is the property of the bank or vault.

Like many others, So Kai Tong, a 53-year-old private investor, buys gold and silver as a form of insurance.

"You hope that you don't need to use it," he said.

If the gold price reaches US$10,000 (S$14,300) an ounce, "you know the rest of the world sucks already."

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