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UBS opens gold vault in Singapore

Section: Daily Dispatches

By Francesa Freeman and Clementine Wallop
The Wall Street Journal
Tuesday, July 2, 2013

Swiss bank UBS said Tuesday that for the first time it has started storing gold in Asia, a move that reflects continued strong demand for the precious metal in the region as Western investors dump their holdings.

Asia's influence in the gold market has been growing in recent years, with China and India vying for the position of the world's top gold consumer. According to the metals consultancy GFMS, the two countries together accounted for 61% of global physical gold bar demand last year, more than double the level a decade earlier.

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This means that, despite the recent historic tumble in gold prices, Asian investors are still eager to invest in the metal and store it closer to home, said Peter Kok, regional market manager for Singapore and Malaysia at UBS Wealth Management. "We have recognized for some time the ever-growing demand for gold among Asian clients and the demand for gold custody services in Asia," he said.

UBS is one of the banks whose trading in gold sets prices every day in London. These so-called fixings are used to determine spot prices for the precious metal, including for sales from mining companies to gold refineries.

The leased vault that the bank opened to clients in May can hold up to 60 metric tons of gold -- worth around $2.4 billion at current prices -- and is located in Singapore's high-security Freeport, said Mr. Kok. Singapore will be the only location outside Switzerland in which UBS stores the precious metal, he said.

Other banks have made similar moves. Last month, Deutsche Bank AG said it had opened a 200-ton-capacity gold vault in the Singapore Freeport. In 2010, JP Morgan Chase also opened a gold vault in Singapore.

"Whoever expects incomes in China and India to continue rising and real interest rates to remain negative or low will by default recognize gold as the beneficiary of these developments," said Ronald-Peter Stoferle, co-founder of wealth management firm Incrementum Liechtenstein.

Gold prices plunged 23% in the April-to-June period, the metal's biggest quarterly drop since modern gold trading began in the 1970s. The metal hit a near three-year low at $1,180.20 an ounce on the European spot market Friday.

"Notwithstanding the drop in gold prices…clients tend to hold a long-term view on gold and enjoy the stability and security benefits which come with holding gold as an asset class," said Mr. Kok.

The eastward shift is also a response to Singapore's decision last year to scrap a goods-and-services tax on gold in a bid to help boost its share of global gold demand to 10% to 15% within a decade from about 2% in 2012.

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