Singapore will open its central bank vaults to foreign central banks, offering to hold their gold reserves as the city-state steps up its bid to become Asia's leading precious metals hub.

The Monetary Authority of Singapore (MAS) said on Tuesday it would launch a vaulting service to hold bullion for foreign central banks, international financial institutions and sovereign entities. The gold will be kept in Singapore's national currency vault, which has room for 500 metric tons.

Deputy Prime Minister Gan Kim Yong, who is also Singapore's minister for trade and industry and chairman of MAS, said several central banks had already shown interest in the service.

"There's interest that has been expressed to us. Because these were confidential, I won't be able to share details of which particular central banks have approached us," Gan said.

Tax relief for the gold trade

MAS and the Ministry of Finance will also seek to introduce a new tax framework from April next year, extending tax relief for gold to wholesale services between institutional participants, including vaulting, refining, recasting, assaying and broking.

The measures are part of a wider package designed to turn Singapore into a place where gold can be stored, traded and settled during Asian trading hours, rather than shipped to London or Zurich. The plan was first outlined by Gan in June at the Asia-Pacific Precious Metals Conference, when MAS said the vaulting service would be available from October this year.

Singapore's commercial vaulting capacity already exceeds 2,000 tonnes and serves bullion banks, institutional investors and wealthy individuals. The MAS service is aimed at official holders of gold, offering them storage backed by the central bank's institutional standing.

Clearing system and gold futures

The vaulting service sits alongside a new over-the-counter gold clearing system being built by the Singapore Exchange for Loco Singapore, the term for physical gold stored in the city-state. The system is due by the end of this year, with live trading and market operations expected to begin by March 2027.

Six banks will act as clearing members: DBS, Deutsche Bank, ICBC Standard Bank, JPMorgan, OCBC and UOB. SGX is also targeting the launch of physically deliverable gold kilobar futures in the second quarter of 2027, a step that would improve price discovery for gold held in Singapore.

MAS has also removed a 5 per cent cap on physical investment precious metals under tax-incentive schemes for eligible funds and family offices, a change intended to draw more institutional money into the market.

Competition with Hong Kong

Singapore is not alone in chasing the gold trade. Elsewhere in Asia, Hong Kong's government has been pushing to expand bullion storage and develop the city as an international gold trading centre.

Gold has had a strong year, with prices climbing as central banks around the world have added to their reserves and investors have sought a refuge from market swings. Singapore's pitch is that reserve managers can now hold their metal in Asia, close to the region's biggest buyers, and trade it in the same time zone.

For Singapore, the vaulting service is a modest but symbolic step: a central bank opening its own vault to its peers, and a signal that the city-state wants a bigger share of a trade long dominated by London and New York.