Singapore gold-price contract seen fueling demand

A physical-gold contract Singapore is instituting this fall is predicted to intensify already booming Asian demand for the precious metal.

The exchange-traded Singapore Kilobar Gold Contract, expected to go "live" as early as in September, will introduce centralized trading and clearing of physically delivered gold, the World Gold Council (WGC) said in a release.

The Asian city-state's move to introduce the contract is part of regional efforts to set new price standards as the global benchmark, the so-called London "fix," has come under regulatory scrutiny.

The kilobar contract for 25 kilograms of 99.99% fineness is seen as providing a viable price benchmark in Asia.

It shows how Southeast Asian markets are hurrying to facilitate transparency in gold trading, WGC investor relations manager John Mulligan told Mining Weekly Online.

That should fuel demand for physical gold.

“Wherever we’ve seen gold made more accessible, we’ve rapidly seen the growth, so we expect something similar,” Mulligan said.

With Asia, particularly China, processing and consuming an increasing amount of gold, exchanges in the region are developing more bullion products to establish their own supply chains and work more efficiently.

“The center of the world for gold consumption is Asia," Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd., told Bloomberg. "So it makes sense that the center of price discovery for the physical market moves that way.”

“It’s only going to be positive for Asian gold demand,” he said.