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Gordon Cheung: Singapore Can Be a Focal Point in the Precious Metals Supply Chain

By The Assay magazine

Published on March 28, 2019

In an interview with The Assay magazine, SBMA’s deputy chief executive talks about how the association is working to raise Singapore’s status as a gold trading hub, and what he thinks about the bullion market in the long term.

Could you talk about the Singapore Bullion Market Association – its background and history, and what you do there?

The Singapore Bullion Market Association (SBMA) was in operation in 1994 as a non-profit association with 16 founding members. In the early 90s, Singapore lacked the necessary expertise for the bullion market. For ten years since year 2000, the SBMA remained dormant until the government decided to enhance the ecosystem to boost trading activities and volume, and aimed to make Singapore one of the major gold hubs in Asia.

To accomplish this goal, government agency, SBMA and the precious metals community engaged the GST committee from IRAS in discussion to the exclusion of GST on investment graded precious metals. In 2012, Singapore finally lifted GST on Investment Precious Metals (IPMs). After the removal of the GST, the World Gold Council reported that gold transactions rose 94% within a year.

The government also provides incentives to attract foreign refiners and international market players to establish their operations in Singapore. One major incentive is the Approved Refinery and Consolidator Scheme (ARCS) that exempts precious metal refiners from the GST on the importation of materials that are processed into IPM.

SBMA, with the support of Enterprise Singapore and its members, is commissioned to raise the status of Singapore as a gold trading hub. Albert Cheng, previously Managing Director, Far East, World Gold Council, was appointed to head the SBMA in 2015 to carry out the commission. Since then, SBMA has grown to 48 members, mostly based in Singapore. Our members include banks, refineries, logistics companies, and international PM trading houses.

SBMA organised the inaugural Asia Pacific Precious Metals Conference (APPMC) in 2017, which was attended by over 330 delegates coming from 23 countries. We also successfully concluded the second APPMC in June 2018 where we welcomed 358 delegates representing 173 companies from 29 countries. The third APPMC will be held on 9–11 June 2019.

How is the gold market performing in Asia, and what role do you see Singapore playing in Asia’s trading of gold?

SBMA aims to have Singapore representing the entire ASEAN precious metals market and aspires to become the go-to hub for the region. This includes sourcing, trading, hedging, clearing and storing of bullion in Singapore.

We hope that Singapore can act as a focal point for the entire precious metals supply chain. That includes suppliers of recycled gold* and LBMA-accredited large bars, traders, refineries, consumers, as well as end-users. The amount of recycled gold reached 304 tonnes in 2017 in East Asia, according to Metals Focus (Table 1).

Table 1: Recycled gold (tonnes)

*Recycled gold = Scrap + Disinvestment + Individual residual

Is improved access to banking and smartphone-enabled digital financial services seen as a threat to gold’s traditional role as a major store of wealth across Asia?

An emerging trend is the use of AI in bullion trading. AI is helping to upgrade services to increase trading efficiency and minimise operational risks. However, gold is still irreplaceable as is the need for a place to store it. With ongoing changes in socio-economic factors, changes in attitudes and a larger middle-class population in Asia, there is still a need for wealth to be stored safely.

In this regard, Singapore is a great place to store wealth, with reputable international logistics service providers like G4S, Loomis and Brinks, which are trusted for their ability to transport and store bullion, and the state-of-the-art Le Freeport situated in Changi Airport, which is regarded as Singapore’s Fort Knox for the storage of collectables and precious metals.

Another new digital innovation is the use of blockchain and the emergence of fintech platforms where consumers can purchase gold bars using online functions or purchase the digital value of the gold. Users can expect to benefit from digital financial services where they can purchase gold online and use China, Hong Kong, or Singapore as a delivery point.

As a leading precious metals hub in the region, what are Singapore’s competitive advantages?

In addition to the points referenced above, factors that contribute to Singapore’s strength as a leading precious metals hub include:

  • No GST on investment-grade precious metals
  • World-class financial infrastructure
  • Role as a financial and wealth management hub
  • Politically stable with strong rule of law
  • Strong governmental support to the industry
  • SBMA support for market participants
  • AAA credit rating with stable outlook

The proximity and centrality of the ASEAN market complement the above-mentioned points. This includes a well-developed supply chain. Also, Southeast Asia still has scrap gold floating through its markets. Increasingly, locals will want to use a trusted site to recycle that gold and send it to refineries to upgrade to Kilo bars. In Southeast Asia, this makes a big difference, as previously you might have had to go to Northeast Asia, Europe, or North America to do this.

What are some of the risks in the long term that will impact bullion markets globally?

I spoke earlier about the AI applications in finance and the role of fintech. While they bring benefits to the industry, there are also risks associated with them. A concern with fintech is that their platforms may have more risk and liability of defaults or bankruptcies. For instance, if gold is purchased digitally and is connected to an at-risk fintech platform, the gold asset could be at risk if there is a default.

Does SBMA see any risks during the ongoing trade disputes between the US and its trading partners?

There are two risks that SBMA is seeing regarding the trade disputes: with the US putting sanctions on Turkey, whose economy has been struggling this year, there’s now further pressure on Turkey to deal with a slowing economy and sanctions. This has had an impact on Turkish currency, as you’ve probably seen with the lira. Turkey is a major gold hub for the Middle East, as a location for buyers and sellers in the region. It also functions as a gateway that connects Europe and the Middle East. If the lira continues to lose value, people will lose trust in the currency and then start putting their money into safe havens like gold. This will have inflationary impacts and will impact the connection that Turkey has to the Middle East and the rest of the Islamic world.

The other major concern is the US and China trade conflict. Inflationary pressures are already being caused by the increasing restrictions on trade between both countries. The US dollar is currently keeping its value, but eventually, these trade wars will drive up global inflation. In these countries, people will lose confidence in their currencies and the demand to store wealth in gold will increase. This will be especially acute in China since the yuan is already depreciating, which will make it difficult for people in China to invest abroad. As a result, they will likely be encouraged to invest in gold to protect their wealth.

This interview was previously published in The Assay (www.theassay.com)

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Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

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Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

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Mr John Levin

Global Metals
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John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

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Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

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Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

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Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

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Albert Cheng

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Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

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Head of Asia-Pacific (ex China) and Global Head of Central Banks
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Mr Alan Liew

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Mr Nuttapong Hirunyasiri

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Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
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Mr Andrew Clarke

Head of Brink’s Global Services
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Mr Kazuya Naoki

Head of Metals, Asia
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Mr Vinh Nguyen

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Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

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Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.