The Anatomy of a Record Quarter
Singapore’s appetite for physical gold reached unprecedented levels in the first quarter of 2026. Demand for gold bars and coins climbed 42 per cent year on year to 3.5 tonnes, according to the World Gold Council’s Gold Demand Trends Q1 2026 report. This surge occurred against a backdrop of extraordinary price volatility—the yellow metal peaked near US$5,500 per ounce in January before retreating sharply in March as geopolitical tensions in the Middle East triggered a broader risk-off sentiment.
What makes this demand profile particularly striking is its composition. While global gold-backed ETF demand declined 73 per cent to 62 tonnes, Asia-listed gold ETFs added 84 tonnes during the same period, outpacing every other region even as Western funds experienced outflows. Fan Shaokai, the World Gold Council’s head of Asia-Pacific and global head of central banks, attributed this to a combination of “geopolitical uncertainty, trade risk and price momentum” that resonated particularly strongly with Asia-Pacific investors.
Infrastructure: The Missing Piece Falls into Place
Singapore’s ambition to become a dominant gold trading hub has historically been constrained by a critical infrastructure gap: the absence of a centralized clearing mechanism for over-the-counter gold transactions. That gap is now being closed. The Singapore Exchange (SGX) will establish an OTC gold clearing system for Loco Singapore—physical gold stored in Singapore—by the end of 2026.
The system will support both large gold bars and kilobars, enabling standardized settlement during Asian trading hours. Six major bullion banks—DBS, Deutsche Bank, ICBC Standard Bank, J.P. Morgan, OCBC, and UOB—have signed memoranda of understanding with SGX to participate as clearing members. Interbank trading is expected to build up from 2027, with the clearing platform serving as what Deputy Prime Minister Gan Kim Yong described as “a foundational piece of market infrastructure”.
Regulatory Tailwinds Amplify the Momentum
The Monetary Authority of Singapore (MAS) has simultaneously removed the 5 per cent cap on physical Investment Precious Metals (IPMs) from fund tax incentive schemes, providing Singapore-based fund managers with greater flexibility to allocate capital to gold. Crucially, this removal applies regardless of where the IPMs are vaulted, though MAS acknowledged that it expects the policy to “bring more gold trading activity to Singapore and contribute to the growth of Singapore’s gold trading and vaulting ecosystem”.
The fund schemes utilize the existing Goods and Services Tax definition of IPM, which covers investment-grade precious metals akin to financial assets. Palladium, notably, is excluded because its market is primarily driven by industrial demand rather than investment flows.
What This Means for the Broader Market
The convergence of record physical demand, new clearing infrastructure, and regulatory liberalization creates a self-reinforcing dynamic. As SGX develops a physically delivered gold futures contract—a product currently under exploration—Singapore will possess the full spectrum of market infrastructure: physical vaulting, OTC clearing, exchange-traded futures, and fund vehicles. For investors seeking exposure to Asian gold demand, this maturation represents a structural shift in how the region’s bullion market operates.
