Concern over the future of the Federal Reserve Bank’s fiscal stimulus program has been one of the pivotal factors in falling commodity prices in 2013, as investors have become very nervous ahead of what is starting to look like a September deadline for “tapering.” And though much of the discussion has centered on gold’s precipitous and spectacular fall throughout the year, no metal has been hit harde than silver.
In Singapore, however, a vault with the capacity to store 200 metric tons of silver is set to open this week. While investors in the West have run in fright from precious metals, leading to across-the-board price-drops and huge outflows from exchange-traded-products, Asia’s wealthy classes have been doing the opposite, and have benefitted from lower prices in the process.
Malca-Amit Global Ltd., the owner and operator of the new vault, already has five gold vaults in the country, at the Singapore FreePort. The new vault was necessary not only because of higher demand, but also due to the fact that gold, being many times more expensive than silver, is accordingly also more expensive to store. The new silver facility, already 30 percent booked, will be able to hold some $128 million of the metal (at the current price of $19.92 per ounce.)
Economic growth in China and throughout Asia has not only inflated the ranks of the middle classes of the region, it has also expanded the number of wealthy people. As of 2012, the number of people with $1 million or more in investible assets has grown to nearly 3.7 million, a great many of whom seem to be impervious to some of the concerns about metals. Malca-Amit is looking to build another silver vault in Hong Kong, as well as more gold storage in Singapore, where space for the yellow metal is running very short.
And while Goldman Sachs (GS) has forecasted further price drops for both gold and silver, the world’s big financial institutions are not turning away from precious metals demand in Singapore; UBS AG ($UBS), JPMorgan (JPM) , and Deutsche Bank (DB) all either own or rent storage space in the Southeast Asian city-state. The Singapore government is currently trying to position the country as a lynchpin for global bullion trading, as evinced by its removal last year of a 7 percent sales tax on investment-grade metal.