The Monetary Authority of Singapore has removed a 5 percent cap on precious metals holdings for investment funds and family offices regulated under Section 13O and Section 13U tax-exemption schemes.
The move comes after many funds were forced to liquidate part of their gold and silver holdings as the price climbed to $5,500 last January.
Under Sections 13O and 13U, certain investment income and gains are exempt from Singapore income tax if the fund or family office meets certain statutory and regulatory conditions -- including the 5 percent cap on precious metals allocation.
According to the Business Times, “The removal of the cap is likely to improve investment flexibility amid geopolitical uncertainty, and boost Singapore’s competitiveness as a regional gold-trading hub.”
According to the Times, some funds and family offices plan to raise their gold and silver allocations above 5 percent, with the investment cap removed.
Others, such as Raffles Family Office, plan to keep their allocation at 5 percent, but applauded the move because it allows for higher allocations in the future should the need arise.
“What it really does is if the market calls for it, we can go heavier and keep the whole position tax efficient. It does not move our base case, but it will give us more flexibility,” William Chow said.
Julius Baer head of FX and precious metals trading Asia, Christopher Irwin, said the changes are "likely to encourage investors to revisit the role of physical precious metals within a strategic portfolio context."
He added that it could more broadly boost Asian gold demand in the future.
“We have long held the view that if Asian investors begin to meaningfully increase their exposure to gold, it could have a significant impact on regional investment demand over time.”
Irwin went on to explain that loosening the tax rules may not have a measurable impact initially; however, it is a bullish move in the long run.
“We may not see an immediate and dramatic reallocation, but the change removes a structural hurdle, allowing clients greater flexibility to hold physical gold where they see value.”
Irwin put the rule change in the context of a broader push to turn Asia into a global precious metal hub.
London, New York, and Switzerland have served as the center of the gold trade for nearly two centuries. However, with gold progressively flowing from West to East, China and other Asian hubs are developing infrastructure to challenge Western dominance.
Earlier this year, Singapore announced plans to create an over-the-counter gold-clearing system and central bank gold vaulting by the end of 2026, among other measures.
Meanwhile, Hong Kong’s revamped dollar-denominated futures contract reported record physical gold deliveries.
A day after the revitalized futures contract launched, Hong Kong began trial operations of its gold clearing and settlement system. The government-owned clearing system will reportedly “mirror” the financial infrastructure used by the LBMA in London.
Looking at the bigger picture, these developments in Hong Kong and Singapore reveal a slow but steady migration of the gold trade from the West to the East.
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