Did you know that gold bars in the lion city are imported from Australia, Switzerland, Hong Kong and Japan? Where it is then sold to buyers in Southeast Asia and India, the world’s largest gold consumer?

According to consultancy firm Thomson Reuters GFMS, Singapore’s investment in gold demand nearly tripled to 3.5 tonnes last year. Gold scraps across the above mentioned region are also traded in Singapore, which helps determine the premiums for gold bars against the prices in London.

Last year, the prices of gold have soared and have silenced many naysayers when it struck an all-time high of US$1,920 an ounce in September 2011. In addition, gold is still considered the most popular choice of “safe haven asset” among investors in the face of uncertainty.

Well, this probably explains why the lion city, well known for being an international trade hub and Asian financial powerhouse is in the midst of scrapping taxes on gold to attract bullion refiners.

Finance Minister Tharman Shanmugaratnam said on 17 February, 2012, that Singapore will exempt investment-grade gold and other precious metals from the seven percent goods and services tax to spur the development of gold trading.

Slated to take effect in October 2012, this exemption could very well see demand for gold bars and coins experience a positive uplift in the region.

This spells good news for refiners who were put off by the tax previously and chose to mould and sell gold bars in Hong Kong, with no imposition duties on the yellow metal and Japan, where consumption tax on gold is only five percent.

Following the change of the tax charge, one major refiner has been said to have shown interest in opening a factory here in Singapore. Hence, we expect that given this exemption, Singapore is likely to attract trading houses to open storage facilities and transform Singapore into a key Asian pricing hub for gold. Additionally, we also believe that this is also going to draw attention to Singapore as a safe place to park funds, which will boost overall flows.

With a potential gold hub situated so centralised in the South East Asian region, which is also conveniently near to India, and coupled with the anticipation that gold could eventually surpass the US$2,000 level, this exemption is going to see a shiny path down the road when it comes to gold investment.