"There has been a dramatic increase in customers wanting to move out of paper, that is over-the-counter gold, and into physical," said Cedric Chanu, director, Asia precious-metals trading at Deutsche Bank.

"We’re seeing customers wanting to move their gold from Europe into Singapore."

Following the tax exemption, Singapore is aiming for a 10%-15% share of global gold demand within five to 10 years, up from around 2% now, government agency IE Singapore said at the time the exemption was announced early this year.

Gregor Gregersen, director of Singapore-based physical gold and silver supplier Silver Bullion, pointed to Singapore’s low crime rate and political stability as key factors in Singapore’s transformation into a precious-metal trading hub. "People feel safe storing their bullion here," he said.

The exemption will come during a broader long-term uptrend in demand for precious metals in Asia. Singapore’s position between India and China, the world’s two biggest gold buyers, also makes it well-placed to benefit from growing Asian demand.

"Within Asia, investors want to hold their gold in Singapore," Mr. Chanu said. "China is riskier than Singapore, so Singapore should attract more demand."

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By GlobalData

The actual Fort Knox of Singapore is known as Singapore FreePort, a high-security storage facility designed for valuables, including precious metals, art and wine, which is located in its own duty-free zone near the city’s airport.

Freeport opened in 2010 and is already doubling in size to 50,000 square meters, including more storage space for precious metals, in part because of that tax change.

Traders of physical gold and silver in Singapore are offering services to investors where they can buy precious metals there and have the bullion stored at Freeport.

Source: Private Banker International