Vault for tonnes of silver rises in S’pore
Inside a six-storey high warehouse near Singapore’s Changi Airport, a vast hangar-like space is waiting to be filled with a precious metal that usually plays second fiddle to its more lustrous sibling.
The vault that’s being built by Silver Bullion Pte Ltd will — when completed in the first half of next year — be able to store 15,000 tonnes of silver. It’s only holding around 400 tonnes of the metal at the moment, but the vacant space is an indication that silver appears to be on the cusp of a promising few years.
Demand for coins and bars is booming, fueled in part by a Reddit-induced buying frenzy in February that drove prices to an eight-year high.
While the fervor has abated, retail interest is still elevated, valuations are relatively cheap and measures are being taken to meet the surge in demand.
The amount of silver stored in vaults in London rose 11% in March to a record, according to the London Bullion Market Association.
As well as the Singapore vault, JM Bullion, one of the biggest precious metals retailers in the US, plans to open a 25,000-square-foot (2,322.5-squaremetre) warehouse in Dallas in June that will be used for storing silver and other precious metals.
The metal’s crucial role in the energy transition — it’s a key component in solar panels — also looks set to buoy consumption over the longer-term.
All this has some analysts forecasting that silver will outperform gold this year.
“The outlook for demand growth for silver over the next few years looks very positive, especially across a wide range of industrial applications, including solar, 5G and automotive,” said Philip Klapwijk, managing director of Hong Kong-based consultant Precious Metals Insights Ltd.
“That, coupled with ongoing high levels of investment is likely to create the need for more dedicated storage space for silver in bullion and also intermediate forms.”
Gregor Gregersen, founder of Silver Bullion, said he started searching for a bigger warehouse two or three years ago and that decision was vindicated last year when demand for the metal surged during the coronavirus pandemic.
“The idea is to make this into a really iconic building,” he said during a tour of the vault that will be known as The Reserve. “There isn’t really a facility built specifically to store large quantities of silver securely.”
Singapore has a reputation as a stable financial centre and has taken steps to position itself as a bullion hub, exempting investment-grade gold, silver and platinum from a goods and services tax.
Physical investment in silver, which covers bullion coin and bar purchases, is expected to reach a six-year high of 257 million ounces in 2021, according to the Silver Institute.
Spot silver, currently trading around $25 an ounce, is forecast by Citigroup Inc to peak at $28 to $30 in the second half, aided by “still solid” investment demand and an end to physical de-stocking in China and India.
The lender sees the price averaging $27.30 this year. Morgan Stanley, meanwhile sees the metal averaging $25 an ounce in 2021, up 22% from last year.
Gold, meanwhile, is stabilizing after its first quarterly loss since 2018 amid high bond yields and optimism over the global economic recovery from the pandemic that’s damping demand for the metal.
Citigroup sees gold, currently fetching around $1,740 an ounce, falling to $1,575 in six to 12 months.