(BSS/AFP) - Singapore on Tuesday launched a gold storage service for foreign central banks and other financial institutions, as it seeks to bolster its position as a key precious metals trading hub.

The Monetary Authority of Singapore said the facility, housed in the city-state`s national currency vault, could store 500 tonnes of gold but could expand that as demand grows.

The service will provide foreign central banks, international financial institutions and sovereign entities "with a secure option to hold gold reserves in Singapore", the MAS said in a statement.

Select Singapore-based bullion banks providing gold-related services to these institutions will be offered "gold custody accounts", it added.

The move comes as Singapore seeks to capitalise on growing demand for gold trading and storage services in Asia.

It follows Hong Kong launch of a trial for a gold clearing system in July, with the backing of several major banks as it looks to become a bullion-trading hub.

Singapore already has a commercial vaulting capacity of more than 2,000 tonnes catering to bullion banks, institutional investors and the ultra rich.

Gold has traditionally been regarded as a safe-haven asset during periods of financial instability, while central banks hold it as part of their international reserves.

Singapore, one of Asia`s leading financial centres, is seeking to expand its role in the global bullion market, which has long been dominated by established trading hubs such as London and New York.

Asia accounts for "roughly 70 percent" of annual consumer gold demand worldwide, shifting the "centre of gravity" to the region, Singapore Deputy Prime Minister Gan Kim Yong said in June.

China and India were the "top contributors of bar and coin demand" last year, he said.

But the region`s gold market infrastructure has lagged, creating a trading gap in the Asian time zone, according to Gan.

The MAS said a joint initiative with the finance ministry will expand goods and services tax waivers for specified wholesale gold-market activities such as storage, refining, assaying and broking, expected from April next year.

"Taken together, these initiatives will put in place the key building blocks for a deeper and more vibrant Singapore gold market, facilitate price discovery and risk management during Asian trading hours," MAS said.

The Singapore Exchange and six founding clearing banks are preparing to launch an over-the-counter gold clearing system, with live trading expected to begin in the first quarter of 2027, according to MAS.