Singapore's rise as a gold hub on a par with London, New York and Switzerland is proceeding despite the recent pullback in the yellow metal's price.
As a result of the new refinery, gold scrap that would have once been shipped from South East Asia to other countries with refining capabilities will now go to Singapore.
"Singapore is gradually building up its own ecosystem for the gold market, seen in the increasing number of banks that are opening storage facilities there and the new Metalor refinery. The Singapore government has planned well with its initiatives and managed to stay ahead of the curve. Further development of the gold value chain will only help to enhance the possibility of the island becoming a gold trading hub," said Cheng.
Slump in price
Following 12 years of gains, gold prices recently tumbled and the gold market now looks to be heading for its worst year in decades.
According to the World Gold Council, gold demand plunged 23 per cent in value between April and June 2013 to $39 billion, the biggest quarterly loss since modern trading began in the mid-1970s. Despite this fall, demand has remained strong in Asia.
This slump occurred amid speculation that the US Federal Reserve would taper, or cut, its quantitative easing programme in response to an improving US economy. As gold benefited from fears that QE would undermine fiat currencies such as the dollar, so the prospect of QE ending has removed some of gold’s safe-haven attraction.
Cheng also attributed the rapid decline in the price of gold to outflows from gold-backed ETFs as a number of hedge funds and speculative investors exited their positions in response to a US recovery.
"The US economy started to pick up at the beginning of the year and it seems people were more willing to take a risk on the stock market than in previous years. Since April, we have seen an exodus of hedge funds and speculative institution investors leaving the ETF market, resulting in the price of gold falling," said Cheng.
"The prospect of the US government tapering quantitative easing by the end of 2013 had a disproportionate downward impact on the price of gold as some investors in ETFs saw their key rationale for seeking a safe haven in gold fade," Cheng said.
The rise of Asia
Asia's influence in the gold market has been rising in recent years, with China and India now accounting for the lion's share of global gold demand.
China and India, where gold is an essential part of weddings and gift giving, now account for over half the global demand for gold, according to the World Gold Council.
Cheng argues that the increased demand for jewellery in China and India has been driven by the fall in global gold prices, which have made it more attractive for Asian investors.
"Because of the decline in the price of gold we have seen a huge increase in jewellery demand, which has helped to stabilise the market," said Cheng.
Last month, the WGC said that China's gold demand could hit a record 1,000 tonnes this year and that the country is set to overtake India as the world's top gold consumer.
"I definitely believe gold demand in China will overtake India at some point, although only by a small margin. It does not really matter though, as these two countries are the twin engines of the gold market and account for the majority of global gold consumption. If China and India continue to buy gold, I think the market will remain positive," added Cheng.