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Gold Investment Singapore: A Comprehensive Beginner’s Guide (2022)

gold investment singapore
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Gold has had many roles throughout history, including currency as gold coins, jewelry, making electronics, and making art with high value. It is one of the most valuable items globally that cuts across all cultures. Many investors still invest in gold today as it offers an alternative to the standard bonds and stock markets.

Gold is a precious metal considered to have high value and is in high demand during volatile economic times such as the Russian-Ukraine tension and the COVID-19 pandemic. It acts as a hedge against inflation since gold prices rise along with the cost of other goods.

This is because gold is available in small quantities, and possessing it ensures that they will preserve their purchasing power even with low interest.

There are different ways in which investors can gain exposure towards gold. You do not have to acquire the metal or have significant capital to buy-in.

Why Invest in Gold?

Here are some of the reasons why people choose to make an investment in gold:

1. It’s Tangible

Gold is a tangible asset just as property and cast. It is an item you can feel and touch. This means you can physically possess the metal, which can give you the perception of security, unlike investments such as cryptocurrencies, bonds, and stocks.

2. It Is a Safe Investment

Gold has been around for many centuries and has preserved its value over time, proving an excellent hedge for inflations. Most investors fall back on gold during market volatility since it holds its monetary value. 

Some financial institutions offer the option of a gold savings account or gold certification that allows you to sell your gold without any hassles.

3. To Diversify Your Portfolio

Diversifying your portfolio is one way to reduce the risk of your investment. You do this by spreading your investments across different geographies, classes, and industries. If one asset class or industry takes a hit, your portfolio will not take a huge hit.

Gold is one way to increase diversification for your portfolio since it has a low correlation to significant assets.

4. It Is Globally Accepted and Recognized

Gold is recognized across the world. This means you can quickly sell gold anywhere across the world.

5. It Has a Visual Appeal

Some people might not purchase gold for investment reasons but because it looks elegant and classy. This includes items such as necklaces, wedding bands, bangles, and earrings.

When Is a Good Time to Purchase Gold?

The best time to buy gold is when its price has dropped. Since 1975, the gold price has usually dropped in early January, March, April, and late June. According to history, you will likely get a better price this year than next year since the price keeps rising.

Keep in mind that the price of gold is inversely correlated to other investments such as stocks. Therefore, you will need a substantial amount of bullion before the stock market selloff starts. If you don’t, the price of gold might leave you behind, which will force you to pay off a higher price and a higher premium.

gold coins with graph

What Are the Different Ways to Invest in Gold?

Here are some of the different ways in which people invest in gold:

1. Buy Physical Gold

Gold can be used as a form of currency. It can be bought in the form of gold bullion coins or as gold bars from gold retailers based on the current state of the market. This means you can have a kilobar of gold sitting in your safe at home.

Gold bullions or gold bars can be purchased either online or in person. For example, UOB customers can buy the gold online and collect them from UOB’s main branch in Singapore. You can also use your CPF account to buy gold under your CPF investment. Find out more about UOB gold price.

Gold jewelry is another way to invest in gold, but it is not the same as investing in actual gold. The price of gold jewelry includes paying for craftsmanship and branding, which is not related to the price of gold.

Jewelry has more value than its gold content and is therefore valued as an antique. Moreover, gold jewelry is categorized as standard gold at the usual GST instead of an IPM.

On the other hand, investing in physical gold requires physical storage and insurance, which are an additional cost of owning physical gold. Most investors keep their gold bullions in safety deposit boxes or vaults rather than keeping them at home. Physical gold can be stolen even in the smaller version of gold bullion coins.

Verification is another essential part of purchasing gold. Ensure that you pick a trustworthy seller since it is prevalent for unethical sellers to mix their gold with other metals hence reducing the content of the gold. It is best to go for dealers registered by the Monetary Authority of Singapore.

It is also vital that you consult an insurance professional to learn the best way to insure your gold. Most insurers have requirements on how to store your gold before they sell you the policy.

Pros

  • Sense of security since you can feel and touch the gold
  • Proud owner of gold bars

Cons

  • Gold bars and gold billion coins take up space
  • Extra cost on the safety deposit box to keep the gold secure

2. Gold-Linked Currency Investments

Gold-linked currency investments are designed for investors who seek high rates on funds and do not mind receiving their earnings in the form of gold.

These investments are liked by currencies such as the USD. So the USD is paired with gold (XAU). The tenure for this investment can range from one week to three months, with the minimum investment being S$30,000.

How to invest in gold-linked currency investments

  • Select the currency you want to pair the gold with. It can either be USD, SGD, or AUD.
  • Agree on a Target Conversion Rate (TCR) which will be applied between the pair currency and XAU.
  • Decide on your placement tenure.

Once your tenure matures, you will be given the principal and coupon based on the base currency or the XAU, depending on the exchange rate compared to the TCR agreed upon.

Pros

  • Gold maintains value through the market and economic uncertainties
  • Gold linked currency investments can improve your hedge against inflation pressures and certain currencies
  • Diversifies your portfolio

Cons

  • It has a high initial investment

3. Gold ETF Or Unit Trusts

If you do not want to purchase physical gold, you can invest in gold by investing in exchange traded funds that holds, owns, and gets its value from physical gold. You will get exposure to the gold market cost-efficiently without buying physical gold.

ETFs have proven to be a popular investment option for many Singapore citizens. The SPDR Gold Share ETF is taking the lead and has registered the highest monthly turnover value among all the exchange traded funds listed on the Singapore Exchange.

You can trade gold on the stock exchange in the form of gold ETF, making them highly liquid and accessible to most retail investors. Other than the SPDR Gold Shares ETF, which holds more than USD$70 billion worth of gold bars, there is the iShares MSCI Global Gold Miners ETF and the VanEck Vector Gold Miners ETF that track gold mining companies. Find out more on the best etf to invest in Singapore.

Pros

  • You have exposure to gold without having to own physical gold
  • Highly liquid and can be sold and bought off the stock market
  • An efficient and low-cost method of investing in a selection of gold stock to build your portfolio

Cons

  • Expense ratio and commissions apply when buying and selling gold ETFs
  • Lesser-known ETFs can be hard to sell.

4. Gold Mining Stocks

Instead of investing in gold ETFs, you can decide to invest in individual stocks linked to businesses in the gold mining industry. Gold mining stocks are from companies that extract the precious metal from the mines.

Such stocks include the Barrick Gold Corporation and Newmont Corporation. Newmont Corporation is the world-leading gold miner with mines in over nine countries and is the only gold stock listed on the S&P 500 index.

Gold stocks allow you to make quick trades, similar to buying ETFs and other types of stocks in the stock market. If you are an investor who prefers to invest in dividends, you should consider investing in gold stocks rather than physical gold.

Pros

  • Have high liquidity
  • Purchased and sold on the stock market
  • Some gold stocks give dividends to their investors

Cons

  • Prone to market volatility
  • Less diversified

5. Gold Certificate

Since storing physical gold can take up a lot of space, you might want to consider getting a gold certificate instead. These certificates can be exchanged for physical gold or cash and held by two holders.

A good example is the UOB gold certificates sold in kilocerts priced the same as a gold bar. It holds a maximum of 30 kilobars for every certification. Gold certificates have no expiry dates, so you will not be forced to liquidate your certificate if you do want to.

They, however, come with a fee. For example, UOB charges a S$5 flat rate for every certificate and a service charge of S$72 per kilobar per annum, subject to GST.

The Pros

  •         Do not take up physical space
  •         Same as buying a gold bar

The Cons

  •         You will incur fees
  •         You must keep your certificate safe

6. Gold Savings Account

A gold savings account allows you to buy and sell gold without physically purchasing the gold. Gold holdings are recorded in grams, and the minimum transaction per transaction is five grams of gold.

The Pros

  •         You can buy gold using CPF
  •         It does not take up physical space

The Cons

  •         Incurs a monthly service charge of 0.25%
  •         The minimum quantity per transaction is 5 grams of gold
  •         Minimum balance of 5 grams of gold

Gold Prices Throughout History

Here are the gold prices from 1967 to 2022.

Source: https://www.macrotrends.net

Factors to Consider When Purchasing Gold

Here are some of the things to look out for when buying your gold:

  • The level of purity
  • The cost per gram
  • Genuine certification
  • Additional charges
  • The buyback terms from the seller
  • The cost of insurance and storage

Closing

Investing in gold will hedge you against inflation. You can invest in gold apart from purchasing physical gold, including gold stocks, ETFs, gold savings accounts, and gold certificates. However, before you invest in anything, make sure you fully understand how the investment makes you money.

Key Takeaways

  • Gold is considered a haven in investment since it holds its value even in turbulent markets.
  • There are different ways to invest in gold other than buying physical gold, including stocks and ETFs.
  • Gold is still prone to price swings.
  • You will incur an additional cost for storing and insuring your gold.

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