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4 Ways For Singaporeans To Invest In Gold
Gold used to be the commodity to turn to when stocks markets are in a rout, but it seems that times have changed.
In fact, with the huge volatility and large declines in stocks markets recently, gold fell to its lowest in 5 and a half years in July this year, registering at US$1,077 per ounce. While the price has recovered more than 5 percent to the current $1,138 per ounce, gold price is considered cheap, taking into consideration that at its peak, the precious metal was at around the $1,900 levels in 2011.
While some people shun from gold as an investment and call it a piece of 'useless metal', there are others who trust in its value given its historical significance as a currency.
If you belong to the latter, it could be worth looking at the various ways to buy into the commodity while prices are considered low now.
GET.com shows you 3 ways in which you can have some investment exposure to this hard asset:
1. Bullion Coins And Bars
Modern bullion coins allow investors to own investment grade gold (between 0.90 and 0.9999 fineness) legal tender coins at a small premium to the spot price of gold.
Examples of gold bullion coins are:
Canadian Maple Leaf Gold Coins
American Eagle Gold Coins
Australian Kangaroo Gold Nuggets
Singapore Lion Gold Bullion Coin
For SG50 this year, an SG50 $50 Gold Proof Coin was released, costing $890 for just 7.76 gram of gold. Using the current gold price at US$1,138 per troy ounce of gold, this translates to around $51.60 per gram.
This works out to around $400 for the cost of gold used in the coin, which means you are paying a high premium of $490.
Investing in gold via gold coins and bars then, may not provide the best returns.
Bullion bars come in different size and weight and major banks have gold counters that sell gold coins and bars. If you are still interested, you can check out UOB and the Singapore Mint to enquire about buying gold coins and bars.
2. Gold Jewellery
Chinese and Indians have a huge cultural affinity for gold jewellery, and it is no wonder they are the biggest consumer of gold globally. These feature greatly during festivals and celebrations.
Even in Singapore, buying gold jewellery during Chinese New Year and weddings are still a big part of our culture. Gold jewellery shops here usually display the price of gold per gram, and use it to calculate the price of a piece of jewellery based on the weight.
While the price of gold is more or less standard across jewellers who are certified by the Singapore Assay Office, do note that there is usually a workmanship charge on the piece of jewellery.
While it's hard to bargain for a lower gold price per gram, you can try to bargain on the latter.
3. Gold Exchange Traded Funds (ETF)
Gold ETFs are traded on the major exchanges and tracks the movements of the underlying gold price. Each share of the ETF denominates a specific amount of gold. The biggest gold ETF is the SPDR Gold Shares which trades on the SGX.
ETFs provide an easy way for an investor to gain exposure to the gold price. Investors can buy and hold shares of an ETF on a long-term basis and do not need to deal with the hassle of storing physical gold which comes with expensive storage fees.
4. Gold Futures
For the ones who have a bigger stomach for risk, gold futures contracts can provide a quick way to speculate on gold price. Gold futures are traded on various exchanges and are traded on margin basis.
This means that you only pay a fraction of the value of the contract upfront. Futures are considered leveraged products and are thus not recommended for passive investors or income investing. This is definitely not for the faint-hearted.
Choose The Best Method According To Your Risk Appetite
While a seasoned gold investor may use futures as his desired investment vehicle, this may not be suitable for a retiree who is seeking to preserve his wealth.
An in-depth assessment of one’s risk profile and motivation for gold investment is required in order to decide which option is most suitable.
If you are looking to diversify and to ensure that your CPF funds keep up in an inflationary environment, having a portion in Gold ETF is prudent.
Gold is also well-known for its low correlation with other risk assets, thus making them a good portfolio diversifier.
What do you think? Share your comments with us below!
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