How to invest in gold in Singapore

Gold price has been on a tear recently with year to date gain of 29.15% outperforming the S&P index gain of 19.75%. Many investors, gurus and bloggers usually do not recommend investors to buy gold as it does not produce income. In fact, Warren Buffett has been very vocal about his disdain for gold as an investment. He sees little to no value in it. What Buffett refers to as a lack of value results from a lack of usefulness. He once stated about gold, "It doesn't do anything but sit there and look at you." However, investors should still consider gold as part of their investment portfolio. This is due to the following reasons:

• Gold is a good hedge against rising inflation
• Gold is a good investment from rising political tensions in the Middle East
• Gold is an alternative to the fiat currency and falling USD. US debt now stands at USD35 trillion. US can never pay back its debts. The FED has to lower interest rates so that the interest payments can be reduced or print money to monetise the debt.
• Gold is an excellent way to preserve your wealth.
• Central banks have been buying gold.

But before you put any of your hard earned money into gold, let's dive into the market outlook for gold and how to invest in gold in Singapore.

Market outlook for gold

As you can see from the above chart, gold price has been on the uptrend over the long term. Of course the S&P index far outperform gold in terms of price appreciation. However, the outlook for gold is still bullish over the long term due to the reasons I describe above. In fact, there is talk that the BRICs nations may introduce a commodities back currency to rival the USD. Also, with the FED cutting interest rates and is poised to cut further, inflation may rear its ugly head again. All these point to the bullish outlook for gold.

How to invest in gold in Singapore

Once you have decided on buying gold as part of your investment portfolio, you can invest in gold in Singapore through various methods, each with different levels of risk and storage considerations. Here’s a guide on how to invest in gold in Singapore:

Physical Gold

You can buy gold bars or coins in Singapore from reputable dealers such as:

• United Overseas Bank. You can buy physical gold bar from UOB. However, only UOB main branch sells gold. Currently, UOB does not sell gold coins. They only sell gold bars and are mostly Pamp gold bars.
• BullionStar, Silver Bullion and GoldSilver Central. They are the more popular dealers in Singapore and has more varieties of gold bar and coins to choose from compared to UOB.

However, if you buy from dealers, you need to check the spread and premium over the spot gold price. Some dealers charge higher premiums than others. Also, you need to ensure that the Mint is a accredited by The London Bullion Market Association (LBMA). The popular Mints will be the Royal Canadian Mint, Perth Mint, PAMP, Argor-Heraeus, etc. In addition, when you buy gold from dealers, it is advisable to ask them to test for you the purity of gold. It should only be 9999 fine gold. If you buy physical gold, the disadvantage is the storage cost. You can store the gold in your home or in a secure storage area that is offered by UOB, Bullionstar and Silver Bullion.

Gold Savings Account

You can open a gold savings account at UOB. This account allows you to buy and sell gold without holding physical gold. You can then profit from gold from the price appreciation. Bullionstar also offers the bullion savings program. You need to be aware of the buy/sell spread and other fees that may apply.

Gold ETF

The 2 main ETFs are SPDR Gold Trust (GLD)  or Sprott Physical Gold Trust (PHYS) both of which are listed in the US. Though GLD is the more popular of the 2 ETFs, PHYS is preferred as PHYS is backed by 100% physical gold.

Gold Crypto

You can also buy PAX Gold (PAXG) and it tracks the gold price very closely.  PAXG offers investors a cost-effective way to own investment-grade physical gold with all the benefits of the blockchain. Each Pax Gold token is backed by one fine troy ounce of gold, stored in LBMA vaults in London. If you own PAXG, you own the underlying physical gold, held in custody by Paxos Trust Company.

Gold Certificates

Gold certificates is only offered by UOB. Gold certificates represent ownership of a specific amount of gold without the need to store it physically. It’s an alternative to holding physical gold with lower storage concerns.

Gold Mining Stocks

Investors can also invest in gold mining companies. In Singapore, CNMC goldmine is a gold mining company listed in Singapore. In its latest half year results ended 30 June 2024, CNMC goldmine reported revenue up by 13.1% to USD29.67 million while net profit is up by 159% to USD5.53 million. The dividend yield is not shabby too with yield of more than 3%.

Tips Before Investing

Before you invest in gold, here are a few tips which might prove useful to you.

• You need to consider your risk appetite. Like stock prices, gold also see price fluctuations. However, gold price fluctuate lesser than stocks. Also, unlike stocks where you may invest in the wrong company and cause you to lose money, gold investment does not have such problem.
• Always take note of the counter-party risk. If you buy gold ETF, gold certificates, gold savings account etc, there is always the counter-party risks. If you buy physical gold, you do not face such risk.
• It is good to diversify your portfolio. Is not advisable to only have gold in your portfolio. Have a mix of gold, stocks, etc in your portfolio.

In this article, I describe on why you should consider buying gold and how to invest in gold in Singapore. Investors need to do their due diligence before investing in gold.