Gold Investment in Singapore: Wealth Insurance with the Historical Standard Store of Value
In an unbroken line stretching to the beginnings of civilization, gold has served as the ‘’basis’’ of money. It has a long history of being the store of value and the standard backing world economies. By 1900, all major international economies converted to the gold standard, meaning that they were essentially monetary systems in which paper money could be exchanged for a fixed amount of gold. In short, the value of paper money was determined by gold. Governments used to use gold as a means of settling trade disparities between nations in the time of economic turmoil, social upheavals, wars, etc.
The beginning of the 21st century saw the price of gold rise from US$265 to US$1400 in only ten years. The staggering rise in gold rates can be explained by several factors: the decrease in gold production, the renewed interest of central banks in gold bullion, and the Wall Street crash in 2008. All of these factors contributed to the rise of the new Bull Market governed by the demand for physical investments.
Still, why gold?
The high value of gold is owed to the fact that it is hard to find, available in low concentrations and extremely expensive to produce. In addition to being scarce, gold is very durable and easily divisible. Although diamonds are also scarce and durable, they cannot be divided into smaller units as efficiently as gold to be used as a reliable exchange currency.
In addition, physical gold is considered the ultimate store of value because it can be easily transported. Compared to other physical investments that are scarce and portable (such as artwork), the value of gold is easier to ascertain. Additionally, no other material is as universally recognized as gold. Boasting a rich history dating as far back as 2000 B.C., gold has both a monetary and cultural value.
Also, unlike silver or platinum, gold has very little industrial use, so its value is considerably less volatile. Only 10% of gold mining production is used in industry, where it is mostly consumed and lost. The rest gradually accumulates in the form of jewelry and bullion, which can be stored and used for investment.
Finally, physical gold retains its purchasing power unaffected by the fluctuation in price of different goods and services, which is not the case with fiat currencies. For example, the US government’s Consumer Price Index (CPI) presented data showing that USD has lost 96% of its value since 1913, with its value diminishing by an average 3.2% per year. By contrast, CPI recorded a 240% rise in gold’s purchasing power in the same time period, with gold rising in value by an average of 4% per year in USD terms. This only serves to prove gold’s status as a trustworthy long-term inflation hedge and the most reliable measure of stability in monetary value.
Redefining investment with gold
There’s an ongoing debate regarding the usage of gold for investment due to its inability to earn interest over a short period of time. Since precious metals do not produce yield, the purchase of physical gold for the purposes of speculative investment is not advised. Instead, gold should be viewed as a store of value and a form of hard currency rather than as an interest-producing asset.
Many investors are attracted to the standard investment option due to its initial affordability. Investing in gold through Exchange-Traded Funds (ETFs) - futures contracts such as iShares COMEX Gold Trust (IAU) – and Gold Stocks means minimal margins since there is no physical production. This is again an instance of speculative investment where investors are ‘’betting’’ on the price of gold in hope it will appreciate so they could get a return on their investment. However, all of these are still just financial instruments and as such are almost always settled in cash despite the fact that there is an underlying asset backing these instruments. Yet, there have been cases where the requested physical delivery couldn’t be executed. As a result, settlements had to be achieved through court proceedings.
Gold as a long-term investment asset
If we consider gold as a long-term investment asset over a period of at least 10 to 15 years, we can realize its real power as a ‘’store of value’’. Namely, gold can retain its value over a long period of time, a quality that other investment assets don’t posses, which makes it the ultimate insurance against systemic risks such as economic crises, the likes of which we have experienced in 2008.
Moreover, due to gold retaining its value, investors are purchasing physical gold and repurposing it as inheritance or college funds for their children and grandchildren. Some investors use their physical gold as ‘’start-over funds’’ they could fall back on if all other investments fall through.
Gold investment in Singapore
Asia is driving the global demand for gold, underpinned by the continuing increase in household incomes, as well as the cultural affinity for this precious metal. Rapidly developing into Asia’s hub for precious metals trade and storage, Singapore has a unique strategic position conducive to capturing the physical flow of gold.
Furthermore, Singapore is situated in close proximity to global gold mining supply centers such as Australia, Indonesia, Papua New Guinea and the Philippines. Boasting a direct connection by air with 280 cities around the world, Singapore is at the center of global gold trade.
Moreover, investment grade gold bullion falls into the category of Investment Precious Metals (IPM) and is, as such, non-taxable in Singapore. In other words, investors from around the world can import their gold bullion tax-free in Singapore.
Finally, Singapore boasts cutting-edge logistics behind IPM gold import, trade and storage. Namely, Metalor Technologies’ first Southeast Asia refinery was opened in Singapore, eliminating the need to transport the gold to Switzerland or Australia for refining. Furthermore, Singapore Freeport was modeled after the Swiss Freeport and represents the vital component in gold bullion import and trade.
Finally, Singapore-based companies such as Silver Bullion are constantly working on innovative ways to leverage Singapore’s jurisdictional protections. Silver Bullion’s subsidiary The Safe House (TSH) was awarded a bonded warehouse status by the Singapore Customs Office, meaning that it can handle all customs procedures within its own facility. In addition to being a reliable logistics partner, TSH is primarily a state-of-the-art vaulting facility that offers ‘’all risk’’ insurance for the clients’ IPM gold bullion. Also, Silver Bullion’s Bullion Storage guarantees the buyback of stored bullion, which is a fantastic option for investing in IPM gold bullion; that is, using it as insurance against systemic risks, ‘’start-over fund’’, etc. The clients can buy and store their bullion in one of the safest vaulting facilities in the world, and choose to sell it back whenever they want or need to.