In times of uncertainty, gold is regarded as a “safe haven” asset class that can hold its value well amid financial market crashes. This was proven to be true during the COVID-19 pandemic in 2020 – which resulted in a steep market selloff. During that time, gold prices held steady and even increased.
Gold also gives you a hedge during tough times (events that cause the value of paper investments like equities and bonds to decrease) or uncertain market conditions
For investors in Singapore who wish to gain exposure to gold as an asset class, there are multiple ways to do so, each with their own set of pros and cons across factors like costs, liquidity, logistical constraints, and suitable timeframe for holding.
#1 Buying And Selling Physical Gold
The traditional method, which has been practised for thousands of years, is to buy and hold physical gold. Although many people may keep gold jewellery, you should ideally buy pure gold bars or gold bullion coins.
There are multiple challenges with holding physical gold, though you can argue that some of them are more of an inconvenience than shortcomings.
First, you need to transport and store the gold. This shouldn’t be hard for most people, since a kilogram of gold is worth about $80,000 based on today’s prices. So, the majority of people may not be able to hold a large amount of physical gold anyway.
Secondly, wherever you choose to store your gold, you have to make sure it is secure, whether it’s a safe at home, or paying for a safety deposit box at a bank. This can be an added cost to storing physical gold.
The third is that when you do want to convert your gold into cash, you’re at the mercy of gold dealers or pawnshops, who often charge a healthy margin for being willing to take in your gold or offer unfavourable rates compared to the spot price.
Finally, with physical gold, you’re at the mercy of whatever denominations your coins or bars are. You can’t decide to just liquidate half your gold bar and keep the other half. It’s all or nothing.
Read Also: Could Your Old Jewellery Be Worth More Than You Think? We Find Out By Getting Them Appraised
#2 Buying Gold Certificates
Sometimes referred to as “paper gold”, these gold certificates can be exchanged for physical gold or cash and have no expiry date. When these certificates are issued, the physical gold that they represent is stored somewhere.
Gold certificates provide their owners with the same benefits of owning physical gold, with an added layer of convenience and security.
However, by not physically keeping the gold you paid for, investors will need to trust that the issuing authority will honour their legal obligations to hand over physical gold or cash when demanded, and that they do not sell rights to the same physical gold to multiple people.
To prevent being scammed, it is important to deal only with well-regulated entities.
Read Also: Complete Guide To Investing In Gold and Silver With UOB And UOB Gold And Silver Savings Account
#3 Opening A Gold Savings Account
A cousin of gold certificates, you can think of a “gold savings account” as a ledger where you can buy and sell gold with more granularity and in varying amounts, as opposed to being limited by the denomination of your gold certificate.
In Singapore, UOB offers gold savings accounts, with minimum quantity per transaction of 5 grams. There is a monthly service charge of 0.25% p.a. on the highest gold balance that month, subject to a monthly minimum charge of 0.12 grams of gold. Since July 2023, accountholders can also convert their holdings into 100g Argor physical gold bars at the UOB Main Branch Gold Counter.
OCBC customers can also open a precious metal account to trade paper gold from as little as 0.01 ounces (or 0.31 grams) of gold. There are no custody or storage fees charged.
Read Also: [2024 Edition] Best Savings Accounts for Working Adults in Singapore
#4 Investing In A Gold Exchange Traded Fund (ETF)
Just as there are Exchange Traded Funds (ETFs) that track the prices of stocks, bonds and other indices, there are also ETFs that aim to track the price of gold.
Since they are traded on the exchange, it means that investors enjoy greater liquidity and price transparency, while not needing to worry about keeping and storing physical gold. They also have the benefit of allowing investors to monitor their gold holdings and returns alongside their other stock and fund investments.
Popular gold ETFs include the SGX-listed SPDR Gold Shares (SGX: O87), the NYSE-listed SPDR Gold MiniShares (NYSE: GLDM) and iShares Gold Trust ETF (NYSE: IAU). As with all other ETF investments, investors should look at each fund’s expense ratio and tracking error when deciding which ETF to use.
You can easily invest in these ETFs via low-cost brokerages such as IBKR, Tiger Brokers, moomoo, Phillip Securities (POEMS), SAXO and several others.
Read Also: Singapore Online Stock Brokerage Account Fees Comparison (2024 Edition)
#5 Trading Gold Contracts For Difference (CFD)
A Contracts For Difference (CFD) provider like IG gives traders the option to trade a wide range of commodities, including gold, platinum, aluminium, orange juice, soya beans and even live cattle.
For the uninitiated, a CFD allows you to trade on price changes (both long and short positions) of a specific underlying asset, which can be commodities as mentioned earlier, stocks, foreign currency, and more. Most CFD providers also allow you to trade using leverage, allowing you to magnify your gains (as well as losses).
CFDs are meant for short-term trading and not long meant for holding on for long-term price appreciation.
Read Also: How CFD Trading Can Support Your Investment Portfolio During A Market Slowdown
This article was originally published on 29 April 2020 and updated to reflect new information.
The post Want To Buy Gold? 5 Ways Investors In Singapore Can Invest In And Gain Exposure To Gold As An Asset Class appeared first on DollarsAndSense.sg.