When it comes to investing in gold, there is a need to understand the fundamentals and study the long term trend of the gold spot price movements. According to BullionStar, the global daily amount of gold mined is only 9 tonnes, yet the daily trading volume in London amounts to 5,500 tonnes. Why is this so and how does this affect the price of gold? Should wealth builders buy gold, now or never?
London is the heart of all the gold trading activities and is regarded as the world’s largest gold market. The market in London set the price for spot gold for the rest of the world to follow and London is also the home of London Bullion Market Association (LBMA), a renowned trade association known for setting the refining standards, trading documents and trading practices. Henceforth, the data concerning gold trading activities in London will provide insights on the value of gold moving forward.
Generally speaking, the supply and demand rule is not strictly applicable to physical gold. In fact, the total amount of gold mined will have limited effect on the price movements of gold because 95% of the gold traded in London is actually unallocated. This means that the trading instruments for gold in the London market are mostly not backed by physical gold. Investors are merely betting on the movement of the gold spot price to make money and it is important to note that there is no underlying real gold for many of these paper gold trading instruments.
The trend of the paper gold plays a dominant factor in how wealth builders should allocate gold in their portfolios. Like all asset classes, there are bull and bear cycles for gold. From 1977 to 1979, gold soared from USD150 per ounce to USD820 per ounce. Then from 1979 to 1982, gold crashed to USD300 per ounce. Subsequently, for the next ten years, gold’s price hovered around USD380 to USD400 until the 90s, which was a roaring period for the stock market. The bull run for the stock market led to a bearish sentiment for gold as everyone’s attention was fixed on the stock market.
Then a series of unfortunate events occurred for the global stock markets. The 9/11 terrorist attacks, followed by the deadly SAR disease and bird flu led to a period of economic downturns from 2001 to 2005. It turned out to be a blessing in disguise for gold, which soared from USD250 in 2001 to an incredible $1900 to 2011. Wealth builders who amassed gold bullion during that period would have seen their wealth increased explosively. What a fine bull run for gold! Subsequently, gold entered a period of bear run from 2011 to 2016, declining from a high of USD1900 to USD1050 per ounce. Is gold entering a new chapter or could this be another value trap?
To put things in perspective, wealth builders who bought gold bullion 10 years ago can still laugh all the way to the bank if they sold their gold holdings at today’s prices, albeit at lower level as compared to the peak of 2011. But if they really do sell their gold bullion today, they might regret it because gold is now at an inflection point that could lead to a potential upward trend. Personally for me, I have diversified some of my portfolio to include gold bullion because my long term view of gold is still positive. Even if my view could be wrong, I still feel that a correction in price is healthy for wealth builders to accumulate more bullion.
With global economic growth expected to face uncertainties for at least the next few years, gold is the asset class to hold because of its traditional status as safe haven. In the first quarter of 2016, the tremors in the China’s stock market and the announcement of Japan to implement Negative Interest Rates Policy (NIRP) had sent gold spot prices up by 19 percent, making gold the best performing asset.
To build wealth with gold, it makes sense to buy gold bullion in Singapore because of the business-friendly government policies which aim to transform the nation into a precious metal trading hub. To support this goal, investment-grade bars and coins are exempted from GST in Singapore. There are also no reporting requirements for buying, selling and storing of gold bullion to the taxman.
In Singapore, you can choose to buy physical gold from BullionStar, one of the largest online bullion dealers with a store-front shop at 45 New Bridge Road. With BullionStar, you can choose to buy gold or silver bullion online and have them delivered to your home or put them into ‘My Vault’ storage in BullionStar’s secure vault storage facility. Alternatively, you can choose to walk in and buy gold and other precious metals at BullionStar shop and showroom premises.
Setting up an online account is pretty simple and you can choose to pay in different currencies, including Singapore dollar and Bitcoins. In addition, the price is very transparency as BullionStar’s website displays the price premium and spread for each bullion. This allows buyers to make price comparisons online before making the purchase.
BullionStar also offers customers their own minted gold and silver bars with zero spread. They have commissioned world-renowned LBMA-approved Swiss gold refiner Argor-Heraeus to produce these stylish and unique minted 100 gram 99.99 % purity gold bars.
Below are some gold bullion offered by BullionStar that are worth buying:
Singaporeans who still think that buying paper gold is the best way of investing in gold should wise up. Instead of risking your hard-earned money, start buying real physical gold from a trustworthy bullion dealer.
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SG Wealth Builder