SG Wealth Builder

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Devastating effect of Brexit

As one of the very few reserve currencies in the world, Britain’s Sterling pound is considered to be one of the most popular reserve currencies held by many central banks. Historically, Sterling is the third most widely held currency, after US dollar and Euro. Thus, one cannot ignore the devastating effect of Brexit on Sterling pound when it recently plummeted to historic low. Currently, Sterling is trading at a 31-year low and this led to a lot of fear in the market.

Market turmoil

The current turmoil stems from the massive drop in the Sterling pound which wiped off billions from the markets. Governments which hold Sterling pound as foreign currency reserves suffer huge losses. Many investors fled for safety and bought into Japanese yen, causing the yen to rise substantially. The upward swing results in Japanese exports becoming expensive overnight and potentially worsen the deflation condition in Japan economy.

The havoc in the currency markets may prompt central banks to take drastic actions before the situation manifests into global crisis of confidence. Some of the possible measures may include further interest rate cuts, stimulus packages to encourage spending or even negative interest rates, which Japan and several European countries have recently implemented. Central banks may likely to also increase their gold holdings to mitigate the losses from the Sterling devaluation.

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The intervention risks arising from monetary policies would have significant consequences for the man in the street because these actions often led to inflation or deflation. Inevitably, the value of their currencies will diminish and thus those who hold their wealth in fiat currencies would see their purchasing power drop. In the face of uncertainties arising from Brexit, investors do not have many alternative safe assets to preserve their wealth.

Gold as safe haven

Gold is seen as a safe haven to hold during uncertain times. This time is no different. According to World Gold Council (WGC), it is expected that there will be a “strong and sustained inflows into the gold market” due to the heightened market uncertainties. Indeed, gold price had surged from US1050 to US1300 per ounce since the start of the year, making it one of the best performing assets for wealth builders. If central banks start to increase their gold holdings, then the price surge will likely to continue.

Data from the WGC report revealed that Gold ETF has witnessed a sharp increase in holding and there are trends of retail investors snapping up gold coins before the Brexit event. Demand for gold bullion is expected to accelerate and continue for the coming months. Thus, WGC is very bullish on the outlook of gold in the near term.

Protect your wealth

As a wealth builder, it is not possible for you to predict the systemic risks in the financial system. Nor would you be able to accurately forecast Black Swan events that can possibly destroy your assets. Instead, start to insure your wealth and diversify your portfolio in alternative safe assets like gold bullion. Gold bullion carries no counter-party or intervention risk, thus making it an ideal asset to hold during times of crisis.

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.

Gold and Silver Bullion

Gold and Silver Bullion

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:

  1. PAMP Gold Bar – 1kg
  2. American Gold Buffalo Various Years
  3. BullionStar Mint Gold (No Spread)

Singaporeans who still think that they can win the stock market should wise up. The matter of fact is that the odds are stacked firmly against retail investors and those who did not diversify their portfolios are taking on big risks. Just one market correction and their wealth would be gone. Instead of risking your hard-earned money on speculative shares, start buying real physical gold from a trustworthy bullion dealer.

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Magically yours,

SG Wealth Builder

Updated: June 29, 2016 — 1:57 pm

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