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Divested my physical gold

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Recently, I partially divested my physical gold for 10% yield amid the rally in gold price. The reason for selling my gold is not because I lost faith in it but solely to consolidate my funds to prepare for the impending Temporary Occupation Period (TOP) for my Executive Condominium.

The average annual yield from my physical gold investment is about 3.33%. Although the return is nothing to shout about, it is still above the prevailing bank interest rates. It is also above the average inflation rate in Singapore for the past three years.

Interestingly, the inflation rate in Singapore has dropped drastically from a high of nearly 6% in 2012 to negative 1% in the middle of last year. Is negative inflation good for Singapore? Absolutely not the case. If negative inflation persists, it may lead to deflation and causes the economy to spiral out of control. Japan’s economy is a classic example. The country has been struggling with deflation for the past 20 years and has to implement Negative Interest Rate Policy (NIRP) to revive the economy.

gold bullion Singapore

The slide in inflation rate coincided with a corresponding decline in gold price, which peaked in 2012 and suffered a slump till 2016. The geopolitical risks arising from Brexit and Trump election subsequently led to an unexpected price recovery for gold in 2016. This is because gold has always been viewed by investors as a safe haven during times of uncertainty.

My mantra in investment has always been to buy low and sell high. Thus, I sold my gold due to short-term needs. Nonetheless, I still believe in gold’s long term prospect and its role in wealth diversification. In Singapore, many investors still do not regard gold as a mainstream asset to hold as part of their wealth portfolio. But in recent years, there have been a gradual shift in mindset among Singaporean investors.

Last year, in his opening speech at the LBMA Precious Metals Conference held in Singapore, Minister Lim Hng Kiang mentioned that the physical volume of gold traded in Singapore was about 5 times the amount in 2012. Over the same period, employment in the sector has doubled to more than 280 jobs. This is an impressive development and reflected the results of a strong government support in building the infrastructure and implementing progressive policies to support the growth of gold trading in Singapore.

Since the Singapore government removed the Goods & Services Tax on investment precious metals in 2012, there were growth across the entire precious metals value chain, including refining, secured logistics and trading. Metalor Singapore, a gold refinery started operations in 2014 and quadrupled its production to more than 100 tonnes in 2015. A slew of logistic companies like Brinks, Malca Amit and Certis Cisco supported the movement of physical gold.

Gold and Silver Bullion

Notably, the last few years also witnessed the entry of many bullion dealers, among them is BullionStar. The differentiating factors that make BullionStar stands out from its competitors are its advanced online system, innovative bullion products and vault storage.

Buying gold and silver bullion from BullionStar is very straightforward. You don’t even need to visit their store to collect your purchase! The first step is to create your account and then go through 4 simple steps to complete your purchase. Some of the innovative products are their in-house gold bars with no spread and Bullion Savings Program. 

Start building a diversified portfolio and accumulate gold bullion to mitigate the risk of stock market corrections. Nobody can predict the arrival of the next financial crisis but it is important to be always prepared for it. Enjoy the ride.

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SG Wealth Builder

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3 Comments

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  1. I always have a problem understanding this anti-deflation sentiment.

    Every single company on the planet that actually produces stuff, electronics, food, white goods, transport and services is striving to be more efficient and producing more for less. And nobody I know complains about it. Quite the opposite if the shopping basket is more expensive this week.

    So who is responsible for this “we need inflation”?

    As fas as I can work out, it is solely those who love to put us in debt. Govenrments and bankers.

    The governments want to inflate away the sovereign debt they have incurred, so they can take out more.

    The banks want to issue even more debt and have the debtors deeper in the poo.

    The old economist’s BS that if prices are dropping, then purchases will be delayed leading to more price dropping and more waiting is nonsense. Again, nobody I know waits to buy a new car or TV, even though they know that next year a better model will be marketed at a similar or lower price.

    Japan has next to no chance of getting inflation running. They still have not recovered from the huge property boom and bust caused by the bankers. The bust has left most of the banks insolvent and the demographics coupled with the reluctance of young people to “play the game” will mean that the finance industry balance sheet will be impaired forever.

  2. Hi Bob,

    Thank you for your very enlightening comments.
    Well, in my opinion, a short period of deflation is good for the economy because of the moderate drop in prices.
    But prolonged period of deflation is harmful for the country as it could lead to demand destruction for goods and services.
    So in this respect, I think Singapore government has done a good job in managing growth and moderating inflation for the past few years. You need good fiscal and monetary policies to achieve this.

    Regards,
    Gerald
    http://www.sgwealthbuilder.com

  3. Hi,

    Yes, I hope that they continue to succeed in developing the economy of Singapore and maintain a good balance.

    Unlike a number of other countries such as the UK, Europe and Australia who seem to believe that by destroying the currency they can lead the way to success.

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