Why SGX Gold Kilobar Contract is a Major Flop

I was reading an article written by BullionStar on SGX Kilobar and could not help but agreed with all the points. The blogger has correctly pointed out the major flaws in the product offering from SGX and also compared it to BullionStar’s products.

From a Singapore Inc perspective, of course I hope SGX’s project will be a success as it could have played a major role in fulfilling Singapore’s desire to become a gold trading hub, thus boosting our economy and creating more high-value jobs for fellow Singaporeans. Unfortunately, SGX messed up royally and thus, I foresee that Singapore may miss the golden opportunity to become a trading hub if the situation is not addressed adequately.

Gold and Silver

Firstly, by setting a 25 x 1 kilo bar of gold contract, SGX has inadvertently made this product exclusive for the big players. Not many retail players can afford to fork out $1.35 million and there are not many gold buyers who are interested in buying 25 kilobars of gold, especially in a small market like Singapore. In this regard, I am quite convinced that SGX has not done much market study on the gold demand before launching this product. If SGX is working with government bodies like IE Singapore to enhance the liquidity of precious metals in Singapore, then the physical quantum for the gold contract should be lowered. Otherwise, the issue of bullion liquidity will not be addressed.

In the recent market statistics report, SGX revealed that the SGX Kilobar Gold contract recorded a shocking zero trading volume in February 2016, and only 1 contract in January 2016. Such performance is indeed dismal, given that in late 2015, there was a lot of hype on the launch of SGX Kilobar Gold. Perhaps the root cause is the complex process involved in the opening of account, delivery of the contract, limited product brands (only 17) and the trading hours. Also, the contracts are quoted in US dollars, so investors need to factor in the currency exchange rates as well.

Most gold buyers prefer a simple and straightforward process of buying and storing their gold or silver in vaults. If the process is too rigid and complicated, most buyers will be too turned off to even consider buying the SGX Kilobar Gold contract. Thus, comparing SGX Kilobar Gold contract to buying physical gold from BullionStar, the latter is more simple and user friendly.

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.

Gold and Silver Bullion
Gold and Silver Bullion

The most compelling product of BullionStar is their Bullion Savings Program (BSP), which I believe is the first-of-its kind in Singapore. There are many allocated gold programs offered by financial institutes or banks in Singapore, but there is none that allows you to convert the gold program balance into physical gold or silver.

With the BSP, the grams in the Bullion Savings Program (BSP) are fully allocated physical precious metal and the BSP grams can be converted to physical bullion bars at any point of time or sold back to BullionStar at any time, BullionStar also publishes a daily report on the holdings of physical metals backing up the BSP at here. From the data in BullionStar’s website, it can be seen that their BSP is getting more and more popular. Thus, start your gold journey today with BullionStar!

Magically yours,

SG Wealth Builder

Leave a Reply

%d bloggers like this: