Below is an email from one of my readers. I feel obliged to reply him because it is the first time that I received queries that touched on precious metals, a topic that I have a lot of interest in and am still learning. Through this sharing, I hope that there is a better understanding of precious metals among Singaporean investors.
Dear SG Wealth Builder,
I came cross your blog and enjoyed reading the articles. I am considering to buy gold and silver bars from dealers and also like to rent their vault storage facilities in Singapore. As such, I will be very grateful if you could help me by answering my questions stated below.
1. Do you have the list of licensed bullion dealers in Singapore?
To the best of my knowledge, based on information gathered from IE Singapore, there is no licensing requirements for the import and export of precious metals in Singapore. IE Singapore is the lead agency tasked to grow Singapore into a precious metal trading hub. Thus, this policy of not regulating bullion dealers make sense because Singapore government’s objective is to ensure a free flow of precious metals through Singapore without any hassle.
Actually, until a few years ago, I also shared the same thoughts that bullion dealers are regulated by Monetary Authority of Singapore until BullionStar revealed to me that bullion dealers don’t actually need a license to trade in Singapore.
2. I understand from friends that there were instances of exit or closure of some bullion players in the Singapore market in the past. How are investors or customers who keep their bars in their vaults protected in the event of their closure/bankruptcy and exit from the local market? Is there any provision for recourse in the Securities and Futures Act on this? In fact, is MAS even the regulatory authority because it regulates financial products but bullion are physical commodities?
This is a good question and I actually spent a few days pondering about it because I want to refrain from making sweeping statements about the bullion industry. 2012 was a water-shed year for the local precious metal scene due to the announcement of the Good and Services Tax (GST) exemption on investment-grade precious metals by Singapore government. This resulted in many new bullion players entering the scene. Given that the bullion business is all about trust and reputation, retailers’ concern on the credibility of the bullion dealers are justifiable.
In fact, buying from a reliable and trusted bullion dealer should be the top priority before you even consider buying a precious metal. Don’t just go for dealers offering the lowest premium and lowest spread. The low margins are not sustainable for such fly-by-night dealers. You may also be surprised that in Singapore, most dealers only buy back precious metals sold by themselves and very few buy back precious metals sold by other dealers. BullionStar is one of the very few local dealers which you can sell your bullion bought from other dealers.
I am not aware of any laws that govern the interest of investors who keep their bullion in the vaults of bullion players. To circumvent this, always buy insurance to protect your gold and silver bars. The key considerations when choosing gold vaults are the financial soundness of the dealers and the reputation. There is a list of corporate members of Singapore Bullion Market Association and you can find it here. The qualifying criteria is quite stringent and thus you can trust the credibility of the dealers in this member list.
3. I know that there are many brands of gold and silver bars from different refiners. Could you advise me on what factors one should consider when selecting a particular brand?
When it comes to different brands of bullion, please make sure that the refiner is accredited in the London Bullion Market Association (LBMA) list which is endorsed by IE Singapore. Besides this, please also check that the purity of the gold bullion is at least 99.5% and silver bullion is at least 99.9%. These two factors (LBMA accreditation and purity) are the two factors for bullion to be considered “investment-grade” bullion in Singapore.
Most importantly, new bullion investors must avoid buying numismatic gold or silver at all cost because such collectible bullion are difficult to gauge their real market value, especially for novice buyers. You will surely end up being ripped off by unethical dealers who will often exploit unwitting buyers’ lack of knowledge.
4. Is it safer to store bullion in banks and are their vault storage charges more competitive?
In Singapore, the only bank that sells bullion is UOB but they don’t have vault storage. However, they do have safe deposit boxes which you can rent to store your precious metals. The rental charges can be found in their website. Whether it’s safe to store bullion in banks is not for me to judge but if I have a substantial holding of gold or silver bars, I would look for dealers that offer a one-stop services that include buying, selling, delivery and storage.
When it comes to security of the vault, you should not take chances even though Singapore has a safe jurisdiction. Choose a vault that allows you to check your assets online, view the audit reports, insure your bullion and has strong security features. In this regard, BullionStar’s My Vault Storage is the online solution for wealth builders seeking to store their wealth in good hands.
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SG Wealth Builder