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.
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 …Read more