Gold on bullet train!

Lifetime Membership What a havoc! Donald Trump’s aggressive tariffs upended the entire world trade order and sent global stock markets into huge turmoil for the past weeks. In the ensuing chaos, US stocks were walloped as US tariffs on Chinese goods hit a whopping 145% while China retaliated with 125% tariffs on US goods. The explosive trade war between the top two global economies sent investors fleeing to gold, turbocharging gold price to high heavens in the process. At the point of writing, gold price hit a record high of US$3,250 an ounce.

The last global trade war took place in 1930 and led to World War II. Given that this generation of investors have not lived in the era of global trade war, investors must not be reckless and enter the market with a view of buying stocks on the cheap. There is a real risk of catching a falling knife. In my view, a disruption in the global trade system is more complicated than a financial crisis and could take years to play out due to the intertwined nature of the trade system between countries.

The tit-for-tat tariffs between US and China have led to claims from analysts that recession is on the way. Many analysts also expect the Fed to have three to four rate cuts in 2025. Against this backdrop, gold price surged due to the economic uncertainty and weaker dollar. As recession anxiety increases, investors turn to gold as a safe haven to hedge against uncertainties.

But what is absolutely puzzling to me was the demolition of US Treasury market. Just like gold, government bonds like US Treasury have always been seen as a safe haven. However, the turmoil in the financial markets saw acute selloff of US Treasury and caused the yield to peak at 4.51% (bond yields move inversely to the price). One reason could be that foreign investors are dumping US Treasuries or it could be investors’ fundamental shift from bond to cash.

Gold price: flying dragon in the sky!

Gold price to hit US$3,000 in 2023?

Singapore government bought bullion!

The recent selloff in the US Treasury, once seen as a safe haven in times of financial crises, is troubling as it indicates a shift in asset classes from US by global investors. So investors must not lull into thinking that the stock market correction is over. For all you know, this crisis could be light from an oncoming train and not light at end of tunnel. As such, investors must stay vigilant and refrain from impulsive or speculative trading.Apart from the upheaval in the bond and stock markets, another notable shakeup is the borrowing interest rate in Singapore, specifically The Singapore Overnight Rate Average (SORA). As at 17 April 2025, Singapore’s 3-month compounded SORA has plunged to a low of 2.46% versus the 3.7611% high in November 2023. In the coming months, with the ongoing global trade war, I presume SORA will continue to plummet even further though US Fed may slow down interest rate cuts in US to fight inflation.

Singapore government ramped up purchase of gold

According to the MAS website on International Reserves and Foreign Currency Liquidity, the volume of gold held in our national reserves in December 2022 was 4.94 million troy ounces. As at January 2023, the volume of gold held surged to 6.38 million troy ounces.

However, in January 2025, the volume of gold held in our reserves swelled to 7.07 million troy ounces. At its peak, MAS held 7.7 million troy ounces of gold in May – June 2024 period. That was before Donald Trump’s became US President for the second time and when gold price was at US$2,300 per troy ounces. Subsequently, as gold price surged, the government started to trim its holding to 7.07 million troy ounces. This means that the government had made a killing from the divestment.

Generally speaking, the MAS is very discreet when it comes to gold buying as it does not make any public announcements over the years. As such, the average gold prices at which the MAS had entered could not be determined. Even though I doubt that the regulator had bought at the lowest prices, the fact that gold price had rocketed after the MAS’ buying vindicated that the purchases were very, very shrewd.

Unlike retail investors, central governments bought bullion as a means to diversify reserves. For Singapore government, this is no exception. Question now is what could have prompted Singapore government to buy gold and if this is the perfect time for retail investors to buy gold?

To put things into perspective, the gold purchases in 2024 were not the first time that Singapore government entered the market in recent years. In 2023, MAS increased its gold holdings following Temasek Holding’s write-off a devastating US$275 million investment in cryptocurrency exchange, FTX.

And then in 2023, the series of interest rate hikes by US Federal Reserves had started to take its toll on the banking sector. Within the span of just one week, three large US banks had failed – Silicon Valley Bank, Silvergate and Signature Bank. The collapses ignited global fear of contagion in the financial sector, leading to another massive financial crisis not seen since 2008.

In particular, the overnight disappearance of Silicon Valley Bank had not only sparked off a global shockwave, but also sent numerous tech companies in US into a tailspin as many of them had deposited funds in the bank. Amid the turmoil in the banking sector, gold price surged from US$1,809 per troy ounce to almost US$2,000 per troy ounce within two weeks.

My investment portfolio

My stock portfolio has been in the red for the past 3 years. I currently hold AEM and Mapletree Logistics Trust. The former has lost 80% in value while the latter has declined 40%. Obviously, I will be lying if I said I was not upset with the performance of the share prices. For sure, the thought of cutting loss did cross my mind. However, I am of the view that AEM may have turned the corner as the company has turned in profits for FY2024 while Mapletree Logistics Trust still continues to pay distributions. Furthermore, I can afford to hold these stocks for the long-term as I have used my CPF and SRS funds to purchase them.

The return from my gold investments is more encouraging. On 1 February 2024, I sold my remaining gold portfolio – a Canadian Gold Maple Leaf bullion that I had purchased from UOB Bank in 2014. The bullion was purchased at $1692 and divested for a profit of $1034. This represented a 61% return for a holding period of 10 years. The rationale for my recent bullion divestment was purely driven by the current bullish gold price.

The last time that I had divested my gold investment was in 2017. Back then, I had made a profit of 10% on the back of buoyant gold price. I had decided to cash out to consolidate my funds for the purchase of my matrimonial home.

So far, all my gold investments were made with UOB Bank. These included physical gold and gold savings account. When buying physical gold from UOB Bank, it is important to note that you must ensure that the physical gold is in its original sealed condition and the original UOB invoice must be presented. In addition, with effect from 30 November 2023, customers must be a UOB account holder in order to purchase physical gold from UOB.

My approach towards gold investment is that of a pragmatic one – buy low and sell high. As such, I may buy bullion again when gold price drops. Then again, trying to forecast the trend of gold price is becoming more and more challenging nowadays.

Economic recession for US and China?

With both US and China embroil in a punitive trade war, it remains to be seen who will blink first. Interestingly, The People Bank of China (PBoC) has announced gold purchases in each of the past five months, and in March, added a further 2.8t. This pushes China’s official gold holdings to 2,292t, or 6.5% of total reserves. During Q1 2025 China reported purchases of 12.8t of gold.

Will there be another Great Financial Crisis in 2024? Nobody knows for sure. Back in 2008, the Great Financial Crisis saw gold price soaring from US$900 per troy ounce in 2008 to US$1,800 per troy ounce in 2011. Those who had bought gold in 2008 and sold off their holdings in 2011 would be laughing all the way to the bank. As such, a potential recession in 2025 could represent a buying opportunity for gold buyers.

For sure, Trump’s tariffs plans will hit China’s economy. Even though the Chinese government has unveiled US$1.4 trillion in November 2024 to tackle local government debt problems, it is uncertain if this will help to reverse the country’s real estate slump going forward. The recent spotlight was on Vanke as the state-backed real estate developer reported a record loss of S$9.1 billion in last year, its first full-year loss since 1991. Vanke’s troubles followed defaults by Evergrande Group and Country Garden Holdings.

On the other hand, US tariffs slapped on its largest trading partner, China, has led to analysts forecasting 50% chance of recession for Americans. Notably, inflation will likely to rocket due to the tariffs, complicating efforts by the Fed to keep inflation to 2%. With weak consumer and business sentiments, US economy could be heading for a hard landing soon.

With both the number 1 and 2 largest economies in recession, I think there could be plenty of uncertainties ahead.

Conclusion

Given the uncertainties, it may be worthwhile to consider buying gold if you have set aside sufficient emergency funds. If you are buying physical gold, make sure to buy from a reputable bullion dealer.

In Singapore, two of the most bullion dealers are BullionStar and UOB. The main advantage of BullionStar’s (BSP) is the opportunity to convert your gold savings to physical bullion bars, produced by LBMA refineries, at any time without any extra cost whatsoever. On the other hand, UOB gold savings account cannot be converted to physical gold or gold certificates. The UOB gold savings account is also not backed by physical gold.

Over the years, I am heartened to note that BullionStar has gone from strength to strength to become one of the leading bullion dealers in Singapore. Obviously, I hope that I have contributed in some small ways in their development. Earlier this year, the company had expanded their operations to United States. On this note, I am of the belief that BullionStar will continue to be a success story in the international bullion dealing community. Till then, enjoy the ride.