Gold; silver

Is this the right time to buy gold? In August, gold price suffered one of the worst sell-downs in recent years when it fell from USD2055 per troy ounce on 7 August 2020 to USD1885 on 12 August 2020. Subsequently, gold price recovered to the USD1940 bandwidth in the following two weeks. What had caused the pull-back in gold price in early August?

Gold price smashed to record high

Year-to-date, gold price has surged by a whopping 28%. So the current correction in gold price may represent a good window of opportunity for wealth builders to buy bullion or bullion savings programs before gold price soars again. To put things into perspective, much of the increase in gold price in 2020 is attributed to the monetary stimulus measures introduced by US government in March 2020. The recent plunge in gold price in August is also largely due to the US monetary stimulus, or the lack of it in August 2020.

Against the backdrop of economy slow-down caused by COVID-19 pandemic, gold price has been in buoyant form in 2020 because the precious metal is viewed as a safe haven. So the recent correction in gold price must have confounded many wealth builders.

As 2019 comes to an end, let’s take a look at how gold price has performed. Looking back, 2019 will be remembered for a year of great uncertainties. The protracted trade war between US and China continued to rattle global economy. Brexit continued to drag on at this point of writing. And then the civil unrests in Hong Kong exploded out of nowhere in the middle of the year.

Amid the turmoil, gold price went on a rampage to reach a euphoric high of USD1544 per ounce on 3 September 2019. This is a remarkable surge of 20% since January 2019. Of course, this was still way off the peak of USD1900 per ounce seen in 2011, but current form of gold price reflected the resilience of the yellow metal.

Since the high seen in September, gold price had cooled off quite a bit. But a few factors could provide critical support for gold price in the coming months.

Gold price rally to continue?

It remains to be seen whether the rally for gold price will continue right into 2020. But the macroeconomic condition certainly lend support for continued momentum in gold price. Global trade tensions have not reduced and there is not really light at end of tunnel in sight between US and China.

The market for purchasing a variety of precious metals in Singapore has steadily increased in the last few years due to the removal of income tax or capital gains tax on imported investment grade precious metals such as gold and silver.

Investors are keen to take advantage of the savings they can make to ensure their deposits are even more profitable. Many of the products available include silver ingots but large numbers of silver coins are being imported from different countries around the world. Some of the coins have beautiful designs and are becoming popular as investments with collectors. You will probably recognise some of them fairly easily but others may be a little more obscure.

Canadian Maple Leaf

This incredibly popular coin was launched in 1988 and is produced by the Royal Canadian Mint. It has the country’s national symbol of the Maple Leaf on the front and overleaf has a portrait of Queen Elizabeth II.

Fiji Silver Taku

The beautifully etched turtle featured on this coin has seen it become an instant hit since its launch in 2010. It is issued on behalf of Fiji’s government by the Sunshine Minting Inc.

Australian Kangaroo

The purity of silver in this striking coin is 99.99%.

In the aftermath of the Singapore’s GST exemption for investment grade precious metals since 2012, many bullion dealers has set up shop to take advantage of gold liberalization by Singapore government. In its latest financial results, it was revealed that BullionStar led in Singapore gold bullion market.

According to data released by World Gold Council, the overall bullion demand in Singapore decreased to 1.2 tonnes in 1Q16 from 1.6 tonnes in 1Q15. The sluggish demand in physical gold could be attributed to the surge in gold prices seen in 2016. Gold price exploded during that period of time because of the crash in China stock market. As a result, the high gold prices cooled demand among wealth builders. Interestingly, BullionStar sold 0.5 tonnes of gold bullion, thereby contributing to 42% of the total Singaporean bullion market.

As we enter into the 2^nd quarter of 2017, the world continues to witness uncertainties arising from USA trade protectionism and the negotiations of Brexit with European Union. On the other hand, the recovery of USA economy and the positive employment data drive America stock market to new highs.

Wall Street continues its mighty bull run and at one point, broke the record of 21,000 points.

Every four years, money and power will have a showdown. October will be a nerve-wrecking month for Americans as the Presidential Election enters into the final leg. There are a lot of uncertainties as to who will be the most powerful person on earth. But regardless the outcome, investors dislike uncertainties. In view of this, should stock investors sell everything and run for their lives?

The US Presidential Election aside, there were already many warning signs of cracks forming in the stock market. In early January 2016, China stock market had two massive melt-downs, leading to forced trading halts by the regulators. Then entered Brexit. Pound experienced free-fall in value and dropped to decades low.

Next on the list may be Deutsche Bank, which has being ordered by US Department of Justice to pay $14 billion for its past practice in mortgage-backed securities that led to the Great Financial Crisis. Many analysts expressed concerns that Deutsche Bank episode could ignite another round of financial crisis but in my opinion, this is unlikely. This is because the German bank is too big to fail and very likely, the EU will bail out the banking giant.

As a wealth builder, it is unproductive to predict when the next economic crisis will arrive because the matter of fact is that no one can predict the future.

The current dismal economy outlook and stock market conditions may entice many wealth builders to buy gold and silver bullion. After all, the price of gold has surged by 25% in the first half of this year, making it one of the best performing assets. You can buy gold bullion in Singapore from local bank UOB or various bullion dealers.

According to the latest World Gold Council report, gold continued its red-hot form, with global gold demand reaching 2,335 tons in the first half of 2016, 16% higher than the previous record in H1 2009. During the second quarter, overall gold demand grew to 1,050t, up 15% from the Q2 2015 figure of 910t. The growth was due to considerable investment demand as a result of global economic and political uncertainties.

The Chinese always has a penchant for gold and like to buy gold bullion. So not surprisingly, for the past 10 years, China has become the world’s largest gold producer and importer. The Chinese banks play a key role in making a gold hub in China through a range of gold-related business activities. In fact, more than 50% of investment demand involving sales of gold bars and coins is fulfilled through commercial banks’ network of branches.

Based on data from LBMA, silver price has increased 44.7 percent in the first half of 2016. The explosive surge of silver reflected many investors’ interest in silver in light of the current global market uncertainties. Interestingly, silver has also outperformed all other precious metals as wealth builders accumulated more silver in the first half of 2016.

Following the record demand seen in 2015, investors’ demand for silver bars has weakened some during this period. This is because in 2015, silver was in a bear market and investors seized the opportunity to accumulate silver bars on the cheap, with the view of potential price appreciation. Since then, the price of silver has galloped and this has somewhat dampened the demand for silver bars.

On the other hand, silver coin sales increased by 29% globally, according to GFMS Thomson Reuters Quarterly Coin Sales Survey. Coin sales enjoy double digits increase across all major regions, such as North America, Asia and Europe. Unlike gold bullion coin sales, which fluctuate according to its prices, silver coin sales have remained resilient since 2010.

2015 has been a disastrous year for the commodity as prices fell across almost all the commodity assets. Silver was no exception as it fell below the support level of US$15 per ounce.

In the aftermath of Brexit, investors scramble for safe haven assets and set gold and silver on fire. The precious metals have climbed to new highs in recent weeks as investors realize that even a stable currency like Sterling pound can drop in value over-night.

As investors pile into gold, the price of the yellow metal surged by 28%, making it one of the best performing assets to hold. At the rate it is climbing, gold may hit the level of US$1,400 per ounce. This is a remarkable turn-around as previously, gold price has declined to a low of US$1050 per ounce in December 2015.

Precious metals bull-run

The current market sentiments seem to suggest that gold may be at the start of a bull-run. The sustainability of the bull-run will depend whether there are further market shocks that trigger investors to flee for safety. For 2016, shell-shocked investors have already witnessed the Chinese stock market carnage, plunging oil prices and then Brexit. These events have fuelled the surge in gold and silver prices.

While gold has been attracting investors’ attention, silver price has also stormed to record level. At US$20.16 per ounce, spot silver rose by 47% since December 2015.

With the score-line at 0-0 nearing full-time, Brexit voters unleashed an unstoppable volley past the “Remain” goal-keeper and claimed an unexpected victory on 23 June 2016. UK has chartered into unfamiliar horizon. Government officials, analysts and economists were all dumbfounded by the results as most of them expected UK to remain part of European Union. In the midst of the chaotic situation, Brexit sparked an explosive gold price surge as expected.

Flight to Safety

At one point, when the Brexit was released, gold price stormed past USD1,300 per ounce as investors bolted to park their wealth in the safe haven amid carnage in the global currencies. Notably, Euro and sterling pound suffered record meltdown as investors flee for safety. Their concerns were not unfound as UK is the world fifth’s largest economy. Decoupling from European may have deep implications in terms of trade and military cooperation.

Whilst it is easy to argue that UK voters had let their emotions ruled their heads, it should be highlighted that the issue of immigration has always been sensitive in an open economy like UK. Many global leaders and analysts grossly underestimated that ground sentiments can swing the voting results, even though there are a lot at stake, in terms of political and economic stability.

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.

According to The Silver Institute, the silver market posted record demand in 2015, driven by new highs from demand of jewelry, coins and bars. Last year also saw the third consecutive annual silver market deficit of 129.8 million ounces, reflecting the continued strength in silver demand.

The data from The Silver Institute reveals a couple important trends that wealth builders should take note. Firstly, unlike gold, silver has very wide industrial applications. Thus, the majority of silver demand come from industrial fabrications for electronic devices, photography, solar and brazing alloys. In 2015, due to the weak global demand, the overall industrial demand declined from 611.2 million ounces in 2014 to 588.7 million ounces last year.

Interestingly, the data on investment demand for silver bars and coins reflected a contrasting picture in 2015. Silver coin and bar investment surged 24% to reach a feverish high of 292.3 million ounces as investors took the opportunity to buy silver on the cheap in the midst of market correction. This was the highest demand on record and overtook the previous high in 2013. The explosive demand from investors was a result of lower average annual silver price of USD15.68 per ounce. The low price of silver in 2015 was due to the slowdown of China and strengthening of US dollars.

When it comes to precious metals like gold and silver, many Singaporean investors are still trying to figure out its status within the world of asset management.

As an emerging asset class, gold is often regarded as money and a form of long term safe-haven during times of financial crises. On the other hand, silver is deemed more as an investment instrument for investors to make money because of its short term price volatility. Whatever the case it may be, it is important for investors to diversify wealth across several asset classes, such as investment precious metals, so that during financial crises, the impact to wealth is mitigated.

In 2012, Singapore government announced that precious metals which qualify as Investment Precious Metals (IPM) will be exempt from GST. The change is to recognize gold and silver bullion as financial assets, and also to grow Singapore into a regional precious metal trading hub. Nonetheless, it is important to note that not all gold and silver bullion are granted the status of IPM. There are basically four criteria to meet:

• It is gold of at least 99.5% purity, silver of at least 99.9% purity or platinum of at least 99% purity.

Many years ago, I wrote several articles on UOB’s Gold Savings Account (GSA) and Silver Savings Account (SSA) in this blog. I had made some monies from GSA and had shared with readers my first experience with gold. But that was the time before BullionStar was established in Singapore and since then, my understanding of gold and silver has improved. The regulatory landscape for bullion trading has also changed as Singapore aims to be a precious metal hub by first removing GST for investment grade bullion. Subsequently, Singapore FreePort was established to cater to gold storage facilities.

UOB’s GSA and SSA

UOB is one of the largest local banks and is the only Singapore bank that sells physical bullion. It is also the only bank that has Gold Savings Account (GSA) and Silver Savings Account (SSA). The biggest advantage of opening a precious metal savings account with UOB is the convenience of transacting online via UOB Personal Internet Banking or UOB Mobile. You can also use your CPF funds to buy gold or silver through GSA or SSA.

However, investors should take note that UOB’s GSA and SSA are not backed by physical bullion, and thus you cannot convert your account balances and take physical delivery of gold and silver or certificates.

U.S stock market plunged 252 points on 6 January 2016 as falling oil prices and North Korea nuclear tests combined to send the Dow Jones to below the support level of 17,000. This marked a terrible start to the year 2016 as investors are spooked by global issues affecting economic growth and looking for safe haven in the midst of stock market chaos.

U.S stock market

The bright spot is that U.S data continue to support the notion that U.S job market is improving and that the U.S economy should be able to withstand these headwinds. However, investors should be cautious and heed the warning from the stock market. Dow Jones had reached an incredible record level of 18,200 in 2015 and is showing signs of peaking. As there will always be cycles of ups and downs in the stock market, existing investors with substantial stock holdings may want to take profits or cut losses on their stock investments now. After all, if the major correction did arrive this year, the opportunity to offload shares will be a premium given the widespread panic selling.

Chinese stock market

Over at the other side of the Pacific Ocean, the China stock market presents a scarier situation.

Silver bullion has always been a favorite of many investors because it’s relatively low price as compared to gold allows investors to buy silver at a fraction of the cost of gold bullion. Today, silver’s price has reached a 5-year low of USD14. In fact, this is the lowest price level last seen since the Great Financial crisis in 2009, thus representing a good window of opportunity to buy silver bullion in Singapore.

Is it a good time for wealth builders to buy silver bullion? If so, should wealth builders buy gold or silver bullion? My perspective is that even though prices of gold and silver are expected to continue to slide moderately in 2016 due to the surging strength of the US dollars and improving US economy, precious metals still offer a form of asset allocation for individual investor’s portfolio.

In my previous article on investing in silver, I had touched on the risks involved. One of the key reasons why silver bullion is not featured in many professional investors’ portfolios is because silver can be very volatile. It can surge more than 5 percent in one day and therefore, not many people can stomach this kind of volatility.

SG Wealth Builder is pleased to catch up with Luke Chua, Chief Operating Officer of BullionStar on their latest product offering – Bullion Savings Program. 

1) What are the key features of Bullion Savings Program? You can actually convert the grams in BSP to physical metals?

The key features of the BSP are that it allows customers to save and/or trade in precious metals. With the BSP, customers can buy BSP Grams of Gold, Silver or Platinum that is fully backed up by physical precious metals in BullionStar’s stock inventory. Grams in the Bullion Savings Program (BSP) are fully allocated physical precious metals. Our BSP Grams are available in Gold, Silver and Platinum for a low price premium and a low spread. This provides customers with a cost-efficient way to start saving in precious metals.

BSP Gold Grams can be converted in increments of 100 grams to 100 gram PAMP Gold Cast Bars. BSP Silver Grams can be converted in increments of 15,000 grams to 15 kg Heraeus Silver Bars. BSP Platinum Grams can be converted in increments of 1,000 grams to 1 kg Heraeus Platinum Bars. BSP Grams can be converted to physical bullion bars at any time or sold back to BullionStar at any time.

Festive season is fast approaching and now is the time to buy gold or silver bullion as gifts for your loved ones! Before making a move, let’s take a look at the global market trend for bullion.

According to a report by Thomas Reuters, 2015 has been an intriguing year for silver as total supply is forecasted to fall by 3% from the previous year. This represented the weakest performance since 2002, when mine production fell by 2%.

There are a lot of head winds for the silver mine production and on top of this, scrap supply is expected to fall for the fourth consecutive year. Because of this, silver will face a physical shortfall for the third consecutive year. Nonetheless, this shortfall is mitigated by outflows from the ETFs and derivative exchange, thus softening the impact of supply shortage from the mine productions.

Interestingly, the deficit in the supply may not cause a spike in prices. This theory is vindicated by the performance of silver prices this year, which saw silver prices averaged US$15.91 per ounce, which was 18.3% lower than in the same period in 2014. Wealth builders have seized this window of opportunity to snap up silver on the cheap and this led silver bullion coin sales to reach record level in the third quarter of this year.

Many investors deem gold and silver bullion as “bad investment” because they don’t yield interests and furthermore incur storage costs. Even the famous Warren Buffett expressed a disdain for gold but it should be noted that the world class investor bought 129,710,000 ounces of silver through Berkshire in the 1990s. In this regard, I don’t deny that gold and silver are a form of bad investment. Because they are never meant to be an investment tool in the first place.

Gold and silver are actually money and have been used as money historically. From a wealth builder’s point of view, gold and silver are meant to hedge money portfolio during time of volatility, high inflation and financial crisis.

Another concern of precious metals is its level of liquidity. This is indeed the case in Singapore where there are not many precious metal dealers willing to buy back gold and silver which are not sold by them. For example, as far as I understand, UOB does not buy back gold bars and coins not sold by them. This is where BullionStar comes in and address the gap in the industry.

Sell Gold & Silver to BullionStar

Sell orders for bullion products are placed on this page.

SG Wealth Builder was alerted to an article written by fellow finance blogger on “Precious Metals: The warning signs are already here”. Personally, I like that article because it provides me value-added information on the latest updates on precious metals. The blogger highlighted that there is currently a tight supply of bullion even though the spot prices for gold and silver are falling. He also cited several notable reputable precious metal dealers to buy from, such as BullionStar. The challenge now is finding trustworthy dealers who have inventory to sell bullion to investors because of the huge demand.

As a wealth builder in Singapore, whilst I have been tracking the prices of gold and silver for quite some time, I did not really note down the price premiums for the gold bars that I bought like what the blogger did. This is because I have always been confident on the long term prospects of both gold and silver, as such, I don’t see the point of monitoring the price premiums. Nonetheless, I was really impressed by the blogger’s research and I must say he really knows what is considered the “normal price premium” for different products.

In his post, he wrote “Today spot silver is at $14.65, but American Eagles are selling for $29.16.