Saturday, April 2, 2011

Is this a good time to invest in gold in Singapore?

I currently ask myself this question a lot:  Is this a good time to invest in gold in Singapore? I personally do not know the answer and what I will write in this article only describes my plans they are not investment advises! Since I have limited knowledge on the markets, I prefer to follow the investors who has a lot of knowledge and does good predictions based on calculations not wishful thinking. So I am currently looking at what they are saying.

Seth Klarman is an ideal person to follow, he manages one of the biggest hedge funds in the world and he is known to be a conservative person:

"But because the greatest risks are of currency debasement and runaway inflation, protection against a currency collapse – such as exposure to gold – and against much higher interest rates seem like necessary hedges to maintain."
Insider Monkey, Seth Klarman Bullish About Gold, Concerned About Runaway Inflation

First of all he is talking about US dollars and inflation risk in USA. I earn in Singapore Dollars and most expect a value appreciation in Singapore dollars so Singapore can manage inflation which is expected to be high this year. But since there is this inflation, holding all my savings in money is not a good idea. I believe gold is a good hedge against inflation and I can even make real returns by investing gold since investors in developed world will likely to buy more gold to hedge them against a currency collapse (particularly US dollar collapse).

Chinese gold ingots - Source: Proactive Investors

Buying physical gold is an option but it is subject to GST. A better way in Singapore to invest in gold looks like UOB Gold Savings Account. It allows you to buy and sell unallocated gold at market prices and this gold account holdings are not subjected to Singapore's Goods and Services Tax (GST). You can exchanged it for cash, whenever the need arises. But it charges an administrative fee of 0.12 gram of gold per month or 0.25% per annum whichever is higher. So keeping low balances in your UOB Gold Savings Account not worth your while[1].

As a diversification strategy gold looks like a good option. It is a form of money in itself and it's value is not tied to any currency. It is also in demand during inflation times and we are in inflation times in South East Asia.  So i will slowly buy gold for diversification and although I will not invest all my money into it (it would be an opportunity cost if stock prices rises significantly) I will allocate a good proportion to it.

[1] - Investing in gold via uob gold savings account

This blog article is to provide general information only and should not be treated as an invitation to buy or sell any property or as sales material.  Users of this report should consider this report as a one of the many factors in making their investment decision. Users should make reference to other sources of information and specific investment advice to obtain a more objective view of the property market. Asia Singapore shall not be responsible for losses suffered.

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