SINGAPORE: With the uptrend in prices seen as unlikely to reverse anytime soon, investors keen to cash in on gold's meteoric rise of nearly 30 per cent thus far this year now have more options to consider.
Two new platforms aimed at making investments in the precious metal more convenient and accessible for retail investors were launched in Singapore last week.
One of them is SK Bullion, a new business under the wing of home-grown jeweller Soo Kee Group which offers buying, selling and insured storage services for investment-grade gold, silver and other precious metals.
Operating solely as a website at the moment, SK Bullion will have a brick-and-mortar store ready at Clifford Centre this month. Meanwhile, the building of a separate storage vault is underway and could be operational in the near term.
According to Soo Kee Group CEO Daniel Lim, while precious metals may be an age-old and traditional way of investment, a lack of full understanding about the asset class, its benefits and regulations remain. As such, the new venture, which is seen as a future growth driver for the Catalist-listed company, aims to be a "one-stop shop" for physical bullion products and trading services.
"More and more people are becoming interested but there are some customers who did not know that they don't have to pay GST (Goods and Services Tax)," said Mr Lim, referring to the exemption of tax for certain investment-grade precious metals since Oct 2012.
"We think that the bullion business has strong potential... It is something for everyone, be it an individual or a sophisticated institutional investor, so we need to create a platform for all."
Meanwhile, bullion dealer GoldSilver Central has rolled out an electronic trading platform for physically-backed gold, silver and platinum. A key feature of the new system, which runs on forex trading platform MetaTrader 4 and went live on Jul 29, is its ability to allow investors to trade beyond Asian trading hours.
"We started this project mainly based on the feedback from our clients that they want to be able to buy and sell during the London and New York time zones because that is when we see the most volatility," managing director Brian Lan said. "Many of our retail clients are also looking for easier entry points; essentially buying at narrower spreads because when you buy smaller denominations of physical bars or coins, it is much more expensive compared to an ounce."
To cater to retail investors, the e-platform offers the option of small contract sizes at 1/10 ounce for gold and platinum, and five ounces for silver. Investors also have the option to key in "buy" and "stop loss" orders, as well as take physical delivery of their holdings.
Soo Kee Group CEO Daniel Lim (L) and GoldSilver Central's managing director Brian Lan (R).
Commenting on the new entrants, CEO of Singapore Bullion Market Association (SBMA) Albert Cheng said: "Anything that helps bring innovation and added liquidity to our Singapore precious metals market is a good development."
For consumers, platforms such as GoldSilver Central's offer a convenient way to "leverage on technology (and) to better manage their physical gold, silver or platinum investments," added Mr Cheng.
PHYSICAL GOLD IS TOP CHOICE? WEIGH YOUR OPTIONS: EXPERT
As gold regained its safe haven lustre amid uncertainties over global economies and financial markets this year, physical gold has seemingly become the preferred choice among investors in Singapore, according to local jewellers and dealers that Channel NewsAsia spoke to.
"Some investors cannot relate well to paperless transactions, such as ETFs, but this is not about being backward. It has more to do with uncertainty because we see this trend being more pronounced in countries that are less stable. People want to have control over what they own and so there is a growing interest in physical-related investments," Soo Kee's Mr Lim said.
German bullion trader Degussa similarly saw a rise in customers at its local store and online platform, with "business more than doubled" on Jun 24 when Britain's decision to leave the European Union (EU) sent tremors across the globe.
"We saw aunties and uncles coming in with their jewelleries, gold bars and coins because they knew that gold prices had spiked and they wanted to participate before prices fall," said managing director of Degussa Singapore Michael Kempinski.
"At the same time, there are other investors who actually see this as a sign to buy because there is the potential to go up higher. So it has always been a two-way traffic in terms of business for us," added Mr Kempinski, who expects the price of gold to reach US$1,400 an ounce in "a matter of weeks" and hit US$1,500 by the end of the year.
Spot gold last traded at US$1,352.10 an ounce early Thursday (Aug 4).
The yellow metal has enjoyed a spectacular rally thus far in 2016, up nearly 27 per cent as of Aug 3, 2016, as investors continue to flee into safe haven assets. (REUTERS/Yuya Shino)
With bullish sentiment lingering, experts expect the asset class to gain more popularity among investors. But while physical gold is widely preferred, investors should weigh their options before jumping in given that there are several ways to invest in the yellow metal.
For one, while purchasing physical gold makes one feels more secure, investors will have to contend with additional costs such as storage and insurance fees, explained Mr Robin Tsui, State Street Global Advisors' (SSGA) vice president and ETF gold specialist for Asia Pacific.
Other ways to invest in gold include buying gold futures or options, stocks of gold miners, gold exchange-traded funds (ETFs) and opening gold accounts with banks. Each method has its advantages and disadvantages, said Mr Tsui.
For example, investing in gold futures or options may not require full funding up front, but it requires one to keep rolling the futures contracts to maintain exposure, which would be "challenging and complicated" for retail investors. In addition, it is not backed by physical gold.
Meanwhile, gold mining stocks may offer investors the additional perk of dividends, but movements in the shares will be swayed by a variety of factors apart from fluctuations in the gold price. "Factors such as earnings results and the leadership of the management team will need to be considered as well," Mr Tsui explained.
Meanwhile, there are other analysts who caution investors from increasing their portfolio allocation for precious metals beyond the golden rule of 10 per cent.
Didier Borowski, head of macroeconomics at European asset manager Amundi, said: "It’s rational for global investors to have gold as an asset allocation, but keep in mind that from a historical standpoint, gold has been more volatile than equities and its return is also lower. In addition, when there’s a recovery, gold will decline."
"So it makes sense to hedge with a certain amount of gold in your portfolio, but we would not say long gold is a good bet."
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