gold etf singapore

Gold ETFs in Singapore (2022): A Complete Know-How

Gold ETFs have become popular investment tools after physical gold bullion since the first launch in 2004. For investors, it is easy to manage and trade gold ETFs than physical gold bars. 

You only need a brokerage account and start trading gold ETFs on local and overseas stock exchanges free from security, transportation, and insurance cost concerns.

Besides a long-held passion for the metal, gold is now a red-hot issue due to recent geopolitical issues such as the Russia-Ukraine conflict and economic concerns like inflation and pandemic-caused recession. Various factors combined caused a significant shift in the gold price this year, which has increased by more than 6 percent since this January. Analysts forecast room for further price increases later this year.

Gold ETFs provide a low-cost and convenient investment vehicle to investors. An additional benefit is buyers can pay a sum more petite than a gold bar for participating and reap the benefits of gold investing. Highly liquid markets like the Singapore stock exchange or the New York stock exchange offer gold ETFs trades efficient and manageable.

What are ETFs?

An exchange-traded fund, a collective investment trust, tracks an index or commodities and can be an actively-managed fund where fund managers pursue investment strategies to outperform the market. 

In the same way, it can also be a passively-managed fund tracking constituents from an index only. Exchanged-traded funds invest in various assets according to their investment objectives. They are all mid-to-long term investments.

An exchange-traded fund has 2 distinct features:

1. It is a legal entity owning investment assets, such as stocks and commodities. 

2. Investors buy shares of an ETF, not the assets in the fund.

In a word, shareholders own an ETF that owns assets. The returns earned by an ETF may differ from the performances of an index or commodities because a fund manager may deduct operating expenses. The expense ratio is typically below 1%.

The advantages of investing in ETFs include:

  • Vast investment choices: An ETF may increase the number and types of assets more than individuals. Therefore an investor can hold more quality assets with a modest sum of money.
  • Risk diversification: Research shows an ETF offers can reduce more risk through diversified investing than holding a single bunch of assets.

Find out more on how to buy ETF in Singapore.

 

Should I purchase a Gold ETF?

A gold ETF offers the benefits like typical ETFs, while it may not suit everyone. The following are the pros and cons.

Pros

1. Budgetary investing: Investors can participate in a gold ETF investment by a modest sum. Rather than paying for a sum of almost USD2,000 for a gold bar, you can buy a share from the SPDR Gold Shares(SGX: 087; GSD) for about USD180 a share. You no longer need to pay a hefty sum for a highly-priced investment.

2. Diversification: The inclusion of gold in your portfolios reduces price risk as gold price rises while stocks fall. Financial advisors suggest a well-diversified portfolio should include commodities by 10% to 15% to cut down risks.

3. Hassle-free investing: Like other ETFs, gold ETFs are professionally-managed investment vehicles, so you don’t bargain prices, transport gold bars, or store them in a safe place and do it vice versa. It is an active let-grow investment.

4. Low expense ratio: Most gold ETFs have low expenses of below 1% per year. That makes it popular among gold investors by sparing purchases of physical bullion. 

5. Inflation hedge: Research shows gold is an effective hedge against inflation. It is the time when we’re living now. Gold is one of the best investment tools against asset erosion by inflation.

6. Liquid investment: It’s never more straightforward to buy and sell gold ETFs. Updated and continuous quotes and information are available on the exchanges so you can invest or divest your investment in a blink. The days you struggle for a seller or buyer are gone.

Cons

1. No dividend/interest: Unlike stocks or bonds, the price performance is the only gain from investing in gold. Therefore, if you opt for assets with steady income streams, gold ETFs are not your type.

2. Commission: Brokers may charge additional fees besides the expense ratio. But most brokerages have waived the load now, and you should consult for the best rate.

3. Physical touch and sense: If you want to have a feel and touch about a physical gold bar, you may be disappointed. As a gold ETF holder, you hold a share of a fund, not the gold itself legally. You should know the relation in-between before investing.

What Gold ETFs can I Purchase?

Since the first launch, numerous financial institutions have offered various gold ETFs to investors. 6 funds are worth notice if you intend to invest in gold ETFs.

1. SPDR Gold Shares ETF(SGX: 087, GSD; NYSE Arca: GLD)

One of the earliest gold ETFs in the market, the ETF tracks the gold bullion in the US over-the-counter market and reflects the performance of spot gold prices. The gold bars backing the shares are kept in vaults in London. You can buy it on the Singapore Stock Exchange or New York Stock Exchange.

Asset under management: USD 57 billion
Expense ratio: 0.40%
Inception date: November 18, 2004

2. SPDR Gold MiniShares(NYSE Arca: GLDM)

Issued by the same sponsor, the ETF has a smaller denomination share than GLD. The smaller gold ETF aims to make the fund more affordable to smaller investors. Besides, the expense ratio for GLDM is smaller than GLD. The GLDM offer price is set at 1/100 per ounce of gold, while GLD is set at 1/10 per ounce of gold. The ETF is only available on the New York Stock Exchange.

Asset under management: USD4.3 billion
Expense ratio: 0.18%
Inception date: June 25, 2018

3. GraniteShares Gold Trust(NYSE Arca: BAR)

The ETF is a trust backed by physical gold stored at vaults in London. Granite tracks the spot gold prices for fund performance. As with other gold funds, it offers fractional interest in gold to investors. Its expense ratio is low compared to other gold ETFs. You can buy the fund on the New York Stock Exchange.

Asset under management: USD912 million
Expense ratio: 0.17%
Inception date: August 23, 2017

4. iShares Gold Trust(NYSEArca: IAU)

The fund is the second-largest fund after SPDR Gold Shares ETF. Denominated in 1/100 of an ounce of gold, the ETF holds more than 260 tonnes of gold. A commodity-back trust, iShares has a modest expense ratio relative to the largest fund.

Asset under management: USD28.7 billion
Expense ratio: 0.25%
Inception date: January 21, 2005

5. Aberdeen Standard Gold ETF Trust(NYSE Arca: SGOL)

Established by Aberdeen Standard Investments, the ETF is a gold-backed trust which stores physical bullion in Switzerland. The gold, verified by the London Bullion Market Association, is up to international standards. It has a low expense ratio.

Asset under management: USD2.4 billion
Expense ratio: 0.17%
Inception date: September 9, 2009

6. iShares Gold Strategy ETF(NYSE Arca: IAUF)

A relatively newly-created gold ETF and distinct from other ETFs, the fund integrates two investing strategies by combining derivatives, such as futures, forward contracts, swaps, options, and gold-backed ETFs like iShares Gold Trust(IAU) to seek high returns in line with exposing to gold performance. Listed on the New York Stock Exchange, IAUF has a modest expense ratio relative to other ETFs.

Asset under management: USD30.7 million
Expense ratio: 0.25%
Inception date: June 6, 2018

gold bars stack investment

How can I purchase Gold ETFs?

You may be excited about different types of this unique commodity in the gold market in Singapore. The gold owners are thrilled to display the precious metals in the form of gold bullion coins, gold jewelry in fabulous shops inside luxurious shopping malls or around the street corners.

Investors happy with owning physical gold can buy the stock from bullion shops scattered around the city. You can trade gold bars by opening a gold savings account with a bank, such as Union Overseas Bank. Instead of buying or selling physical gold, you may invest in gold mining companies listed in the local or international stock exchanges like the Singapore Stock Exchange and the New York Stock Exchange.

Nevertheless, if you google the words: “gold ETF Singapore” on the net, you may be somehow let down. You only have a search result popped up on your computer screen: SPDR Gold Shares ETF. Yes, it has even 2 currency versions: 087 for the US dollar and GSD for the Singapore dollar and is the largest gold ETF backed by one of the leading world gold trust services. 

The fact that gold exchange-traded funds still receive scant attention from investors springs from 2 reasons. The first is investors have more choices over gold investments and investment venues. And traditional views of holding physical gold are yet to stay in the investor community. Secondly, information and promotions about gold ETFs are little relative to their peers. If gold ETF sponsors put more effort into the 2 areas, more room for further domestic market share is a potential opportunity.

Final Thoughts

Gold ETFs in Singapore offer investors new venues to invest in precious metals in addition to existing channels. You should know the mechanism and whereabouts of ETF investing because a high confidence level precedes putting the first dollar on the investment tool.

Key Takeaways:

  • Gold ETF is a low-cost and efficient investment tool.
  • It is tradable on local and international stock exchanges like stocks and other liquid investments.
  • Global gold trust services providers manage gold ETFs.
  • You cannot trade shares of a gold ETF for physical gold bullion.
  • You profit from capital gains only from investing in gold ETFs.

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