Gold bars

Why Gold Investment Is a Tool During Economic Crisis

Why Gold Investment is Important

Gold plays a very important role in the economy. Investors, traders, and even laypeople have seen the effectiveness of gold when it comes to investing and saving. In fact, its prices have been steadily rising since the mid-2000s.

Here are some practical reasons to own some gold or include gold in your portfolio:

  1. Valuable commodity

Throughout history, gold has maintained its value, unlike paper money, coins, or other assets. In addition that that, when the value of the currency weakens, people flock for the security of gold, raising prices

  1. Hedge against inflation

Gold’s price tends to rice when the cost of living increases

  1. Portfolio diversification

When the value of shares or other assets falls, the price of gold may rise.

  1. Security during geopolitical crises

Gold is called the “crisis commodity.” because its price appreciates during geopolitical uncertainty when the value of other assets usually depreciates.

  1. The supply is shrinking

Gold is limited, but gold demand is rising. As a general rule, a reduction in the supply of gold increases gold prices.

  1. Provides liquidity

Gold can be liquidated much faster than other physical assets.

Note that investing in gold can be a difficult business. While there are success stories in investing in gold, there are also tales of failure and disappointments. Hence, it is important that you choose which type of gold purchase fits your specific needs.

Man Holding Gold Bar

What Are the Ways to Purchase Gold

You can physically acquire gold in Singapore, invest in gold stock market and mining companies, and obtain gold certificates.

Buy Physical Gold (Gold Coins & Gold Jewellery)

One way to invest in gold is to buy yellow metal or the so-called gold bullion coins. Gold bullion coins refer to pure gold that may come in the form of bars, ingots, or coins.

These gold bars and other physical items can be bought from a gold jewellery store, gold retailers, brokerage, pawn shops, or banks.

While the prospect of holding gold coins and bars is exciting, note that buying physical gold takes more work than others would imagine. Let us face it.

Owning this expensive precious metal can attract thieves and criminals. To successfully keep and store it, you either have to build a secured space for your gold property or hire an expensive facility that would keep it for you. For some, this additional expense is simply not bearable.

In Singapore, there are various stores that sell physical gold. Be sure to do your own gold market research first before buying gold bullion because UOB gold prices in Singapore and other gold sellers have varying prices. You can also research the keywords “UOB gold and silver price” or “gold and silver price UOB” online to expand further your knowledge about physical gold or other precious metal.

Buy Gold ETFs or other types of funds

Another way to invest in gold stocks or other commodities is through the help of Gold ETF (Exchange-Traded Fund), SPDR Gold Shares ETF/ gold ETFs, or gold futures contracts.

In this method, you can buy or sell gold shares through a broker or a website. An Exchange Traded Funds company will help you deal with your investment. You do not get to hold gold physically.

This type of investment is more liquid because investors can easily sell their gold stocks. Also, it is a low-cost entry because even with limited money, you can buy gold stocks. This is unlike purchasing gold bullion, where you have to buy one entire bar or a piece of coin.

For individuals who do not have prior experience to trade gold, they prefer this because it does not require a lot of money, and it does not overwhelm them as new investors.

Investors who are more inclined to take this form of investment can begin looking for companies here.

Be sure to choose trusted companies. Examine their background and history first so you can be sure that your investment is safe and secure.

On the other hand, CPF eligible members are also eligible for CPF Investment Scheme (CPFIS) where you can invest up to 10% of your investible savings on gold and gold-linked products.

Buy Gold Certificates

Investors can also choose to buy a gold certificate as a form of investment. Here, investors are issued a certificate that can be exchanged at any time for cash or physical gold.

Buying a gold certificate is similar to buying physical gold. It is just that you are not carrying your gold bars and coins and are given a certificate. This certificate is proof that you own actual gold. You can then sell this certificate so you can turn it into cash.

A lot of individuals would choose this type of investment because it is hassle-free. Also, it does not require any additional form of protection.

You can buy a gold certificate in your own bank. Just ask your trusted banks if they offer this type of service. For many, this is a better option than buying physical gold because having a secure facility to store bars or gold coin can really be challenging. Buying a secure storage space or facility for gold bullions can be expensive as well.

Buy Gold Mining Companies Stocks

Unlike the other forms of investments cited above, buying gold mining stocks is technically not purchasing gold. Instead, you are gold investing in companies that mine, explore, or produce gold. Buying their stocks means buying a part of the company. As the value of the company increase, the value of the stocks you bought increases too.

Oftentimes, the movement of gold reflects that of the movement of gold mining stocks. This means that in most cases, when gold prices soared, investors with gold mining stocks can make a profit as well.

This is not true in some instances, though, because companies have their own growth and progress separate from the development in gold trade. This is the reason why some people would still prefer buying a bar of physical gold.

If you happen to prefer this form of investment, you can look for the top gold companies. Make sure that you are putting in your money to legitimate and trusted companies. You can do your own research on the mining company before investing just to be sure that you are not wasting your money.

Gold savings account

A savings account can be purchased in banks. In this type of savings account, you are basically buying gold and keeping it as your investment.

Gold-linked savings accounts usually have high starting costs depending on the price of gold. However, you can assume that gold always has high value. On the other hand, it rarely fluctuates, allowing your savings to maintain their value due to its gold linkage plus a potential to gain growth once gold starts rising in value.

Virtually every bank has its respective gold reserve, allowing it to match your savings with its gold equivalent. In addition, gold savings accounts have better insurance policies than regular savings accounts, allowing you to recover lost value through a claim during any covered emergency or criminal event.

Among the largest banks that offer gold savings accounts are UOB, Bank of China, DBS, among others.

Gold bar price with arrow rise

Gold Prices

The gold prices tend to fluctuate from time to time and in Singapore, it is based on the international gold price adjusted for Singapore market conditions. There are various factors that cause the price of this important metal. This means that people wishing to be gold investors must be constantly knowledgeable about the market price.

Globally, gold always retains its value because humans, societies, and economies will always place value on gold because of their aesthetic, function, and emotional attachment to the metal.

Practically, gold offers substantial usefulness for government coin currency printing, electrical, and electronic industries because it does not corrode, allowing it to become a formidable store of value for eternity.

In Singapore, there are many ways where investors can be updated on the movement of gold prices. You can check for the daily gold price in Singapore and international gold price by checking this website.

Here’s a sample table to show you gold’s fluctuation during a normal day in the market.

Date Price (close) Unit Change
06/05/21 2,419.54 Ounce 665.08 37.91 %
77.790 Gram 21.38
77,790 Kilo 21,382.69

Should You Buy Gold Now?

You should buy gold when you can because it’s an excellent investment and hedge against inflation. However, this question has no simple binary answer because you have to consider many factors before investing in gold.

Here are some factors to help you gain insight whether or not a gold purchase is worth it during the time you deem optimal.

  • The metal’s price rises when many continue to buy and hold the precious element. Higher gold investment activity can indicate a bubble, such as the gold-buying frenzy during the 2020 pandemic. This activity can artificially increase gold’s prices, but it’s not a good buying foundation for starting investors.
  • When you’ve held gold, and it starts to rally, you can be sure its price will rise within the next three days or a week. That moment would be the best time to sell it. According to Singapore Bullion Market Association CEO Albert Cheng, there’s no right time to buy gold, and every investor should have them in their investment portfolio.

How Much Gold Should You Buy?

Albert Cheng mentions that having as high as 15% gold in one’s portfolio is never a bad bet. Unlike cryptocurrencies, gold is a universal store of value that many institutions and individuals widely accept as a substitute for legal tender.

On average, formidable investors can have gold building 1-5% of their portfolio.

However, always make sure you have investment objectives in buying gold and consider your risk appetite. Most investors use it as a hedge against inflation and keeping their savings values intact.

On the other hand, it can be a quick liquidation asset given gold’s nature as a substitute for legal tender in any country.

Conclusion

This year’s pandemic and the economic upheavals it has caused have further revealed the value of gold. As the world economy is facing abrupt changes, investing in gold have simply become more stable and less risky than financial investments and almost guaranteed to return your investment in the long term. On the other hand, if you are looking for a short term potential gain investment you may consider buying and investing in cryptocurrency.

If you need a loan to fund your investment, personal loans will be a great way for you to help kick start investing. Get a personal loan quote from Instant Loan that matches you with the best licensed money lenders in Singapore so you can get the most practical package.

Take note that you should only take a loan if you expect the return on your investment to be higher than the legitimate interest rate you pay on your loan. Request up to 3 loan quotes now to get the best deals!

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