Gold In Singapore
What is gold
Gold is a yellow colour metal widely accepted by the international community as a representation of wealth. The metal is one of the most precious elements which has been used as a trading commodity for thousands of years. Gold In Singapore is considered as a precious metal due to its attractive colour, rarity, resistance to tarnish, ability to conduct electricity, can be made into wires, hammered into thin sheets and it is precious. Even though traces of gold can be found nearly everywhere, large deposits are only found in a few locations where they occur in the Earth’s hydrothermal veins.
78% of the global gold is used to manufacture jewellery. The use of gold in the production of jewellery is due to several key reasons that includes but not limited to its highly desirable yellow shimmering colour, tarnish resistance, high lustre, and it can be cast into various shapes and sizes making it an eye-catching piece in the manufacturing of jewellery products. As one of the most popular shopping destinations in the world for luxury products, the demand for gold in Singapore always been high (SBMA, 2018).
Around 12% of the gold worldwide is used to manufacture electronics. Given that solid-state electronic devices use very low voltages of current which can be easily interrupted if the conducting element is corroded or tarnished at the point of contact. Therefore, there is a need to have an element that does not easily tarnish or corrode, gold would be the perfect metal to use.
This precious element is highly reliable in the manufacturing of electronic components such as switches, relay contacts, soldered joints, connecting wires and connection strips. Various small electronic devices that use gold include mobile phones, personal digital assistants, GPS units, calculators and etc. Gold is also used in dental fillings, used as a drug for treatment of various medical conditions and also in aerospace related machineries.
Gold has also been used as a trading commodity because of its high value, limited supply and that it is being considered to be a replacement of the US dollar as the global currency (Benko, 2017). About 10% of the globally produced gold is used in coinage and also stored in government vaults as a representation of the local currency in circulation. For many years, the rarity, usefulness and desirability of gold has made it an effective trading metal among merchants (O’Connor, et al., 2015).
Types of Investment Gold
In the traditional days, small pieces of gold were used as a way of exchanging value in a trade. In the 21st century, gold bars are held by investors as a way of hedging against currency devaluation risks, risks of inflation and geopolitical risks. For investors, bullions are a way of diversifying their investment portfolios. Some countries made bullion coins which were used as currencies. In Singapore, bullion coins are some of the commodities that customers can trade in.
They can also be used as business strikes and collectable proofs. For the non-investors, bullion coins can be collected, given as gifts, used as a way of storing wealth and even given as inheritance (BullionVault, 2018). Bullions are used in various industries including banks, investment companies and by private individuals. Customers in the Singapore market are able to purchase gold bullions and coins from gold retailers such as Bullionstar.
Investors can also trade in gold as an Exchange Traded Fund (ETF) commodity where during trading, physical gold is used to back the ETFs. Through the ETF trading entity, an investor purchases the commodity and the trading entity will purchase the physical gold at the back end to represent the value of the transaction. The process is usually carried out at the stock market where buy and sell orders for the commodity are placed, and then brokers execute them accordingly (Corbet & Twomey, 2014).
Jewelleries is another form of investment with the use of gold. Due to the rarity of certain jewelleries, its indestructible nature and value that it contains, it is effective as a way of storing wealth for a long-term period. An example are the Chinese and the Indians who have used the commodity to flaunt their wealth. Due to the high value of the metal, it can always be liquidated to money whenever they wish to. Different civilizations for a long time have used gold as a currency for trade where it was exchanged with goods of equal value.
Paper gold is the other gold-related investment tool. Since gold is a hedge against inflation and it has a low correlation with other asset classes, this makes paper gold an effective investment vehicle and it is widely traded. As other assets continue to experience losses due to the volatile business environment, gold has been able to maintain its value giving a positive year-on-year return on investment for the past 10 years.
Paper gold is an option that allows people to buy gold in a dematerialized form rather than having to deal with the physical commodity. Holding physical gold involves dealing with various risks such as risk of theft and storage risks. This also means that more costs will be involved in securing the physical commodity. Gold paper ensures that one does not have to deal with such risks and the extra expenses involved as the paper is issued in an electronic form. The purity and the price transparency involved can hence be enjoyed in a more convenient way (UOB , 2018).
Gold certificates allow customers to own a paper certificate which they can exchange for physical gold or cash at any given time. Even though similar to buying physical gold, one is not issued with the physical commodity as proof of ownership. Instead, one is given the certificate as proof of ownership of an equivalent value to the price of gold. In the Singapore gold market, financial institutions such as UOB allows customers to open gold savings accounts and use them to purchase gold.
In such an option, customers do not have to deal with holding the physical commodity. They can then use the account to trade on gold through the represented value of the commodity by the amount they have. Futures, options, commodities and forex trading are other gold-related investment options are also available in the market. These options are available for customers who do not want to hold the gold as a long-term investment.
Gold prices in Singapore
Currently, the 24-karat gold price in Singapore stands at S$1,619.16 per ounce. The cost of 11-karat per ounce is $742.12. Over the last few years, the prices of gold in the country have been on the rise from a low of S$500 in 1999 to a high of S$2,200 in 2011 before going down to the current prices.
Forces of demand and supply determine the gold prices. Some of the critical factors that affect the demand and supply of gold in the Singapore market which includes investment demand, jewellery demand, fluctuations of currency, inflation, deflation, interest rates and the government’s monetary policies. Geopolitical factors and economic stress have been found to have a negligible effect on the prices of gold in the recent past.
Where to Buy Gold in Singapore?
Singapore is one of the most popular shopping destinations in the world. The country has also been dominating the international market for the sale of gold and other precious metals. Some of the key destinations of Singapore products include Malaysia, Switzerland and China. Since 2015, the export of gold in Singapore has increased by 437%. Customers can purchase various options of gold such as small bars, coins, and jewellery. These products were purchased for investment reasons, as a way of storing their wealth and for the purpose of aesthetics. The key attraction for purchasing in the Singapore market is due to the none to low spread that many brokers and merchants provide (Monetary Authority of Singapore, 2016).
Customers looking to buy gold for investment purposes can do so from investment banks, merchant banks and trading houses. Some of the investment banks which have a presence in the precious metals market include United Overseas Bank (UOB), Standard Bank, ANZ, UBS and JP Morgan. There are also merchant banks which have been involved in the business, they are usually referred to as “bullion banks”. Trading houses such as INTL Stone, Sumitomo Global Commodities, Mitsubishi and MKS are also engaged in the gold trading business.
Singapore’s United Overseas Bank (UOB) Limited has been a key participant in the precious metal market. The bank offers customers a low spread, making it one of the best places to purchase gold in the country. For example, on May 2 2017, when the price of gold was S$53.00 per gram, the bank offered a spread of around S$73 as the selling price for a 50-gram pamp gold bar was $2089.91, and the buying price was $2016.06. The 100-gram Pamp Bar had a selling price of $4123.17 and a buying price of $4033.55. On 17th August 2018, UOB Gold and Silver Price quoted the selling price of their 1KG cast bar at S$52,241.00 and a buying price of S$51,974.00 (UOB Gold Price, 2018).
Singapore’s Government Role in Gold Trading
Over the years, Singapore has grown to become one of the most dynamic gold trading hubs in the world (Ministry of Trade and Industry, Singapore, 2016). This has been supported by the various initiatives from the government which have aimed at improving investments in the precious metals (IPM) sector. Some of the key players who have made the sector successful include retail bullion dealers, bullion wholesalers, metal refineries, secure logistics providers, bullion banks and trading houses.
One key policy implemented by the government in 2012 exempted the importation and supply of investment-grade gold and other precious metals from Goods and Services Tax (GST), this was done to help improve the precious metals sector. Since other taxes such as capital gains tax, other sales tax or death tax are not imposed on gold, silver and other precious metals, the country is able to attract a big number of interested investors to buy into the industry. Various troublesome reporting and declaration requirements were also removed, hence simplifying the trading process and ensuring a conducive trading environment.
The government, through international Enterprise (IE) Singapore, has also assisted in the promotion of the country’s precious metal sector to the global market. This has been aimed at selling the country as the primary bullion trading, storage and transport hub in the region. One of the key environmental advantages that have made this process easy is its high levels of security in the country. This has also created a safe environment where customers can walk in and out of the bullion dealer shops to purchase gold without worry of being a victim of theft.
The well-developed gold storage and vaulting infrastructure have ensured that secure transport services are assured to the customers (International Enterprise Singapore, 2014). These are some of the key factors that have ensured the country’s position as one of the top global safest destinations for the trading of luxury products and investments.
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SBMA, 2018. ASEAN Gold Market. [Online]
Available at: http://www.sbma.org.sg/asean-gold-market/
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