Why you should have some money in Gold and Silver?

[Dennis Ng]

last week, as Euro and other currencies fall due to the uncertainties of the Greece Debt Crisis, Gold and Silver prices went up...

We cannot control what might happen in the next few years, including the possible risk of Rising Inflation and Currency Devaluation.....

When that happens, Gold and Silver prices are likely to go up...do you have some money in Gold and Silver? Be prepared or you might be sorry.

[Dennis Ng]

From a Technical Analysis perspective, Gold is testing the previous high of US$1,200.....once break, next target is US$1,300.

While Silver is testing resistance level at US$19....once break above, likely to head towards previous high in year 2007 of US$21.

[Dennis Ng]

From a Technical Analysis perspective, Gold is testing the previous high of US$1,200.....once break, next target is US$1,300.

While Silver is testing resistance level at US$19....once break above, likely to head towards previous high in year 2007 of US$21.

As expected, with the uncertainties caused by Greece Crisis, Gold prices made a NEW Historical high of US$1,230 and Silver price shot up above US$19.20...

Do you have some Gold and Silver as "Insurance" against uncertainties? I have about 7% of my wealth invested into Gold and Silver.

[Sigmar]

For those who are looking to buy physical silver/gold, you would want to check out these local sellers.

http://www.silverbullion.com.sg/
http://singaporesilverbullion.com/

[wemakebread]

Just for info.
I have communicated with the guy from http://singaporesilverbullion.com/
At the moment, he only deals in monster box.
Monster box refers to 500 pieces of 1 oz Silver coins in a box.
In the region of SGD 18000 for 1 box.

In addition, I have also come across this website
http://goldsilversingapore.com/sg/

Buying gold/silver sounds great.
Buying physical also sounds good.
But please do due diligence.

Example:
1. what exactly are you buying?
2. who are you buying from?
3. how to pay them?
4. how will they deliver to you?
5. any additional charges?
eg. tax, foreign exchange, delivery, etc
6. how & where do you plan to store your precious metal?
7. do you have sufficient liquidity/cash in your portfolio?

Actually Q6-7 are the more fundamental questions before going thru Q1-5.

Just to elaborate on Q1
a. 1 oz coin considered most liquid, but there is a price premium
usually sold in minimum lots of 20 coins
b. where is the silver minted? is it pure?
is it a widely recognized & traded?
c. do consider the weight & size and how to transport/store it


Personally I believe in buying gold/silver & also believe in buying physical.
But it may not be suitable for everyone.

Cheers!

[wemakebread]

For a start, maybe can buy a bit of US Silver Eagles 1 oz coins.

Benefits:
1. positive action that follows from belief (buying physical silver is good)

2. you have something to look & feel

3. gain better understanding of dealer & transaction process

4. start to think deeper about how/where to store

5. motivation to study this topic more in-depth coz already invested

Above is from my personal experience.

Additional "tip":
Once all due diligence has been done, you may want to wait for the occasional sharp dip in spot silver prices to buy in. From past few months observation, the dip can be as much as USD 0.50 - 1.50.

However, it may also shoot up sharply if global investors seek safe haven in gold/silver to escape from the stock & currencies markets.

The most impt Q: "If I am wrong, will I be financially OK?"

[Sigmar]

Thanks for the information

Some additional points to take note.

For orders from www.silverbullion.com.sg, the minimum order is $2000 SGD.

For goldsilversingapore.com, the minimum is 100 pieces of 1oz eagles or min 500 oz for the bars. Also, their price seems to be the highest.

The premium/price per oz is lower for bars than coins. You might take that into consideration when making your purchase.

If you are considering buying a quality safe to store the precious metals, you can check out (GRUPP MARKETING PTE LTD)http://www.safemegamart.com.sg/home.html

There is also a shop selling safes outside Fairprice Finest at Bukit Timah Plaza. The price is lower as compared to what i paid for my safe which i got from Grupp Marketing.

[Dennis Ng]

Thanks for the information

Some additional points to take note.

For orders from www.silverbullion.com.sg, the minimum order is $2000 SGD.

For goldsilversingapore.com, the minimum is 100 pieces of 1oz eagles or min 500 oz for the bars. Also, their price seems to be the highest.

The premium/price per oz is lower for bars than coins. You might take that into consideration when making your purchase.

If you are considering buying a quality safe to store the precious metals, you can check out (GRUPP MARKETING PTE LTD)http://www.safemegamart.com.sg/home.html

There is also a shop selling safes outside Fairprice Finest at Bukit Timah Plaza. The price is lower as compared to what i paid for my safe which i got from Grupp Marketing.

actually, I don't really see a need to buy physical Gold or Silver.

Of course, others might have a different opinion.

[alvin]

Silver ETF

The most famous Silver ETF is the iShares Silver Trust (SLV) which is listed in the American Stock Exchange. Silver ETFs are supposed to pool the money from investors and buy an equivalent amount of silver to back the fund. Silver ETF is one of the easiest method to buy silver since the ETF is traded like stocks in the exchange. Currently, we have no silver ETFs listed in SGX and the closest is the Lyxor Commodities ETF, but the composition is very small compared to the entire fund. Thus, if you want to buy SLV, you would need a shares account that allows you to access to the US stock market. There have been questions on whether the Silver ETF has genuine backing of physical silver in their holdings, and it is important as an investor to find out this important criteria. If an ETF does not have a real silver backing, and when inflation hits, the ETF cannot follow up with the rise in the price of silver. In this case, your “silver investment” provides no hedging.

Advantages:
- Buy and sell as long as the exchange is open
- Do not need to find a storage
- Low cost

Disadvantage:
- May not be backed by physical silver

UOB Silver Savings Account

UOB has long been offering a Silver Account. As their website says, “You can buy and sell unallocated silver – through a passbook – at prevailing market prices in multiples of 10 ounces of silver each time, limited to a maximum of 500 ounces per account on Saturdays.” And for the cost, “An annual administrative fee (in ounces of silver) as low as 0.2 ounce per month or 0.375% p.a. on the highest balance per month, whichever is higher. The fee is subjected to GST, which will be deducted from your account in ounces of silver also.” The only question is that UOB did not state where the Silver would be stored, and would there be additional charges for the storage. In addition, are these Silver Bars or coins?

Advantages:
- Convenient way to own silver (though not as liquid as an ETF)
- Own physical silver

Disadvantage:
- Not sure what kind Silver (bars or coins?)
- Not sure about the storage

Silver Futures

A method to buy silver that requires more sophisticated investment knowledge is futures. Futures is a form of derivatives and as as all derivatives, they are complicated and if you do not understand or have not traded futures before, it is adviseable to stay away. Those who engaged in Silver futures are more speculative in nature as all futures have expiry dates, and usually traders have no intention to exercise the contracts and receive the delivery of the physical silver. They just want to profit from the change in price over the period of the contract. To buy Silver futures, you would need to open a futures account with the local brokers. Futures accounts would require a higher capital outlay than a stock account as each contract size is as big as tens to hundreds of thousand dollars. They are highly leveraged which means your losses and profits are amplified.

Advantages:
- Big transaction window (stay open longer than stock exchange)
- Leverage

Disadvantages:
- Requires more product knowledge
- Leverage

Buy and store Silver on your own

The most inconvenient method to own silver is to buy it yourself as you have to administer the delivery process and finding a place to store the physical silver. There are a few local start-ups that facilitate the sale and delivery of physical silver. Take a look at Silver Bullion Singapore. BigFatPurse is not affiliated to or has any interest in this company, and not in a way recommending her products. Do your research and check the validity of the physical silver is of utmost importance.

Advantages:
- See the real physical silver in your hands

Disadvantages:
- Risk of scams
- Not liquid
- Buy and sell silver by yourself

[Dennis Ng]

Silver ETF

The most famous Silver ETF is the iShares Silver Trust (SLV) which is listed in the American Stock Exchange. Silver ETFs are supposed to pool the money from investors and buy an equivalent amount of silver to back the fund. Silver ETF is one of the easiest method to buy silver since the ETF is traded like stocks in the exchange. Currently, we have no silver ETFs listed in SGX and the closest is the Lyxor Commodities ETF, but the composition is very small compared to the entire fund. Thus, if you want to buy SLV, you would need a shares account that allows you to access to the US stock market. There have been questions on whether the Silver ETF has genuine backing of physical silver in their holdings, and it is important as an investor to find out this important criteria. If an ETF does not have a real silver backing, and when inflation hits, the ETF cannot follow up with the rise in the price of silver. In this case, your “silver investment” provides no hedging.

Advantages:
- Buy and sell as long as the exchange is open
- Do not need to find a storage
- Low cost

Disadvantage:
- May not be backed by physical silver

UOB Silver Savings Account

UOB has long been offering a Silver Account. As their website says, “You can buy and sell unallocated silver – through a passbook – at prevailing market prices in multiples of 10 ounces of silver each time, limited to a maximum of 500 ounces per account on Saturdays.” And for the cost, “An annual administrative fee (in ounces of silver) as low as 0.2 ounce per month or 0.375% p.a. on the highest balance per month, whichever is higher. The fee is subjected to GST, which will be deducted from your account in ounces of silver also.” The only question is that UOB did not state where the Silver would be stored, and would there be additional charges for the storage. In addition, are these Silver Bars or coins?

Advantages:
- Convenient way to own silver (though not as liquid as an ETF)
- Own physical silver

Disadvantage:
- Not sure what kind Silver (bars or coins?)
- Not sure about the storage

Silver Futures

A method to buy silver that requires more sophisticated investment knowledge is futures. Futures is a form of derivatives and as as all derivatives, they are complicated and if you do not understand or have not traded futures before, it is adviseable to stay away. Those who engaged in Silver futures are more speculative in nature as all futures have expiry dates, and usually traders have no intention to exercise the contracts and receive the delivery of the physical silver. They just want to profit from the change in price over the period of the contract. To buy Silver futures, you would need to open a futures account with the local brokers. Futures accounts would require a higher capital outlay than a stock account as each contract size is as big as tens to hundreds of thousand dollars. They are highly leveraged which means your losses and profits are amplified.

Advantages:
- Big transaction window (stay open longer than stock exchange)
- Leverage

Disadvantages:
- Requires more product knowledge
- Leverage

Buy and store Silver on your own

The most inconvenient method to own silver is to buy it yourself as you have to administer the delivery process and finding a place to store the physical silver. There are a few local start-ups that facilitate the sale and delivery of physical silver. Take a look at Silver Bullion Singapore. BigFatPurse is not affiliated to or has any interest in this company, and not in a way recommending her products. Do your research and check the validity of the physical silver is of utmost importance.

Advantages:
- See the real physical silver in your hands

Disadvantages:
- Risk of scams
- Not liquid
- Buy and sell silver by yourself

Hi Alvin,
thank you very much for sharing the info, very comprehensive, plus you have provided your own comments on the advantages and disadvantages of buying Silver through the various means.

Bravo! Look forward to more of your sharing...

[star88]

Hi Dennis,

Do you think we can open the Gold Saving Account and buy in Gold min 5 gram every month as long term investment?

[Dennis Ng]

Hi Dennis,

Do you think we can open the Gold Saving Account and buy in Gold min 5 gram every month as long term investment?

Hi star88,

once again, just to reiterate, I don't buy Gold as investment, but buy Gold as insurance.

Gold prices would shoot up in the event of a stagflation, a possible scenario I'm insuring against.

[alvin]

In addition to why gold should not be a long term investment because it has no yields. Unlike shares who gives dividends, gold does not. In fact, it can be considered a negative yielding asset as it incurs storage cost.

Usually investors buy gold as a hedge, not as a long term investment. Gold rise when people lose confidence in currencies and when inflation is high.

[alvin]

Gold Bars

The most precious form of gold is the bars and they come in different weight and size. Gold is measured in troy-ounces even though it is stated conveniently as ounce (oz). It is important to know that one troy-ounce is not equivalent to one ounce. The most standard weight for a gold bar is 400 troy-ounces and would cost around US$400,000 one bar if the gold price is US$1,000/ounce. You must be rich enough to buy a few of these bars. If you are not that rich, you can consider other weights like kilobar (1,000g or 32.15oz at US$32,150), 5 Tael bar (187g or 6oz at US$6,000) and ten tolla bar (117g or 3.75oz at US$3,750). Note: Prices quoted are based on US$1,000/ounce for ease of calculation. UOB Bank offers the service to buy and sell gold bars. The drawback for smaller gold bars is that your cost of ownership will be higher, as the fixed cost of brokerage/admin fees as well as storage fees will take up a higher percentage of your purchase price.

Advantage:
- Most valuable form

Disadvantages:
- Storage cost
- Insurance cost
- expensive

Gold Bullion Coins

UOB Bank sells 3 types of gold bullion coins namely, Canadian Maple Leaf Gold Coins, Australian Kangaroo Gold Nuggets and Singapore Lion Gold Bullion Coins. They range from 1/20oz to 1oz so if gold cost US$1,000/ounce, the coins would cost from US$50 to US$1,000. They are much more affordable than gold bars but similar to smaller gold bars, the cost of ownership is higher. Remember the theory of economies of scale works here too – the more you buy, the cheaper, and the contrary is the less you buy, the more expensive is the cost. Some may even charged a premium for “collector’s series” coins in additional to the true value of gold in the coins. In addition, the market for bullion coins are not as liquid as gold bars, which means it is relatively more difficult to sell and often fetch a lower price.

Advantages:
- Affordable
- Next best alternative to bars

Disadvantages:
- Higher cost to own
- Less liquid than bars

Gold Certificates

Certificates allow gold to be securitized. Instead of trading the real phiysical gold, ”paper gold” is transacted. This has an advantage when you want to buy and sell gold without the hassle of delivering the physical ones which incur transportation, storage and insurance cost. These certificates are like our paper money, just that they are backed by gold. You can actually use these certificates to exchange for physical gold if you want to. UOB Bank offers certificates that can own up to 30 kilobars of gold per certificate. It is important to buy certificates from established businesses as certificates can be easily forged. Another risk is that unethical companies may also issue certificates without the backing them with the same amount of gold. It will be a problem if many people start to cash in their certificates, you may found that there aren’t enough gold to go around.

Advantage:
- No storage/transportation cost

Disadvantages:
- Risk of forgeries
- May not be backed by actual amount of gold

Gold Savings Account

UOB offers a Gold Savings Account: “You can buy and sell unallocated gold – through a passbook – at prevailing market prices and transact any time during banking hours in units of one gm of gold, subject to a minimum of five gm per transaction. Limited to a maximum of 1,000 gm per account on Saturdays”. The keyword in that sentence is “unallocated gold”, just in case you miss it. Unallocated gold is like the excess supply in the market that is sold to the investors. This helps the suppliers to clear their stock as well as the banks to profit from it. It is interesting to find out from an article from bullionvault that banks actually “owes” you the gold. It is the same as a cash savings account. You deposit a sum of money in the bank and the bank uses a large percentage of this deposit to do whatever she wants. She pays you paltry interest in exchange for using your money to earn money. It is the same as a gold deposit account. The banks buy the gold for you but will use it for her own purposes to profit from it. Similar to certificates, you may find that one day you are not able to get your money or gold out of it.

Advantage:
- Convenient to own gold

Disadvantage:
- Risk of not getting back the worth of gold

Gold ETF

There is an Exchange Traded Fund for Gold which tracks the gold – SPDR Gold Shares. It is both available in NYSE (US) and SGX (Singapore). From the prospectus – “The investment objective of the Trust is for the Shares to reflect the performance of gold bullion, less the Trust’s expenses.” By buying gold collectively, they claimed that the expenses of carrying, storing, insuring the gold is lowered and can be passed on to the investors. You can now go through your usual broker to purchase gold shares throughout a trading day. Real gold bullion bars are purchased by the trust on behalf of the gold shares investors and are kept “in the form of allocated 400 oz. London Good Delivery Bars in the London vaults of HSBC Bank USA.” There were some claims that Gold ETFs may not possess the actual amount of gold to back the funds it holds. If it is true, in times of crisis, a shortage of gold may cause the fund to collapse and you not getting your money back.

Listed – SGX
Expense ratio – 0.40%
Minimum Order Size – 10 shares

Advantage:
- buy and sell as easy and convenient from the stock market

Disadvantage:
- May not be backed by the actual amount of gold

Gold Futures

A method to buy gold that requires more sophisticated investment knowledge is futures. Futures is a form of derivatives and as all derivatives, they are complicated and if you do not understand or have not traded futures before, it is adviseable to stay away. Those who engaged in gold futures are more speculative in nature as all futures have expiry dates, and usually traders have no intention to exercise the contracts and receive the delivery of the physical gold. They just want to profit from the change in price over the period of the contract. To buy gold futures, you would need to open a futures account with the local brokers. Futures accounts would require a higher capital outlay than a stock account as each contract size is as big as tens to hundreds of thousand dollars. They are highly leveraged which means your losses and profits are amplified.

Advantages:
- Big transaction window (stay open longer than stock exchange)
- Leverage

Disadvantages:
- Requires more product knowledge
- Leverage

Gold Mining Companies

Besides owning gold directly, you can consider buying shares of gold mining companies. You can look at companies like Barrick Gold (NYSE), Gold Corp (NYSE), and Newmont (NYSE). The risk is that the stock price may not go in tandem as gold price.

Advantage:
- Easy to buy and sell in the stock market

Disadvantage:
- May not have a direct correlation with the rise in gold price

Gold Jeweleries

I guess most of us own a piece or two of gold jeweleries. But jeweleries are not considered good investment because the price that you paid includes design and fabrication cost, which are in addition to the gold material itself. These additional costs do not retain their value over time.

Advantage:
- You have it already!

Disadvantage:
- Design and fabrication costs included[/b]

[Dennis Ng]

Hi Dennis,

Do you think we can open the Gold Saving Account and buy in Gold min 5 gram every month as long term investment?

Hi star88,

once again, just to reiterate, I don't buy Gold as investment, but buy Gold as insurance.

Gold prices would shoot up in the event of a stagflation, a possible scenario I'm insuring against.

18 Jun 2010 - Gold Prices hit new Record High of US$1,260!!!

(Reuters) - Gold rallied to a record high near $1,260 an ounce on Friday as momentum triggered by buying of the metal as a haven from sovereign and financial risk pushed prices through technical resistance to near their previous peak.

Spot gold hit a high of $1,259.25 an ounce and was bid at $1,256.25 an ounce at 1354 GMT, against $1,243.40 late on Thursday. U.S. gold futures for August delivery also hit a record $1,260.90, and were later up $9.00 at $1,257.70.

The precious metal has risen nearly 15 percent since the end of 2009, fueled by sovereign risk in the euro zone, historically low interest rates, and concern over the stability of paper currencies.

"Sovereign debt worries, central banks raising their holdings and record low interest rates keep attracting new buyers to gold," said Saxo Bank senior manager Ole Hansen.

"The Goldilocks scenario continues. Risk-off helps gold through safe haven (buying), risk-on helps it as well through a weaker dollar."

The dollar fell to three-week lows against the euro on Friday, and a one-month low versus the Swiss franc, pressured by disappointing U.S. data, which helped push U.S. Treasury yields to their lowest in a week.

Growth concerns also pressured industrial commodities, with oil prices falling on Friday on signs economic expansion in the world's top two oil consumers may not be as rapid as expected, while base metals declined.

Interest in gold improved, however, as the U.S. data raised concerns about the pace of economic recovery. Lingering fears over European sovereign debt levels are also burnishing the metal's safe-haven appeal.

"We expect gold to continue to perform well given continued fiscal/debt challenges in Europe and the potential for this to spread to other regions," Deutsche Bank said in a note.

SPDR ETF HITS RECORD

Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, hit record highs at 1,307.963 tons on Thursday as investors continued to turn to physical bullion as a haven from risk.

Silver tracked gold higher to a four-week peak of $19.12 an ounce. It was later at $19.06 an ounce against $18.67, slightly outperforming the yellow metal.

The gold:silver ratio fell to its lowest since late May on a day-to-day basis, with one ounce of gold now buying 66 ounces of silver. The silver market, smaller and more illiquid than gold, tends to outperform the yellow metal when prices are rising.

"If both gold and silver continue to improve, we expect silver to outperform, thus moving the gold-silver ratio lower," said ScotiaMocatta in a note.

Among other precious metals, platinum was at $1,572 an ounce against $1,574, while palladium was at $481.50 against $479.50.

The world's biggest palladium producer, Norilsk Nickel, said it had received an offer for some of its Australian assets, and that it planned to proceed with plans to divest them.

(Editing by Sue Thomas)