Make the Singaporean case for gold
Written by: David Fergusson, Chairman and CEO and co-founder, Hugo
Gold is a curious metal: it is remarkably heavy, yet soft, extremely inert, but with a luster that appeals to almost everyone; that is why it remains the material of choice for jewelry. It is an equally curious investment, and there is no more divisive issue among investment professionals than gold.
We live in a globalized world where economies are all interconnected. Thus, protecting our heritage from economic risks and market volatility is essential. And for Singapore, a global trade hub maintaining the delicate balance of business and diplomacy with its most powerful economic partners demonstrates more than that that investing in gold must be a serious consideration for everyone’s personal finances. Singaporean.
Gold shines brightest in times of inflation and uncertainty
Opponents claim that gold does not give way. It is expensive to produce, it is useless for nothing other than jewelry, and its price moves a lot. They’re right.
Pro-gold lobbyists will point out that over time, the price of gold reflects the cost of its production, which tends to reflect inflation. It’s a form of money since humanity has lived in grass huts: it has a semi-rigid supply, which means central bankers cannot debase it, and this is the highest power in money because it has no counterpart. Additionally, gold cannot be created out of thin air like the US dollar, British pound, Singapore dollar, or any other fiat currency. Gold retains its value over time no matter what is going on around it.
This is the paradox of gold. There may be no earthly reason to own gold or for gold to be the only long-term constant in millennia of financial innovation and fraud! But he is. And this constant offers protection against all kinds of risks and uncertainties. As such, investors ignore gold at their peril.
It is often argued that gold has seen its time and that it is time to move on. After all, the collapse of the Bretton Woods system – the abandonment of the gold standard – in 1971 led many to believe it was time to retire the gold. Well, 50 years later, he’s still very much present. So why is this still relevant today?
The gold market is very liquid
Well, the gold market is still one of the most liquid markets in the world, with around US $ 200 billion traded on recognized exchanges, making it the 3rd largest financial market. But this creates a misconception that gold is traded in informal markets in every small town in the world, through traditional jewelers (in India or Indonesia) or pawn shops in developed countries. This volume is not recorded but is undoubtedly enormous. This also underlies an important feature: you have to be in a financial center to trade securities, but gold can be traded from Toronto to Timbuktu at Temasek (former name of Singapore).
Gold effectively insures your investments against risks
Singaporean investors these days are bombarded with all kinds of instruments and investment products, most of which are generally volatile and highly exposed global portfolios. Thus, having gold in their portfolios can serve to mitigate volatility. Not only is it liquid, but gold is also one of the few uncorrelated asset classes. This means you can put it in your wallet as insurance, and you can be sure that if the world around you explodes (or your Bitcoin value crashes) your gold will provide you with safe haven performance.
Gold can amortize your wealth in black swan events
Also consider a live scenario. The hegemony of the US dollar that we have witnessed since the end of World War II is increasingly bristling for China. Within Asia, much of the trade is still conducted in US dollars. It made sense when Asia’s biggest trading partner was the United States, but less now that China is the neighborhood big kid. So, logically, it makes sense to switch Intra-Asia trade to RMB.
Regardless of the empty talk to China, countries in the region are delighted with the military presence in Asia brought about by the hegemony of the US dollar. And no one trusts China or its currency (against the US dollar).
China, if that’s anything, is strategically savvy. It is well aware of the “reserves” that other countries have for the most populous country in the world and its monetary system. A simple solution to restore balance against the US dollar would be to introduce a teen gold on the Chinese yuan. This would have a massive, immediate and strategic impact on China’s position relative to the United States and the dollar. That China’s amazing gold production and purchase over the past 15 years has been a precursor to this type of strategic move is pure speculation. However, this highlights the relevance of gold.
Where your gold is, there is your wealth
You may have heard of central bank digital currencies – this, perhaps more than anything, highlights the relevance of gold in the modern monetary system. Central Bank digital currencies are hailed by central bankers and their cronies as a new wave of efficiency in currency management. Even Singapore is in the process of implementing its own digital currency.
For anyone with even a fleeting understanding of monetary mechanics, central bank digital currencies are, at best, a way to stealthily monetize all the debt on the central bank’s balance sheets – that is, to poach currency in the same way as any other monetary reform. At worst, they will allow governments to combine fiscal and monetary policy and target their thefts much more effectively. Either way, gold will give you a safe haven from piracy.
Hold 6,500 cryptocurrencies or hold a single gold?
It is fair to wonder where the increased digitization of the world leaves such a physical phenomenon. The adoption of Bitcoin and other forms of cryptocurrency and their anointing by experts as “Digital Gold” has certainly had some impact on the gold trade. After all, they’re all the rage these days with 28% of young investors already involved. Money that would normally have gone to gold has gone to Bitcoin and other cryptos. And it can be argued that gold would be much higher today without the foam removed from the market by Bitcoin et al.
But this does not affect its relevance. In fact, the proliferation of cryptocurrencies highlights the advantage of gold – you can invest thousands of unanchored cryptocurrencies but there is only one gold. When a currency, including cryptocurrencies, is not pegged, it means that its value is not based on anything real or reliable. That’s why just one tweet from Elon Musk took Bitcoin down, and why China’s cryptocurrency ban rocked crypto exchanges.
How Singaporeans Can Hold Gold
The most obvious way to own gold is through bullion and coins, but these usually have relatively high premiums (read costs) for buying the exhibit. There are reasons why you can’t find gold bars in most Singapore homes:
1. A small 1 kilo gold bar is worth $ 76,000 at the time of writing. Keeping him at home is nerve-wracking.
2. When you keep it in a safe, you pay a safe deposit box fee.
3. Most people buy insurance to protect their gold.
They also have inherent issues like counterfeiting, theft, and an easy lack of cash. As such, they have been replaced by various “paper” gold instruments, from ETFs to derivatives. Although these are cheap, liquid and accessible, they are not gold, but a facsimile. You have a claim on the gold through a counterparty and not on the underlying gold.
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