Continue reading »]]> The Gold Guarantee, a company that had a gold buy-back with discount scheme similar to companies like Genneva Gold and The Gold Label, made its way onto the front page article of the Business Times recently.

Of course, all of us know what happened to The Gold Label.

Anyway, since The Gold Guarantee started in July last year, it has managed to sell almost 2 tonnes of gold.

You can read the entire article about The Gold Guarantee here:

New gold player emerges with ’buyback offer’ (Business Times)

Continue reading »]]> Bao Jing Trading, a company that offered a gold investment scheme, appears to have defaulted.

Investors with Bao Jing Trading were promised monthly returns of 1.5% to 3% through an elaborate buyback scheme. If they left their gold bars with the company, the returns could go up to even 7-10%.

At least 120 investors are now feared to have lost up to S$40 million with their gold investments.

The office of Bao Jin in Rochor is currently empty and the Malaysian owners have also since gone missing.

Many investors were also afraid to make a police report as the owners had threatened them that they would not be able to get back their money if they did so.

According to ACRA, the Bao Jing Trading was registered using a HDB flat address in Jurong East. The owner of the flat denied any links with the company.

Actually, there were already tell tale signs a couple of years back that Bao Jing was in trouble. According to this article in the Straits Times back in February 2009, an investor who invested $5000 with Bao Jing and was promised a monthly return of $150 had problems getting back his money when he tried to end the agreement.

Despite this, the company was able to continue operating for another two years and con Singaporeans of their hard earned money.

If there is any company out there that promises to give you a guaranteed monthly return of 2-3%, you better be very careful. Because if it turns out to be a scam, you are very much on your own and can forget about getting back any money.

Continue reading »]]> For the second time this month, the CME Group, the operator of New York’s Comex exchange (the main metals and energy exchanges in the U.S.), announced an increase in margin requirements to trade gold. It raised the amount of money needed to trade gold contracts by 27% to $9,450 per 100-ounce contract.

This followed a 22% increase in margin requirements two weeks ago.

After Shanghai Gold Exchange raised its margins on Tuesday, there were rumors that CME would follow suit. This led the price of gold into a correction even before the news was announced.

This price of gold has now dropped more than $160 per ounce from a high of US$1911 on Tuesday to below US$1750 on Wednesday. This was the largest two-day absolute fall in more than thirty years, and a more than 8% correction.

The last time CME hiked the margin requirements for silver four times in May 2011, the price of silver dropped more than 20% in a week.

The current pullback gives a nice entry point for long term bulls on gold to add to their positions, although if the price fails to hold at the current levels, we could be seeing a quick drop back to the US$1650 region.

Continue reading »]]> db-X ETC (Exchange Traded Commodity) has listed the World’s first Gold ETC hedged in SGD on the London Stock Exchange.

As the product is hedged in SGD, an investor will be able to get exposure to any full potential upside (or downside) in percentage terms of the underlying gold (net of fees).

If you are not familiar with Exchange Traded Commodities (ETC), you can refer to this guide:

ETC Brochure by London Stock Exchange

But before you even consider investing in such a product, you should know the difference between a ETF, ETP and ETC and understand the risks behind them.

What is the Difference between an ETF and an ETP? (Part 1)

The Difference between an ETF and an ETP (Part 2)

Understanding Exchange-Traded Commodities & Notes

Features of Gold ETC hedged in SGD

• Linked to the spot performance of gold (less fees)
• Forex Hedged – Daily Forex hedged to minimize the SGD/USD exchange rate risk
• Backed by gold
• Liquid – Traded in USD in London with Deutsche Bank as the dedicated market maker
• Transparent – NAV published daily

Management fee: 0.29% p.a.
FX hedging fee: 0.40% p.a.
Bloomberg/Reuters Code: XGLI LN / XGLI.L
Trading Currency: USD

The product factsheet can be found here:  db Physical Gold SGD Hedged ETC

Continue reading »]]> Gold Insignia LLP was recently placed on the MAS Investor Alert list.

Gold Insignia LLP (Gold Insignia)

3 Raffles Place
#07-01 Bharat Building
Singapore 048617

It joins similar companies like Genneva and The Gold Label who were placed on the MAS alert list earlier.

All three companies offered gold investment buyback schemes that offered investors a chance to make returns of approximately 1% per month.

The Gold Label is already in trouble with the company placed into liquidation.

Continue reading »]]> Genneva Gold has been recently placed on MAS Investors’ Alert List.

This comes a few months after another company operating under a similar business model, The Gold Label, was also placed on the list.

Business Times has covered a story on this last weekend. You can read it here:

Golden Fleece

Extracted from the article:

“Effectively, Genneva has sold investors a put option along with gold, charging them a premium for it, and sweetening that by sharing some of that premium at the end of the contract period of a month or three months.”

Some people may think along the same line. But actually, this put option thing will never work out.

Assume spot gold is at $1000 and Genneva quotes you a selling price of $1200. Factoring in a discount, you only pay $1180 and have the option of selling it back to them at $1200 in one month’s time.

What has happened is that you have paid $1000 for spot gold, and $180 for a one-month put option with an exercise price of $1200. Charging $180 for an option that has an intrinsic value of $200 just doesn’t make any sense. The price of this option should be more than $200 if you factor in the time value of the option.

If you can understand the logic of this, then you will know that the deal is too good to be true.

Because if it is feasible for Genneva (due to whatever trading strategy they have in the backend), then they would have sold a similar put option to financial institutions at a price much higher than $180. Why would they want to sell it to you and get only $180?

Continue reading »]]> Back in December 2010, it was reported that The Gold Label was in cashflow difficulties.

For the uninitiated, The Gold Label is a company (among a few) that sells gold at a markup to retail investors and then offer them a “guaranteed” buyback option with a cash rebate. The cash rebate can amount to more than 10% a year if the rollover is done continuously.

I haven’t seen any latest news report of The Gold Label being liquidated yet, but judging from the comments posted here by their customers, looks like it’s game over for all the Gold Label investors.

I wonder how many of their customers managed to hold on to their gold (hope it’s real).

For those who are contemplating investing into similar schemes, I hope you know what you are getting yourself into.

Continue reading »]]> It was reported in Today’s newspapers that The Gold Label, a company specializing in selling gold as an investment to retail investors, is in cashflow difficulties.

The company entices people to invest with them by way of a sales and buyback agreement, promising attractive yields.

I had earlier warned that such a scheme offered by The Gold Label (or similar companies) would not be sustainable.

In October this year, the company’s directors had actually filed a notice to ACRA that they were not to continue business as they were unable to meet their liabilities.

The Gold Label was also recently placed on MAS’s investor alert list, more than one year after it started operating.

In the meantime, Genneva Gold continues to operate. Will this signal the start of a run on Genneva Gold?

Continue reading »]]> In Gold we trust?

What happens if the Gold turns out to be fake?

That is exactly what has happened to some goldsmiths in Hong Kong, people that you expect would be able to detect gold fakes.

Jewellers and pawn shops in Hong Kong have discovered at least 200 ounces of fake bullion so far this year. The value of the fakes is worth about US$280,000.

It is estimated that ten times that amount could have gone into the retail market.

In the past, fake gold can be manufactured using gold-plated tungsten, a material that has a similar density to gold. Experienced jewelers would be able to detect such fakes.

Apparently, this batch of fake gold that was sold in Hong Kong involved a complex alloy that had similar properties to gold. It consisted of a significant amount of gold combined with osmium, iridium, ruthenium, copper, nickel, iron and rhodium. Detecting such fakes require more sophisticated tests.

Is your gold real?

Continue reading »]]> Do you know that there are now gold ATMs?

The first ones opened up in Abu Dhabi, Munich, and Madrid.

Warren Buffett recently had this to say on Gold, “You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all — not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”