In this gold-related article, I shall list out the ways that an individual can do so along with the pros and cons of each method. This article is meant to be introductory, so I will also try to provide the link to the product page for more details (if applicable).

I just want to highlight that there is no best way, as the option that is most suitable for you will really depend on your investment objectives and personal financial situation.

However, one thing certain is that you should avoid those companies that sell you gold at a high premium to the spot rate, and then try to entice you by giving you a monthly or quarterly cash via a so-called guaranteed buyback option.

Gold Bars and Coins

Some of the banks do sell gold in its physical form.

There is currently a huge spread due to GST but once that is abolished in October 2012, the buying of gold bar and coins will become a more viable option.

This would be for the more traditional investors who prefer to own the physical asset although storage and security might be an issue.

Current Gold rates from UOB

Gold Certificate and Savings Account

Beside the physical gold bars, UOB also offers gold certificates and gold savings account (GSA).

With this option, you avoid the hassle of storing your own gold.

You need at least S$69,000 to get the gold certificate but the gold savings account starts from S$69 per gram.

For the gold certificate, there is a flat fee of $5 per certificate and an annual fee of S$36 (plus gst) per kilobar

For the GSA,  there is an annual administrative fee (in grams of gold) as low as 0.12 gram per month or 0.25% per annum on the highest balance per month, whichever is higher. So if you are buying very low amounts, the annual fees can be quite significant.

CPF OA can be used for the GSA but there is a small markup price you need to pay.

There is also a silver savings account for those who are interested in silver.

The fees are only accurate as of today so you might want to refer to UOB for the latest rates.

UOB Precious Metals Investments

Gold Exchange Traded Products

Exchange traded products can actually be broken down into three categories:

1. Exchange Traded Funds (ETF)
2. Exchange Traded Notes (ETN)
3. Exchange Traded Commodities (ETC)

Gold ETF

If you do not want the hassle of owning your own gold, SPDR® Gold Shares can be considered for a medium or long term investment in gold.

SPDR® Gold Shares is the largest physically backed gold exchange traded fund (ETF) in the world and is listed on New York, Tokyo, Hong Kong and Singapore.

The flip side is that you don’t actually get to hold and keep your gold, so in an end of the world or world war situation where the financial markets don’t operate, you might not be able to get access to your asset.

Look for the counter GLD 10$US on the Singapore Stock Exchange. As the minimum share size is just 10 shares, you will require less than US$2000 to get started (current price is around US$170).

The annual expense cap is 0.4% and CPF OA can be used for this investment.

SPDR website (Singapore)

Gold Futures and Gold CFD

These two options will allow you to take a long or short position to gold using leverage.

They are financial derivatives that is really meant for short term trading and more experienced investors.

A long term position using CFD will cause you to incur ongoing interests cost.

For futures, the contracts will typically expire every month (in the near term) or quarterly or half-yearly.

If you want to hold a long term position, you will be required to roll-over the futures contract as they expire. Thus, you might be subjected to the effects of contango (beyond the scope of this article).

If I want to take a short term position on gold, futures will be my preferred option. The trading cost is low and they are more transparent than CFDs as the contracts are traded on an exchange (less counterparty risk).

There are a few brokerage firms in Singapore that allow you to trade the commodity futures from the major commodity exchanges like COMEX, CBOT and TOCOM. You can also choose to use offshore brokers and some of their rates can be more competitive.

Phillip Futures

Introduction to Gold Futures

Gold Mining Companies and Funds

Investors who want to do stock picking can also choose to invest into gold mining companies directly.

An investment in gold mining companies can give you a higher beta than gold itself. However, you do end up with a higher correlation to equities than if you were to invest into gold.

This should be done only if you are very familiar with the mining industry and are able to understand the intricacies and advantages/disadvantages of the mining process of each company. If not, where is your competitive advantage?

Some of the mining companies might also be involved in other metals besides gold so you might end up with exposure to other metals.

Another alternative way (for newbies) is to use funds or ETFs that invest into these companies. Most of these funds will have quite a fair bit of holdings in the largest mining companies so yet another option is to create your own diversified portfolio of gold mining companies by buying the biggest names.

Largest gold mining companies

Gold Mining ETFs traded on US

Gold Jewelry

The last method is of course in owning the jewelry. This is probably the simplest to understand but yet difficult to value as the valuation of jewelry will take into account other factors (eg design, brand) besides the gold content.

To leave your comments, please go to : How to Invest In Gold In Singapore

The proposals aim to address the specific risks posed by unlisted margined derivatives such as contracts for differences (CFDs) and leveraged foreign exchange products (LFX), which are currently available to retail investors.

I guess the changes are prompted very much by the failure of MF Global, which left some retail investors in Singapore in the lurch.

Retail investors who trade in CFDs and LFX are exposed to considerable risks, given the leveraging effect of margin trading on potential losses.

The unlisted nature of such products further subjects investors to counterparty risks since they do not trade through an exchange which has a central clearing house to guarantee the settlement obligations to investors.

Instead, investors are exposed to the creditworthiness and operational risks of the derivative product dealer. In the event of a default, they may not have recourse to transfer their positions or recover their moneys in their trading accounts.

The consultation paper can be found here:

Review of Regulatory Framework for Unlisted Margined Derivatives

Some of the proposed changes of MAS include:

• Increasing margin for FX from 2% to 5%
• Prohibiting the derivative dealer from using client’s money as margin with hedging counterparties
• For those dealers using white label solutions, to make them accountable for client’s position should something go wrong with the underlying provider
• Prohibiting the dealer from maintaining customers assets in trust accounts with custodians outside Singapore
• Providing customers with a simplified 3-page Additional Risk Fact Sheet to highlight the risks of derivatives trading.

Written comments should be submitted to [email protected] by 2 July 2012.

To leave your comments, please go to : MAS Reviews Regulatory Requirements for Unlisted Margined Derivatives

For example, oil might be trading at US$100/barrel now.

In the futures market, a company that uses oil in its daily operation might want to buy a 1-month futures at US$105/barrel if they think the price of oil is going up. Similarly, a company that produces oil can sell the futures to lock in their future selling price. The price of the futures will be higher than the current rate if people are bullish and vice versa.

This means that no matter what happens to the price of oil in a month, the company can (and have to) transact at the agreed price. Unlike options, for futures you are required to exercise your right when settlement comes.

The way the futures market work is that no actual exchange of product takes place. Rather, the price difference is used to determine the profit or loss.

In my example above whereby the company bought a $105/barrel futures, if price of oil goes up to $110, the company will be better off by $5/barrel than if it would have if it didn’t buy the futures.

If it drops to $95, it will be worse off by $10/barrel.

Futures are traded in contracts. Each contract will be equal to a certain quantity of the underlying asset.

There are futures for all sorts of things, from commodities to prices of financial products. It is also a leveraged product, which means you can lose your pants if you are using it for speculative trading and your trade goes against you.

CFDs would be another instrument which is very similar to futures.

To leave your comments, please go to : What are Futures?

We have recently reviewed our Customer Agreement and have made a number of amendments.

The new Customer Agreement comes into effect on 23 April 2008, and you can view it now at:

Click on this link to read the new customer agreement.

This Agreement will govern all positions entered into from, or still open on, 23 April 2008.

I opened the pdf document to see a 19-page document staring at me.

What exactly are the changes? Well, there’s only one way to find out. I sent IG Markets an email (at 11pm) and within minutes, the reply came:

Thank you for your email. The main changes are:

• Inclusion of new conflicts of interests clause disclosing conflicts that may exist and setting out our policy for managing such conflicts (Term 3);
• Incorporation of new electronic trading terms (Term 8) allowing seamless sign up for new L2 users;
• Inclusion of extra information regarding currency balances on account (Term 15(3));
• Some general tidy up of drafting.

Please do not hesitate to contact us if you have any further enquiries.

Now, that’s more useful.

To leave your comments, please go to : Changes to IG Markets Customer Agreement

It seems that they have increased the margin requirements for some counters in view of current market volatility. Seems that institutions are doing as much as they can to reduce their exposure in line with the current credit crisis.

Trade with care!

In light of current market volatility, it has become necessary to review the margin rates on a number of markets. The changes will be made in two phases:

* Tuesday 25 March – Banking Stocks
Banks will be margined at a minimum of 10% with some more volatile stocks either 15% or 25%

For a full list of affected instruments, please visit the following link:
http://www.igmarkets.com.sg/cfd/banks-margin-changes.html

* Tuesday 1 April – Indices
Margins on Asian and Australian indices are set to rise but many, including the France 40 and US Tech100, will fall

For a full list of affected instruments, please visit the following link:
http://www.igmarkets.com.sg/cfd/indices-margin-changes.html

It will usually be possible to reduce any margin by placing stop losses on open positions. Please be advised that, should these changes create a shortfall on your account, it remains your obligation to fund the shortfall or reduce the size of your positions.

For full details of impending margin changes, please contact the helpdesk on (65) 6390 5118 and we will be happy to help.

To leave your comments, please go to : IG Markets Margin Rate Changes