Buying Gold Bullion in Singapore For Long-Term Financial Security vs Holding USD

Buying Gold Bullion in Singapore For Long-Term Financial Security vs Holding USD

A glance at the news is all it takes to see that the current economic climate is extremely volatile. Global trade tensions and geopolitical risks are running at their highest in decades. Investors are seeking opportunities to preserve their wealth, with gold bullion presenting itself as a fantastic haven.

Buying Gold and Gold Bullion in Singapore

If you are looking to buy gold in Singapore, gold coins or other precious metals, these have proved to be extremely liquid and attractive assets during periods of economic uncertainty.

The Dollar’s History as a Safe Haven

The US dollar offers political and economic stability thanks to its deep, broad and well-regulated markets; the US government can borrow heavily from overseas, earning its currency the “King Dollar” status.

The US Dollar Index

Since its launch, the US dollar index has demonstrated that the currency has traded consistently against other freely traded currencies such as the Yen, Euro and sterling. However, in the last five decades, the dollar has only appreciated 20% in spite of rapid growth since 2018, as the graph below demonstrates.

Gold’s_Long-Term_Role_in_the_Global_Financial_System_(1)

Is Buying Gold in Singapore the new Safe Haven?

While the US dollar has performed admirably against other currencies, it is gold’s purchasing power that has persevered.

Gold is effectively an international currency in everything but name and offers a hedge against inflation along with insurance in the event of turmoil in the global financial system.

Buying Gold has a Proven Track Record

Gold bullion and silver bullion have a track record over many millennia as a currency used in both local and cross border exchange. They also possess specific attributes of successful currencies such as an ability to retain value.

From this perspective as well, gold and silver behave like a currency. Gold as a safe asset is still a superb option, but the IMF revoked gold’s official status as a currency in the 1970s. This demotion is the most critical factor limiting gold’s ability to function as a currency.

Gold No Longer an Official Tender

Gold is no longer official tender and lacks access to the international banking system. Consequently, it cannot be used to conduct transactions like actual currencies.

If you were to buy gold in Hong Kong, you would be investing an extraordinarily safe and liquid asset. Although gold and silver are not recognised as official tender in the fact that they do not have a direct connection to any currency, they can be easily traded and exchanged almost anywhere in the world. 

Gold cannot be duplicated, and its amount is finite. Therefore, economic growth could be constrained by a rising gold price if there were no other currency alternatives.

Gold is Government Agnostic

For these same reasons, gold bars or gold coins can protect against some of the vagaries of governments. Gold does not require the backing of individual governments, which is appealing given the tendency for regimes to change and not honour previous commitments. 

Gold has no associated liability, which makes it resistant to price manipulation and political turmoil. Spot prices for gold can be sort every day.

Gold Serves as a Hedge For Currency Fluctuations

However, gold can serve as a hedge against the tendency of currencies to weaken over the long-term. Below is a chart starting in 1969, showing the ratio of the gold price to the value of the dollar as quoted in DXY, the currency basket reflecting the “true value” of the dollar. 

What this means is that if the dollar is strengthening against other currencies and gold stays the same versus the dollar, the gold has actually retained its value against fiat currencies. And conversely, if the dollar is weakening against other currencies, then gold and other precious metals such as silver would need to appreciate against the DXY quoted dollar to retain its “true value”.

Gold’s_Long-Term_Role_in_the_Global_Financial_System_(2)

Looking at the gold in this trade-weighted fashion can be quite revealing. The ratio’s ascent from 0.42 in 1969 to over 12 today clearly shows that gold has retained its purchasing value far better than has the US dollar.

The ratio has increased an impressive 30 times, while the USD has appreciated by 26% over the past five decades versus the currencies of its trading partners, it has fallen by 97% versus gold!

Buying Gold Bullion in Singapore

To invest in physical gold such as gold jewellery, gold bullion coins and bullion storage is perfect in terms of wealth protection. Established markets for buying gold such as Singapore and Hong Kong provide investors with security.

Gold Bullion Coins

Gold bullion coins such as the South African Krugerrand of those produced by the Royal Canadian Mint are also excellent examples. In many ways, these are better alternatives than gold jewellery.

Singapore’s Independence

Since its independence, Singapore has proven an island of financial stability, with strong traditions for rule of law, good protections for private enterprise, and a ruling class that sees maintaining a business-friendly approach as a matter of national security. Indeed Singaporean passports are considered one of the world’s best.

To Buying Gold Bullion in Singapore Offers Protection for a “Rainy Day”

As such Singapore, offers an excellent opportunity to investors looking to buy and store gold with an outlook for a “rainy day”. Buying gold bullion in Singapore will inevitably provide wealth protection over the medium to long-term

Conclusion

In conclusion, while its value is less stable than US dollars, and it is not easily used as a currency, gold bullion has proven itself to be a much more valuable store of value. A recognised insurance company should fully insure any gold.

J.Rotbart & Co