Everything You Need to Know Before Investing in Gold | Investment Series

Why Gold is a Safe Haven Asset

• Gold is considered a safe haven asset because it performs well during periods of market instability, uncertainty, and disruption, such as pandemics, wars, and trade conflicts [00:57].

• Its value is maintained because it is scarce, with a limited supply that cannot be increased [01:21].

• Unlike other assets, gold has no inherent credit risk from a company or government [01:35] and is not issued by any country, meaning it has no political risk [01:47].

Gold's Performance in Different Economic Conditions

• During times of economic instability and high inflation, gold traditionally performs well [02:11].

• When inflation exceeds expectations and is out of control, gold's value tends to rise [02:53].

• Geopolitical events like international conflicts and trade disputes also positively impact the price of gold as large buyers, like central banks, seek to protect their reserve assets [03:05].

Major Buyers of Gold

• Central Banks: They are significant buyers of gold to hold as part of their official reserve assets [03:27]. This includes countries like China, India, Poland, Hungary, and the Czech Republic [03:32].

• Institutional and Retail Investors: Both groups have shown increased interest in buying physical gold bars, coins, and gold-backed ETFs (Exchange-Traded Funds) [04:01].

Factors Influencing Gold Prices

• There is a historical inverse relationship between gold prices and U.S. interest rates and the strength of the U.S. dollar [05:15].

• However, this relationship has weakened in recent years because investors, such as Chinese retail investors, are buying gold for reasons unrelated to U.S. monetary policy [05:36].

How to Invest in Gold in Singapore

• Physical Gold: You can purchase physical gold bars or coins from precious metals dealers [07:31]. Storage facilities are available in Singapore for those who prefer not to keep it at home [08:03].

• Gold ETFs (Exchange-Traded Funds): These are equity instruments that buy physical gold, with their share price moving in line with the gold price [08:09]. They are often an easier option for those accustomed to trading in a stock portfolio but come with management fees [08:44].

• Gold Jewelry: While gold jewelry can be considered an investment by some, the price paid often includes craftsmanship and workmanship, which can differ from the price of the underlying gold [09:28].

Determining Gold's Role in a Portfolio

• Before buying gold, consider if it will play a part in your portfolio as a counterbalance or a "shock absorber" [10:45].

• Gold has a low correlation to other assets like equities, making it a good diversifier to add resilience to a portfolio [11:07].

• There's no single answer for the ideal gold allocation, but a typical range is between 5% and 10% for most investors, depending on the risk level of their current portfolio [11:58].

Reference Link:

https://www.youtube.com/watch?v=aLMnRjVtC7U

Happy Investing! 😉