10 burning questions about gold
10 burning questions about gold
In today's unpredictable market, savvy investors are flocking to the timeless allure of gold. Through the following questions, discover the secrets behind gold’s wealth preservation characteristics and explore the myriad of exciting avenues to invest in this precious metal.
- Is gold a safe investment during times of economic uncertainty?
Gold tends to perform well in periods of economic uncertainty due to its limited amounts (or scarcity) and it can be saved, retrieved and used to store value relatively well.
Before the paper currencies that we use today became commonplace, many cultures and societies have traditionally used gold and silver as money for these reasons, and these traditions have continued till today.
However, do note that the price of gold is subject to the supply and demand forces of the markets and thus your principal is not protected when you invest in gold. This means you should only invest in gold if you are comfortable with the risks (see question 3), and you are able to hold on to this investment for the medium to longer term. - How does investing in gold compare to other investment options?
Investing in gold differs from other investment options in several ways. Gold is a tangible asset that holds intrinsic value, unlike stocks or bonds. It has historically acted as a hedge against inflation and economic uncertainties, providing stability to a portfolio.
However, gold does not generate income like dividend-paying stocks or interest-bearing bonds. Compared to stocks, gold tends to have lower volatility but may also offer lower potential returns.
Additionally, gold is not influenced by company-specific risks and is less affected by sentiments in the stock and bond markets.
Overall, investing in gold can diversify a portfolio and provide a store of value, but it is important to consider individual investment goals and risk tolerance when comparing it to other investment options. - What are the potential risks and benefits of investing in gold?
Investing in gold can offer several potential benefits. It is often considered a safe-haven asset, providing a hedge against inflation and currency fluctuations. Gold has a long history of retaining its value and can act as a store of wealth during economic uncertainties. Additionally, it can diversify an investment portfolio and offer a level of stability.
However, there are also risks involved. Gold prices can be volatile, affected by various factors like geopolitical events or changes in interest rates. Furthermore, gold does not generate income or dividends, making it less attractive for some investors seeking regular returns. It is crucial to carefully assess personal financial goals and risk tolerance before investing in gold. - How can I invest in gold? Are there different methods or options available?
You can invest in gold in several ways:- Physical gold – you can buy gold bullion to keep at home or store at a secure location. Do note that apart from not earning any interest, you may even need to continuously pay for storage cost to keep your gold safe.
- Paper gold – Investing in paper gold, such as through the OCBC Precious Metals Account, allows investors to gain exposure to the price movements of gold without the costs associated with buying and storing physical gold. It also allows investors to invest in smaller amounts by owning fractional amounts of gold.
- Gold exchange traded fund (ETF) – You can open an Online Equities Account through the OCBC Digital app and invest in an ETF that holds actual gold bullion and/or paper gold as its underlying asset.
- OCBC RoboInvest Precious Metals portfolio – The Precious Metals portfolio provides diversified exposure to major precious metals namely gold, silver, platinum and palladium. This portfolio is expected to have low correlation to the traditional asset classes and should be an integral part of any well-diversified portfolio. A proprietary algorithm is used to determine the relative allocation of each instrument in the portfolio. The portfolio is constantly monitored and rebalanced regularly.
- What factors should I consider before investing in gold?
Before investing in gold, several factors should be considered.
Firstly, assess your investment goals and risk tolerance. Understand that gold prices can be volatile so be prepared for potential fluctuations.
Consider the current economic and geopolitical environment as these factors can impact gold prices. Evaluate the supply and demand dynamics of the gold market, including factors like mining production and central bank buying.
Additionally, consider the costs associated with investing in gold, such as storage fees and transaction costs.
Lastly, diversification is key, so ensure that gold aligns with your overall investment portfolio and does not overexpose you to a single asset class. - Is now a good time to invest in gold? What are the current market trends and forecasts?
Gold has historically been influenced by changes in the US interest rate expectations, which impact the US dollar and US interest rates. However, the recent surge in gold prices at the time of writing (25 April 2024) cannot be solely attributed to these shifts.
Gold ETF holdings have decreased in 2024, suggesting that factors beyond the macro environment are driving its inflow. Structural changes in demand, such as increased gold buying by emerging markets’ central banks due to US sanctions and higher retail gold purchases in China, are supporting gold independently of the macro backdrop.
If central banks like the US Federal Reserve and the European Central Bank begin cutting policy interest rates, the macro support for gold will strengthen.
While OCBC remains optimistic on gold in 2024, the strong momentum can result in the price of gold running too far ahead and investors should consider investing with a longer time horizon and be prepared for occasional price drops in the short to medium term. - How does the price of gold fluctuate? What are the factors that influence its value?
The price of gold can go up and down because of different reasons. One reason is the balance between how much people want to buy gold and how much gold is available.
If more people want to buy gold and there is not enough to meet the demand, the price can go up. On the other hand, if there is a lot of gold available and not many people want to buy it, the price can go down.
Other things that can affect the price of gold are events happening in the world, like wars or conflicts, which can make people want to buy gold as a safe place to keep their money.
Changes in interest rates and the value of money can also influence the price of gold.
Lastly, how people feel about gold and how much they are willing to pay for it can cause the price to change too as this affects the demand for gold. - What are the tax implications of investing in gold?
The tax implications of investing in gold can vary depending on the country and the specific circumstances.
In some other countries, buying and selling gold may be subject to capital gains tax. If the value of the gold increases when you sell it, you may need to pay tax on the profit.
However, tax laws can differ, and there may be exemptions or special rules for certain types of gold investments. It is important to consult with a tax professional or research the specific tax regulations in your country to understand the potential tax implications of investing in gold.
Gains from the sale of a property, shares and financial instruments, such as gold, in Singapore are generally not taxable. If you are unsure whether your purchase or sale of gold is taxable, you can contact the Inland Revenue Authority of Singapore for clarification. - Are there any storage or security concerns when investing in physical gold?
There can be storage and security concerns when investing in physical gold.
Since gold is a valuable and tangible asset, it needs to be stored securely to protect it from theft or damage.
Investing in physical gold requires finding a safe and reliable storage option, such as a safe deposit box, bank vault or a specialised storage facility. This may involve additional costs for renting storage space or purchasing secure storage solutions.
Furthermore, there can be concerns about the authenticity of gold bars and coins so it is important to ensure that the gold is obtained from reputable sources to avoid counterfeit or impure gold.
On the other hand, investing in paper gold such as through the OCBC Precious Metals Account saves you the trouble of storing the physical gold, and transacting with an established financial institution like OCBC can give you greater peace of mind. - How does investing in gold align with my overall investment strategy and goals?
Investing in gold can align with your overall investment strategy and goals in a few ways. Gold is often considered a safe-haven asset that can act as a hedge against inflation and economic uncertainties. It has historically retained its value and can provide stability to a diversified portfolio.
If your investment strategy aims to preserve wealth, mitigate risks or diversify your holdings, adding gold can be beneficial. However, it’s important to note that gold does not generate income like stocks or bonds, so it may not be suitable for those seeking regular cash flow.
Assessing your risk tolerance, investment horizon, and consulting with one of our Personal Financial Consultants can help determine if investing in gold aligns with your specific goals.
Seizing the golden opportunity
Investing in gold has never been easier, with a range of accessible options available to all investors. Whether it’s through paper gold, gold ETFs, or a portfolio of precious metals, adding gold to your portfolio can provide a valuable hedge against market volatility and diversify your investments.
Here are some gold ideas you can explore today.
- OCBC Precious Metals Account
The OCBC Precious Metals Account lets you easily buy and sell precious metals 24/7 using the OCBC Digital app. You can diversify your portfolio from as little as 0.01 ounces (or 0.31 grams) of gold or silver for less than S$35 (as of 11 March 2024). The issued paper bullion will hold the same value as physical gold and silver. No custody or storage fees will be incurred. You can also invest in precious metals using SGD or foreign currencies available in your OCBC Global Savings Account. - OCBC RoboInvest Precious Metals portfolio
The Precious Metals portfolio provides diversified exposure to major precious metals namely gold, silver, platinum and palladium. This portfolio is expected to have low correlation to the traditional asset classes and should be an integral part of any well-diversified portfolio. A proprietary algorithm is used to determine the relative allocation of each instrument in the portfolio. The portfolio is constantly monitored and rebalanced regularly. - Investing in a gold ETF via the OCBC Online Equities Account
The Online Equities Account lets you trade across 15 global exchanges, including Singapore, US, China and Hong Kong markets. Grow your portfolio with REITs (Real Estate Investment Trusts), shares, exchange-traded funds (ETFs) and bonds.
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Date of publication: 22 September 2020 (updated June 2023)
Doc ID: 1323351
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