Did you know, other than purchasing Precious Metals outright through our e-commerce site or over-the-counter, you can also accumulate precious metals gradually. Take your time to save and accumulate the asset and then redeem it whenever you decide.
Accumulating (Precious Metals) gradually allows you to average out your cost and spread out your funds just like the current trending way of purchasing, BNPL (Buy Now Pay Later). Just that in this case you can only take delivery after you saved the full weight of the physical precious metal you want. You can have a peace of mind even if you do not have the time to monitor prices in order to decide when to buy in. GSC Savings Accumulation Program (GSAP) is designed to automatically purchase for you daily, based on your stipulated amount you would like to save into precious metals monthly.
At any time during or after the accumulation, you may redeem the precious metals by selecting your desired physical products – bars, coins and/or jewellery. Based on your accumulated weight at that point of time, you can browse through GSC and Kim Gold product range to select what you would like to redeem. After you have decided, GSC will share more on the premium/Kim Gold Fee to top up.
Jewellery with different purity will be calculated accordingly when redeeming them. If you have queries on this, please do not hesitate to contact our team to understand more.
Don’t miss this good “lobang” as we Singaporeans like to say it in Singlish. This means don’t miss out on this good opportunity on our very own Precious Metals BNPL Program aka GSAP!
Suzane
“Spot prices dropped by over 4.00% in a span of 60 minutes before rebounding back 2-3 hours later.”
The above situation sounds like how BTC typically behaves with its extreme volatility. (For those of us who doesn’t track BTC, BTC’s price fell by over 55.00% in a span of 2 months recently, with the biggest drop being 49.00% within 2 weeks.)
That’s akin to saying your million-dollar HDB flat is now worth only 500k on the market. Ouch.
But guess what, the above situation refers to our safe haven asset known as Gold and it happened just this week, 9th August 2021 (Incidentally when Singapore celebrated its National Day holiday.)
The massive dip occurred just after 0700hrs local Singapore time, a time where most people were just starting their day. The dip lasted for an hour before rebounding back upwards 2 hours later towards levels of US$1740.
The big money question is “Why?” And we at GoldSilver Central, have laid out several possible scenarios as to what might have happened.
Background
Coincidentally, on the 9th August, two major Asian markets were closed. Singapore was celebrating its National day and Japan was observing its Mountain Day holiday in lieu. With both markets closed, the depth of the commodities market was shallow, and liquidity obviously was not as readily available. There were probably fewer traders physically on desk as well.
Scenario 1:
A large legitimate sell order was placed. As traders were mostly off desk, the order could have been placed out into the market instead of a manual cover by an actual trader. And due to the lack of liquidity in the market, prices dipped accordingly to fill up the glut caused by the large sell order.
Of course, there are several follow-up questions in this scenario. Would prices really dip that much? Would this big dip happen again? What can I do to prevent margin calls for my account?
The truth is, we will never know with certainty. Unless we are the actual parties involved (The dealer who got the sell order or the actual customer with the sell order), we can only “guess” based on the available data that we have on hand. And the one thing is clear, Gold dipped by over 4.00% in an hour to hit a low of US$1684.72 between 0700 – 0800 hr local Singapore time on 9th August 2021.
Would it happen again?
We don’t know. From our experience, big orders are usually spread out across several days due to its sheer size to avoid large slippages and market movements. Hence, they are usually done Over-The-Counter, directly between market participants. This prevents unnecessary shocks to the markets. From the looks of the markets right now, it seems that we are out of the woods with gold prices hovering around the US$1750.00/oz levels. But can we say with certainty that prices will not cross below US$1700 in a shock dip like what we just experienced? No, we cannot be certain.
Scenario 2:
High-frequency trading probably exacerbated the drop triggered by stop losses.
Due to the prevalence of high frequency trading these days, large volumes of trades can be pushed through in a shorter span of time now. There is debate as to whether HFT ultimately contributes to increased market volatility and sharper spikes and crashes. However, we will leave that to another day for discussion.
What we wish to bring up here is that the quick pace at which the price dropped that morning probably didn’t even leave time for most traders to adjust their stop losses accordingly. Each lower price level would likely have triggered further stop losses, thus resulting in a negative spiral downwards until more and more traders caught wind of the situation and managed their positions accordingly.
Well, what should you do now?
NOTHING.
Ever heard of the saying “Don’t try to catch a falling knife?” The same principle applies here, you weren’t in the right position before the event occurred. So don’t try to chase after something that is just simply not meant to be.
Reacting to an unexpected situation is never a good thing and we won’t know for certain what is going to happen next. If anything, stick to your gameplan. There are always opportunities in the markets.
If your initial position was a buy position, then see this as a good chance for accumulation. And do it wisely. GoldSilver Central offers you the tools to do so. We have:
1. GoldSilver Central Savings Accumulation Programme
Dollar Cost Averaging Strategy is the crux here, and when you onboard the GSAP, accumulating daily is stress-free. Think of it as automated disciplined savings for your purse strings. It allows you to break up your purchase into daily smaller bite sizes, spreading out the price risk that you must bear. More discipline in your life isn’t such a bad thing.
A mobile friendly application that is a powerful tool for investors. You now have the capability to view and transact based on live streaming market prices. Yes, that is right, you can buy / sell anytime and anywhere that you find convenient. So if prices were to crash once again, you would be able to take action immediately. And the best part? It’s 100% physically deliverable. Yes, let me repeat, 100% physically deliverable. You can exchange the pool allocated gold in your GSC Live! Account for physical bars & coins at our retail shop.
If you wish to learn how GoldSilver Central can add value to your portfolio, let us know and we’ll give you a call at your convenience.
Jason
Many wonder what other benefits the GSC Collateral Loan Program will have other than the usual that is already known, e.g. short term cash flow. Here we have a perfect case study about how you can keep your physical precious metals but yet still unlock liquidity from it for other available opportunities or need.
Amy invested in Silver after she had done her own research and believe that silver price will rise in the long run. She bought 1000 oz worth of 100 oz Silver bars that cost $37,500 last week but she believes that equities now are a good time to get into.
This is where the GSC Collateral Loan program can assist and help Amy to have both in her portfolio. Assuming the Silver spot bid price is at $34/oz and the loan-to-value of silver is at 75%, let’s look at a simple scenario on how this program works.
Amy starts by buying 1 pc of the 100 oz silver bar and put it into the collateral loan program. She will get $34/oz x 100 oz x 75% = $2550 from collateralizing the bar. If she collateralises 10 of her 100 oz Silver bars, she will be able to get $25,500 from them. She can then use the short term liquidity from her bars for other investment opportunities such as the equities she is looking at or even buy into other precious metals such as Gold if she believes that we are in a commodities super cycle. This is akin to what many are more familiar with, mortgaging their homes for liquidity for investment opportunities or to tide through tough times, you can do the same for Precious Metals and jewellery too!
Feel free to contact us if you are interested!
Maya
It has been a busy week, you didn’t have much time to look at your Precious Metals (PM) investments during the week. Now that it is coming to the weekend, you decide to purchase some LBMA Good Delivery gold bars as prices having been dipping throughout the week.
BOOM. Wrong move there. You might have been better off waiting for Monday. To understand why, we first must understand the price components of a gold bar and why weekday prices are different from weekend prices.
If you are unfamiliar with the below equation, get familiar with it first!
Price = Physical Premiums + Spot price
(For more information, refer to “Cheaper a bit can a not?” Why your gold bar should NOT be cheaper.“ Article)
“Wise and successful businesses properly manage risks.”
For GoldSilver Central, we adopt a Hedging-based model approach where we ensure that we are not exposed to price fluctuations on our clients’ orders. This approach allows us to serve our clients without any prejudice on prices and ensures that we are not adversely affected by massive rise/drop in prices. To put things in perspective, a $200 increase in gold price will not equate a $200 increase in profits for selling a gold bar, as we do not take any positions on the gold spot price.
Under normal market conditions, where there is deep liquidity available and market participants aren’t afraid to quote prices for buying/selling, the difference between the selling price and buyback price (Also known as the buy-sell spread) is narrow. This is a natural function of efficient markets, where conditions for performing transactions are very fluid and has less or no friction. This is what usually transpires on a weekday where many market participants are available, and dealers are active also.
However, on a weekend, this is not the case. Market participants are inactive and do not quote prices. Hence a bullion dealer who deals on the weekends will instead, take the trade onto their own books. This creates exposure and a higher risk for the business itself, come Monday when markets are once again open. To deal with this increased risk, the buy-sell spread is widened to account for any possible fluctuations between the current quotes and the Monday market prices. This widening could be reflected in either the physical premiums or the spot prices itself.
A fun fact: Never try to compare prices of brokerages on a weekend. The adjustment of the buy-sell spread differs for each brokerage and you will end up with an inaccurate comparison.
How is the buy-sell spread determined on the weekends?
Reputable bullion dealers will have their own price risk assessment and structure. They consider several factors, such as the current market volatility, and price accordingly. Hence, you may observe that the buy-sell spread for the weekends may differ for different products.
This is also why some bullion dealers do not take in large orders on the weekend, as this increases their risks to an unacceptable level.
This sounds so unfair! Why should there be a wider buy-sell spread?
It is not a question of “fair / unfair”. Rather a more appropriate question to ask yourself should be “am I willing to deal at the current quoted rates?” Reputable bullion dealers widen the buy-sell spread to account for the increase in risks that they undertake. If they do not, they expose themselves to unacceptable risks and may even go out of business if the risk is not managed properly. However, if a dealer widens the buy-sell spread too widely compared to others, savvy investors know not to take it up and the dealer effectively prices himself out of the market. GSC offers services such as GSC Live! and price alerts/limits that assist our clients to monitor their desired price levels.
So why transact on the weekends?
It depends on your objectives!
If you are a regular investor and are now in the accumulation phase of your investments, you may wish to avoid placing weekend trades to avoid any major fluctuations in your accumulation. Slow and steady as some call it.
However, if you are a gun-slinging sniper looking for short-term opportunities from minor movements in price, and you foresee that prices are poised for a big movement come Monday, then yes transact on the weekends and lock in those prices. There are also investors who see that the current weekend prices meet their desired levels and are happy to sell at these levels. There is nothing wrong in that too.
Ultimately, GSC’s role is provide liquidity to our customers at fair and transparent rates. We also have value added services such as GSC Live! that make it easier for clients to achieve their objectives. The choice to transact or not, has and always will be the client’s to decide.
Till the next time, have a good weekend.
Jason
GSC Savings Accumulation Program (GSAP) is a unique program whereby we help investors to accumulate precious metals based on the Dollar-Cost Averaging method. By putting aside a minimum amount of SGD 100 a month for 1 cycle (3 months) to accumulate into your preferred precious metal type you are technically doing the following:
Taking reference to a month with 20 business days, you will be accumulating $5 worth of Gold daily;
($100 / 20) = $5 will be used to purchase into Gold
The value of holding these precious metals way surpass paper currencies or coins due to its unique diversification role in an investor’s portfolio. Regardless of the Market condition and by investing in precious metals daily with GSAP, you would have had unknowingly diversified your portfolio to:
- Hedge for Inflation
- Protect against Deflation
What’s so intriguing about this program is that you can flex it anytime. – you can sell part of your holdings for cash or take *physical delivery during the accumulation period. As these holdings are physical holdings, there is a storage fee of 2.5% per annum, calculated on a daily basis, which works out to be less than S$0.50 for the whole month during your first accumulation month. As your holdings increase, the storage charges will increase as well. For a $100, storage fees are less than 1 cent, if fact it is only 0.7 cents per day!
Fancy a piece of Gold bar or coin? Opt to take physical delivery against your holdings by contacting us, and we can arrange all these for you.
Signing up is just a click away, head over to our website, and click on the “Sign Up” button under the GSAP section. We look forward to helping you accumulate your savings in precious metals for all occasions and needs.
*Physical Delivery refers to swapping your accumulated holdings for a physical precious metal bar or coin of your choice. Most of our Gold bars are LBMA accredited and are recognized internationally. When taking physical delivery, a premium top-up is required, and the amount varies from product to product.
Wendy
Have you ever wondered how do bullion dealers come up with the price of your physical gold bar? Is it true that bullion dealers make a lot of profits? Today, we look at the breakdown of a gold bar and why it is important to get a value deal instead of a cheap deal.
Essentially, the basic 101 formula is this:
Price = Physical Premiums + Spot price
Physical Premiums
Precious Metals Investors know that when they buy physical gold, they must pay a markup known as a physical premium.
For instance, on our GSC website, an Argor Heraeus Cast Gold Bar 100g is selling at S$8050.00 with the spot price of S$2450.80/oz. This translates to a physical premium of S$170.50 for the bar now.
This physical premium includes all the various costs components incurred in the minting of the gold bar. Some of these components include, but not exclusive:
- Refinery Minting costs
- Logistics Costs for delivery
- Insurance Costs
- Storage Costs
- Profit Markup
We covered this in a previous article also:
What are Physical Premiums? Why are they important?
You can see in the above example, it is inaccurate to say that the bullion dealer earns $170.50 from selling the Argor Heraeus Cast Gold Bar 100g. The bullion dealer incurs costs when it decides to bring in inventory stock from refineries and typically the local SEA market competition is very stiff. It is not far-fetched to say that for a 100g gold bar retailing at S$8000+, the dealer could only be making S$10+ from it.
However, it is accurate to say that the retail investor’s “additional” costs of owning the physical bar is $170.50. It is an unavoidable cost incurred for the eliminating the counterparty risks and having the additional security of the physical asset. (We will discuss this in greater details in another article. PM us for more details!)
Spot Price
This is commonly known as the price of gold which may be bought and sold at this moment. What determines the spot gold price? The simplest answer is demand and supply of the market participants. However, there are many alternate theories about it which we will not delve into. We must note that the spot gold price differs slightly from region to region for many practical reasons, considering the geographical location and the time lag.
So, why should I not want my bar to be cheaper?
The more appropriate question here would be “What’s the opportunity costs I have to forgo here?”
Just imagine this, a dealer who is solely focused on “a race to 0” as we affectionately term it, is likely not going to be focused on value adding to its customers. Its main goal would be to try and attract as many customers as possible by virtue of its “lowest prices possible” strategy and hope to attain enough market share to be a dominant player. We know that does not work in the bullion industry, as seen from the numerous players initially making a big entrance in the precious metals industry with “low premiums inventories”, only to shut down shortly after with huge losses.
Price should not be your only comparison.
Instead, you should be looking for a dealer who is not only price competitive, but also able to value add to your portfolio investments! We’ve spoken on the importance of having an expert to guide you in your precious metals holdings in this article here (All Precious Metals investors fall into 2 categories. Which are you?)
Personally, I would absolutely be willing to top up the extra $10 in premium costs if in the long run, the dealer is able to value add to my portfolio. The costs savings would be much more than the $10 I put up now. Think of it as a minor investment in ensuring you get a better deal rather than a cheaper one. As Warren Buffett says:
“Price is what you pay. Value is what you get.”
And I would choose value over price anytime of the day.
Till the next time.
Jason
Inflation refers to the rise in prices of most goods and services of daily or common use. Whenever there is a higher demand than supply, prices will be increased and therefore, leading to inflation.
Investors holding on to tangible assets, such as property(s), may like to see inflation in the Real-Estate sector, as that will cause the value of their assets to increase. On the other hand, as whenever there is a negative in the Real Rates of Return in the Equity, Bond, or Real-Estate markets, investors will purchase Gold regularly as it is an asset that maintains value. This is because Gold, Silver, and other Precious Metals have both intrinsic and industrial value, cannot be printed at will like currencies; therefore will not be affected by inflation in the same way as food or personal services
However, investors will have to take note that the volatility of these assets can turn down the benefits of their insulation from rising prices, especially if it is only used for a short-term investment.
Deflation is when the inflation rate falls below 0% (a negative inflation rate). Inflation will cause the value of the currency to decrease over time however, sudden deflation will increase the value of the currency. This will mean that more goods and services can be bought with the same amount of currency than before this sudden deflation.
Usually, deflation happens when there is a high supply (excess production) with low demand (decreased consumption), or when supply of money is decreased (sometimes in response to a contraction created from careless investment or a credit crunch), or because of a net capital outflow from the economy.
If deflation is exacerbated, it can throw an economy into a deflationary spiral. This will happen when a decrease in price leading to lower production levels, and therefore to lower wages. This will cause a lower demand by businesses and consumers, and the price will decrease further due to the lower demand. Unemployment rate will also increase if consumers delay spending in anticipation of falling prices, as it will eventually lead to a falling economic activity.
What we see today, the big increase in money supply in support of the global economies due to the effect of the pandemic, the low interest rate to spur lending and spending, inflation seem more like a plausible event moving forward. At this moment, a portfolio with a slightly higher allocation to Precious Metals might be good as we are bullish in the longer term and this period (current price levels for Precious Metals) might be a good window to enter the market and accumulate more.
Always remember that a diversified portfolio will be important to tide investors through inflation and also remember to constantly rebalance your portfolio to achieve the best results!
Suzane
We have many clients and new investors who have asked us about what is LBMA and the LBMA Gold price published. In this short article, we will have a short knowledge sharing on these 2 frequently asked questions. LBMA is an association that sets standards and represents the global bullion market players. The members of LBMA are to ensure the highest standard of transparency and quality assurance for the precious metals market. LBMA has a responsible sourcing programme for precious metals, this is to protect the integrity of the global supply chain, combat money laundering, terrorist financing and human rights abuses globally. Inland Revenue Authority of Singapore (IRAS) takes into consideration the good delivery list from LBMA as the tax exemption criteria for investment precious metals in Singapore.
However, the overall association does not generally set or provide any metals live pricing per se, e.g. Brinks is a member of LBMA but the company doesn’t make live market prices. The LBMA Gold Price is a global benchmark price for unallocated Gold delivered in London. It is set twice daily at 10:30am (AM Price) and 15:30pm (PM Price) London time by an auction that is independently operated and administered by ICE Benchmark Administration (IBA). The price is set in US dollars per fine troy ounce (31.1035g). Since LBMA doesn’t set the gold price, UK bank holiday where no LBMA prices are published actually doesn’t affect trading of gold as prices are still generated by over counter transactions globally.
In Singapore, there is the Singapore Bullion Market Association (SBMA), which GoldSilver Central has been a member since 2016. The SBMA is a non-profit organisation representing 35 key stakeholders from the precious metals industry in Singapore including bullion banks, exchanges, refineries, bullion merchants and secured logistics support companies. Its mission is to develop the bullion market in Asia and aims to have widespread representation of the ASEAN precious metals industry.
Hope this short article provided you some insights into our trade and stay tuned for more knowledge sharing articles by our team!
Maya
Governments around the world including the United States have been utilising monetary policy to aid their economies tide through this pandemic. I think that by now, you would understand with governments injecting liquidity into the market, inflation inevitably will creep up, which will in turn reduce your purchasing power. Investors are now looking at various assets to protect their wealth and if you chose Gold; should you buy into Physical Gold or Gold ETFs?
Let’s have a quick run-through for both forms of investment. With Gold ETFs, you get a transparent and convenient way to invest in gold. As long as the market is open, you are able to buy and sell Gold ETFs on the exchange, making it as easy as trading stocks on the stock exchange. Prices are relatively more inexpensive as the costs for production (premiums) are excluded from the ETFs. Furthermore, you do not have to be concerned on the storage of the assets.
However, with Physical Gold, it is one of the most secure form of investment. You are not exposed to any third-party risks as you are in full control of the asset yourself. In the event of unforeseen catastrophes, the value of your asset will still be there giving you the financial insurance you are looking for.
What if there is a third option that somehow allows you to have the best of both worlds? That third option will be Pool Allocated Gold. Rather than buying Physical Gold (fully allocated), you can purchase Pool Allocated Gold which is physical deliverable as it has the underlying physical precious metal, without paying the premiums upfront. At this stage, you enjoy the convenience of Gold ETFs, allowing to buy and sell anytime during the opening hours of the market. Should a time of emergency come, and you want the security of Physical Gold, you can simply swap your pool allocated holdings into physical Gold by paying the premium and bring your Gold bars home. This is essentially what GSC Live! allows you to do! Read more about GSC Live! and open your account today!
Sin Pong
