#whatstrending feat. Phillip Securities (a member of PhillipCapital)

Ever wondered what is currently driving the local and regional markets? #whatstrending is a series addressing some of the most trending questions/topics on the markets for investors. Designed to be educational, expect to get factual information on what is driving sectors and stocks listed on SGX, featuring insights from professionals in the community.

Today, we hear more from Phillip Securities’ Ada Tam, Wealth Manager, as she shares her thoughts and views on the recent surge in popularity for Gold  

Q:  What is happening to Gold prices recently?

From  Ada, Wealth Manager of Phillip Securities:

Aside from the ongoing wars, higher interest rates in advanced economies, trade and geopolitical rivalries between nations. There are many other factors behind this spiraling demand for gold.

1. Gold is becoming increasingly scarce

According to the World Gold Council (WGC), a group representing the interests of mining companies and other participants in the sector, Gold is becoming harder to find worldwide. John Reade, Chief Market Strategist for WGC, told CNBC that mine production is stalling out despite some gains earlier this year. 

2. Central banks worldwide are accumulating gold in increasing quantities

In the first quarter of 2024, Turkey, China, and India exhibited the highest demand for gold, with their gold purchases significantly outweighing sales. Additionally, Kazakhstan’s net purchases exceeded 10 tonnes. Central banks worldwide experienced record-high gold demand in 2022, which remained similarly robust in 2023.

3. Calls to move away from the US dollar are growing

With the existing trade tensions among the economic powers, more emerging countries are considering to be less dependent on just one currency. The discussion on shifting away from US Dollar as the most traded currency for reserves and valuating assets, has started to gain attention worldwide in recent years, especially in countries like China and Russia.

4. Gold vs Bitcoin

While Bitcoin’s price has surged by 718% over the past five years, the price of an ounce of gold has risen by only 73% during the same period. However, cryptocurrency scams and fraud have tarnished the reputation of crypto investing. Market volatility and regulatory uncertainties also make cryptocurrencies less appealing to seasoned investors.

On the other hand, gold continues to be recognized as a safe-haven asset during times of uncertainty. Its stable value provides protection against inflation and serves as a diversification tool for investors’ portfolios.

Q:  How can a retail investor invest in Gold?

From  Ada, Wealth Manager of Phillip Securities:

Potential investors may consider approaching reputable banks to purchase physical gold. However, it’s important to be aware that there are minimum transaction amounts and monthly service charges associated with such transactions. 

Aside to physical gold, there is also the Gold Exchange Traded Fund (ETF). The SPDR Gold Shares ETF that is traded on the SGX can be traded in two currencies—USD (stock code: O87) and SGD (stock code: GSD).The SPDR Gold Shares ETF tracks the performance of gold bullion prices, net of the trust’s annual expenses (0.4%). Each ETF unit represents a fractional, undivided interest in the trust, which primarily holds allocated gold. The LBMA Gold Price PM serves as the reference benchmark for calculating the trust’s Net Asset Value (NAV).  Besides cash investments, investors can also invest via their SRS and CPF Ordinary Account “CPF-OA” savings. For CPF OA, investors can allocate up to 10% in the ETF.

Since its inception in 2004, the ETF has generated an annualized USD returns of 8.41%. This mean that if an investor invested US$10,000 into the ETF at the first day of its listing and held to today, it would have grown to almost US$50,000 which equates to approximately 400% gains over the last 20 years.

SPDR Gold Shares ETF is also among the most popular ETF on SGX in terms of trading turnover, with average daily turnover of S$3.1 million in 1H 2024. In June 2024, it has recorded a net inflow of S$40 million, highest level in terms of monthly inflows since November 2020.

For more insights from Ada, visit her blog at Adatamyy.com.