By Alan Ho Chok Chan
So investment in gold must be regarded as an Anti-Risk Strategy. Investment choices –What gold?
Perspective
As an investment vehicle gold occupies only a small niche among global financial assets. It is estimated there is a pool of $150 trillion of financial assets globally ( 2007 estimate)
Since the time of the Pharaohs ALL the gold that was mined, and above ground , is 150,000 tonnes. Since gold is indestructible, all of it is still around. This is about $3 trillion worth.
Half of this is not accessible : made into religious artifacts, national treasures, ornamental gold, in museums, jewellery, and hoarded in private vaults to be used as gifts or heirlooms. So, only about $1.5 trillion worth of gold is in the investible pool, or about 1% of total global financial assets.
Investment in Gold
So gold investors are a select, small group of careful people with their eye on the future!
There are essentially 4 ways you can invest in gold :
- Physical gold : bullions and coins
- Gold certificates and gold accounts
- Gold ETF ( exchange traded funds )
- Gold mining company shares and gold funds invested in mining companies.
Gold Investors
There are 2 classes of investors :
#1. Those who invest for anti-risk purposes — as an insurance against catastrophe and worse-case scenario. Here the purchase and storage of physical gold is the only way to go. There are gold bars and coins of different denominations and varietals.
Buy the minted coins and bars only for their gold content and value : these are like the Krugerrands ( south African ), American Double eagle, Canadian Maple leaf
Numismatic coins minted with special designs , eg China Panda gold; special proof sets or commemorative issues , like the S’pore Mint lunar new year issues with the animal symbols in the Chinese Almanac. All these tend to be priced at a premium over the gold value of the coin, as they were perceived to be limited editions , and therefore collectible.
The advice to potential investors, as with all financial investments, is price and timing.
The other points are to ensure you buy from an authorised dealer or bank that will guarantee a buy back policy. Keep always the certificate of sale, in the case of bullion bars, the certificate of authentification with the engraved number on the bar.
Finally, never open the sealed packagings , this allows ease of identification and verification.
Final, final advice : safekeep the gold in a stout vault !
#2. Gold speculators. The other 3 instruments of gold investing are really for Gold speculators. They are fraught with some risks, which rises from a relatively low risk in Gold ETFs, to issuer risks in gold accounts and gold certificates, to risks on par with, or sometimes exceeding those of mutual funds and poorly regulated companies .
Caveat Emptor !
In conclusion, for the risk averse investors who worry about the turbulent and unpredictable financial, political, and religious milieu we live in, putting a small portion of your total financial wealth, not exceeding 10% of your portfolio, into gold, wouldn’t make you rich as King Solomon, but give you some peace of mind .
Happy investing in future !
Dr Alan Ho Chok Chan is a Paediatrician in private Family Practice. He also spends time golfing, swimming, playing tennis, wine tasting, playing guitar and singing. He is also a bibliophile and voracious reader.
