My review on buying and selling gold with Gold Trader Asia

Just a brief introduction about Gold Price Singapore. The online store selling gold bars and coins minted in Singapore is owned by Gold Trader Asia Pte Ltd. The firm is a registered business with ACRA and has a licence with the Police Licensing Unit as Secondhand Goods Dealers.

Operating for around 3 years, Gold Trader Asia has been buying used gold and selling bullion gold products such as Pamp gold bars. In recent months, the firm decided to extend their business by smelting used gold into bullion gold bars and coins to sell in the retail market through e-commerce. This business model profits from the margin in buying and selling the gold. Sounds simple? I think so too and I love business models that are easy to understand and it’s usually these business that sustain in the long run.

Product design

I had the pleasure of looking at the bullion gold bars and coins up close and personal. Dennis has chosen to use the Singapore Lion symbol as the main feature on the gold bar to tell consumers that they are made in Singapore. In terms of the quality of the product, I would say that it’s comparable to the Singapore Lion bullion coin. As the design is simplistic, it can’t be compared to complicated designs like the Australia Kangaroo nuggets.

As you can see on the right, Gold Trader Asia offers a few different sizes of gold bars and a 1-ounce gold coin. On the top of the photo are their certificate of authenticity. It is noted that there is no legal tender on the gold coin so you cannot use their gold coins as money.

The gold bars and coins are encased between two pieces of plastic, with small magnets on each corner to secure the case. There are seals on the sides of the cases. In my opinion, they do look better than Pamp Suisse gold bars that are sealed in what looked like cheap plastic enclosures.

Authenticity of gold products

The manufacturer will sends a sample from each batch of their gold products to the Singapore Assay Office to undergo Fire Assay (Cupellation). Instead of stamping the hallmark on their gold products, Gold Trader Asia chose to issue a certificate detailing the assaying process and guaranteeing the authenticity of the product.

All the gold bars (except 1gm gold bars) are also stamped with a serial number, e.g. SGDXXXXXX that is also indicated in the certificate. I suggested to Bill that they could consider setting a database of their serial numbers in their website so that in future, buyers can verify the serial number of the gold bar that they are buying online.

Final thoughts on Gold Trader Asia

Gold Trader Asia is probably one of the first firms in Singapore that buy used gold and make bullion gold products to sell although this business is very common overseas. Personally, I like the fact that Gold Trader Asia’s business model is simple to understand. The fact that they make a profit from selling their gold products makes me feel comfortable that they are here to stay. Naturally, only time will tell if their business is sustainable.

If you are worried that end of the day you are unable to sell them off, Gold Trader Asia assures me that they are always willing to purchase your gold back at used gold prices, which are close to gold spot prices.

Main Drivers Of Gold Prices

Gold in 1999 was at an ebb in the wake of a 20-year bear market, and has steadily been on the rise ever since. Gold prices are driven by several factors and there is every indication that this rising trend will continue. The factors while diverse and in constant change, are also influenced by political, economic and global monetary conditions. The price of gold is akin to a global thermometer ceaselessly measuring these varying indices. While fluctuations are influenced by the demand/supply metrics it is not as evident with gold as with other metals.

Some of the factors that drive gold prices are:

A weak US $

Due to the Current Account Deficit which exceeds 5% of GDP, and extreme debt levels exacerbating the dollar’s woes, foreign central banks have resorted to selling US dollars to broad-base their currency reserves. A steadily weakening dollar pushes up the price of gold since the yellow metal remains the most popularly traded monetary asset, no different to currency trading. The price of gold is inversely proportional to that of the dollar.

US Inflation

Negative real interest rates, history has shown, rank among the most powerful drivers of gold price. Provided the US government maintains interest rates and does not raise it to a level to control inflation, real interest rate remains below the median, which forces the price of gold up.

Demand and Supply

Demand for gold is insatiable. Alert investors and speculators play the market according to global circumstances; countries like India, especially during festival and wedding seasons, have a inexhaustible demand for the metal; and China poses a constant threat with her intent to convert foreign currency reserves into gold. These stresses impose an enormous pressure on central banks to sell gold to other banks to meet their incessant demand. The demand at current prices hovers around 3,000 tonnes per annum, far in excess of supply.

Declining Supply

The supply of gold is steadily decreasing. The Beacon Group Advisors as far back as 2002 projected a drop in production of between 30 and 35 percent in the ensuing 7 to 8-year period because of lack of exploration since 1997. Without exploration the world had no fresh gold deposits to tap. To reverse this position with new explorations requires time. It is estimated that a new mine requires anywhere from four to seven years to provide commercial gold.

Geopolitical Tensions

Gold prices are heavily influenced by turbulent conditions around the globe. Some of the recent and current issues have been a stressed situation in the Middle East exacerbated by Iran’s nuclear posturing, the fall-out of NATO troops exiting Afghanistan, a nuclear stand-off with North Korea and the ceaseless tension between the US and China. Prevalent uncertainties create a shift toward gold.

Manipulative Practices

The Gold Anti-Trust Action Committee (GATA) maintains that the price of gold is being artificially suppressed by the Bullion Banks who are in debt to Central Banks because of the unexpected rise in gold prices. There is a mountain of evidence to suggest that every time gold rallies, Central Banks divest some of their government gold stocks to hold the price. This band-aid measure cannot continue indefinitely and when the bubble bursts the price of gold is likely to go through the roof.

How and when to start investing?

When to invest:

It's never too late or too early to start investing. The best time to invest is now. The 4 keys that could guide you regarding when to invest are:-

1-Start investing early- Start early and retire rich. Invest whatever you can today and move steadily towards a secure tomorrow.

2-Invest regularly- Invest regularly and methodically and let the magic of compounding work for you.

3-Never time the market- Be a smart investor. Always invest in time but never try to time the market. Timing the market is mastered by none and is beyond one's control.

4-Be patient- For long-term wealth creation, you need to be patient. The longer the investment horizon, the lesser is the risk and greater are the returns.

How to invest:

You toil hard to earn money and, therefore, it is important to invest it wisely. Ask yourself certain questions before deciding on how to invest:

1-What are your needs and financial goals? Do you need a regular income or want to buy a house or require funds for your child's education?

2-How much risk are you willing to take on? Can you withstand the volatilities in the capital market or are you satisfied with a low-risk, low-returns philosophy?

3-How soon do you need the money? Can you invest for a longer time-horizon or do you need money in the near future?

4-What are your cash flow requirements? Do you need a regular income or a lump sum amount after a certain period of time?

Factors which influence the decision to invest

Past market trends

Sometimes history repeats itself; sometimes markets learn from their mistakes. You need to understand how various asset classes have performed in the past before planning your finances.

Your risk appetite

The ability to tolerate risk differs from person to person. It depends on factors such as your financial responsibilities, your environment, your basic personality, etc. Therefore, understanding your capacity to take on risk becomes a crucial factor in investment decision making.

Investment horizon

How long can you keep the money invested? The longer the time-horizon, the greater are the returns that you should expect. Further, the risk element reduces with time.

Investible surplus

How much money are you able to keep aside for investments? The investible surplus plays a vital role in selecting from various asset classes as the minimum investment amounts differ and so do the risks and returns.

Investment need

How much money do you need at the time of maturity? This helps you determine the amount of money you need to invest every month or year to reach the magic figure.

Expected returns

The expected rate of returns is a crucial factor as it will guide your choice of investment. Based on your expectations, you can decide whether you want to invest heavily into equities or debt or balance your portfolio.

Why you should invest?

Take a minute to think about why you may want to invest

Inflation is constantly increasing the cost of goods and services and eating into the value of your income and wealth. You need to save money and invest it well so that the value of every rupee is augmented.

Higher life-expectancy means people live longer and hence, need more money to maintain their living standards.

Investing selectively allows you to enjoy tax benefits.

By investing wisely you can improve your standard of living and create wealth for the future.

Financial Instruments

Equities

Equities are a type of security that represents the ownership in a company. Equities are traded (bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the company. Investing in equities is a good long-term investment option as the returns on equities over a long time horizon are generally higher than most other investment avenues. However, along with the possibility of greater returns comes greater risk.

Mutual funds

A mutual fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment objective. This investment avenue is popular because of its cost-efficiency, risk-diversification, professional management and sound regulation. You can invest as little as Rs. 1,000 per month in a mutual fund. There are various general and thematic mutual funds to choose from and the risk and return possibilities vary accordingly.

Bonds

Bonds are fixed income instruments which are issued for the purpose of raising capital. Both private entities, such as companies, financial institutions, and the central or state government and other government institutions use this instrument as a means of garnering funds. Bonds issued by the Government carry the lowest level of risk but could deliver fair returns.

Deposits

Investing in bank or post-office deposits is a very common way of securing surplus funds. These instruments are at the low end of the risk-return spectrum.

Cash equivalents

These are relatively safe and highly liquid investment options. Treasury bills and money market funds are cash equivalents.


Non-financial Instruments

Real estate

With the ever-increasing cost of land, real estate has come up as a profitable investment proposition.

Gold

The 'yellow metal' is a preferred investment option, particularly when markets are volatile. Today, beyond physical gold, a number of products which derive their value from the price of gold are available for investment. These include gold futures and gold exchange traded funds.

Crude oil prices today

Crude oil price varies in appearance depending on its composition. It is usually black or dark brown (although it may be yellowish or even greenish). In the reservoir it is usually found in association with natural gas, which being lighter forms a gas cap over the crude oil, and saline water which, being heavier than most forms of crude oil, generally sinks beneath it. Crude oil may also be found in semi-solid form mixed with sand and water, as in the Athabasca oil sands in Canada, where it is usually referred to as crude bitumen. In Canada, bitumen is considered a sticky, tar-like form of crude oil which is so thick and heavy that it must be heated or diluted before it will flow. Venezuela also has large amounts of oil in the Orinoco oil sands, although the hydrocarbons trapped in them are more fluid than in Canada and are usually called extra heavy crude oil. These oil sands resources are called unconventional oil to distinguish them from crude oil which can be extracted using traditional oil well methods. Between them, Canada and Venezuela contain an estimated 3.6 trillion barrels (570?109 m3) of bitumen and extra-heavy oil, about twice the volume of the world's reserves of conventional oil.