Maximizing Returns on Surging Gold Prices at Minimal Expense
Taking advantage of record high gold prices while keeping costs low can be achieved through various avenues. One strategy involves embracing fractional gold ownership. Jermyn Wong, the head of intermediary South-East Asia at State Street Global Advisors, explains that fractional gold divides the ownership of an ounce into smaller, more affordable units. For instance, owning one-tenth of an ounce equates to approximately 10 percent of the gold price, with an ounce being equivalent to 31.1 grams.
Retail investors can engage in buying and selling fractions of physical gold bars, ranging from as little as one gram to a full ounce, through UOB. Meanwhile, for institutional investors and traders, David Tait, the chief executive of the World Gold Council, highlights a historical indifference among asset managers towards gold. To address this, Tait aims to enhance transparency in gold sourcing, thereby creating a trusted product for portfolio inclusion. Collaborating with stakeholders such as large-scale miners, refiners, and financial institutions, the World Gold Council utilizes blockchain technology to establish a comprehensive database tracking gold from its source to end users. Each gold bar is furnished with its own digital passport, ensuring legitimacy and traceability.
Standardized digital gold units are represented digitally, ranging from high-quality five nines to 995 gold. Richard Siaw, director of South-east Asia at Global X ETFs, suggests that these digital units, backed by physical gold, offer stability compared to volatile cryptocurrencies like Bitcoin. Limited retail access to digital gold tokens currently exists, with offerings such as Paxos Gold and Tether Gold. Additionally, HSBC introduced a digital gold token in Hong Kong, providing fractional ownership of physical gold held in London vaults.
Retail investors can also opt for shares in physical gold-backed exchange-traded funds (ETFs) like the SPDR Gold Shares ETF listed on the Singapore Exchange. Managed by State Street Global Advisors, this ETF pools resources, leveraging economies of scale to minimize costs associated with holding and storing physical gold. Unlike purchasing physical gold, investors in gold ETFs avoid bearing individual storage expenses, which can diminish long-term appreciation value.
Ultimately, when deciding between physical gold, gold tokens, or gold ETFs, it’s crucial for investors to consider fees and costs alongside their investment goals. As Mr. Siaw suggests, a holistic approach beyond mere price appreciation forecasts is essential in constructing a resilient investment portfolio.