Tuesday, January 12, 2010

SPDR Gold Shares

This share caught my eye recently after watching a certain Youtube video about how bad the USD is going to devalue in a few years time.

With the expected depreciation in the USD, many countries are switching to gold as their reserves (besides switching away from USD as their foreign reserves), hence with a limited supply of gold in the world, and increasing demand, price of gold will have to go up!)

This has the same theory as land prices in Singapore will eventually go up over the years. With a limited supply of land, and more people, land prices can only go upwards!

This SPDR Gold Shares is trade on the Singapore stock exchange, under the name GLD 10US$.

One stock is approximately 1/10 ounce of gold. This is because, at the start of this gold fund, it is exactly 1/10 ounce of gold per stock. However over the years, with the management fee of around 0.4% per year, they have to sell some gold to pay for it, so the total amount of gold gets lesser though the number of stock stays the same. Hence the value of stock drops slightly every year, around 0.4%.

Main Advantages:
  • It is more cost effective to most investors (due to the small amount that we buy) to buy these shares, instead of buying the actual gold, and finding storage and getting insurance
  • This stock is liquid, meaning that there is always a buyer on the stock market, so that you can dispose of it quickly
  • Because of the high price of the stock, around USD110 per stock, it is not trade in denominations of 1000, but rather in 10.
Disadvantages :
  • It is traded in USD. Hence when u see the stock listed on the market as '110' it means 110 USD and you are subjected to the currency conversion of the brokerage firms, unless you have a foreign exchange account. Good thing is that, I have checked, their rates are better than the banks.

Here is the link to the site : SPDR Gold Shares

Some thoughts of mine....

Since gold is denominated in USD.
  1. With the depreciation in USD, and the 'worth' of the gold staying the same, the numerical USD value of the gold will go up.
  2. However, even with the numerical USD going up, say you want to change it back to SGD, you will actually get back the same amount, due to a bad exchange rate.
  3. Aren't we back to square one?
But I would think the most important thing is that gold has a limited supply and an every increasing demand. Unless someone happens to be able to 'make' gold, gold being scarce commodity that is readily used in commercial and retail industry, will continue to have a strong demand, leading to an increase in price.


AK71 said...

Taken from one of my posts in my blog:

"...I'm not overzealous about gold because I am not living in the USA or HK, making US$ or HK$. I am living in Singapore and making S$ which will appreciate against US$ and HK$ in time. This makes gold investment less compelling for me..."


ntuchartist said...

Yeah,I agree with you on that. Cos I expect singapore to do well.

However, if purely investing as a commodity, it is a way for a retail investor to buy into gold.

Anonymous said...

you shouldn't blindly go into conclusion that USD and gold has an inverse relationship.


Theirs a closed end fund called ASA limited they specialize in quality gold silver and other commodities.