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Gold and property rights

History teaches us that countries that most uphold property rights are also those best known as gold havens. Even though rules constantly change, an investor must decide based on a comparison of risk levels, wherein Singapore ranks as tops in safety.

Published: 06-02-2013 00:00

Gold and property rights

Property rights’ link to gold

In the world, Switzerland and Singapore are among the most prominent examples of guaranteed protection of one’s property rights. It’s no coincidence that the countries that most uphold property rights, are also those known to be the best for gold storage.

Gold itself protects wealth and property from devaluating over time, as occurs with fiat currencies. When holding one’s savings as bank notes, it is more difficult to save and preserve the whole from devaluation. Unfortunately, one who desires to save their wealth in gold is inundated with several obstacles. For one, he is limited to saving in the legal tender. When such currencies are no longer presumed to be backed by stable assets like precious metals, what happens is that the savings become doomed to depreciate. Furthermore, many countries have rules that limit the use of gold and silver as media of exchange and stores of value.

Changing rankings

At present, Switzerland and the US, among other countries, have dropped in ranking of the International Property Rights Index. This shows that even when investing wisely, there is always risk, in particular of a country’s rules being changed that may threaten one’s ownership of an asset. The key, then, is to minimize risk, to look for a jurisdiction that is most consistent in the rules people live by.

In the case of Singapore, the Lion City is a bastion of property rights. Hong Kong is another Asian destination, that was once considered among the very freest countries. Its link to China with the end of British rule in 1997, however, have raised concern that the deregulated environment may soon be controlled by government. Recently already, the Hong Kong business environment has become less free, by way of the passage of certain laws regarding wage controls that would have been far-fetched as little as a decade or two ago.

The Singapore government, on the other hand, has recently lifted the 7% goods and services tax (GST) on most popular gold and silver products, thus promoting precious metals in a very specific way.

Different ways of life

Although there is always the chance that legislation changes the political and economic landscape in a country over time, it is important for an investor to understand a country’s culture and laws, in order to best choose where to park one’s wealth.

It has been shown that a strong affirmation of the right to property goes hand in hand with economic progress, as well as allows for a stable monetary regime. In this regard, gold has long been looked in favor as a means of preserving wealth and storing value.

Countries like Singapore are among the most ideal to store gold as an investment, because of their continued upholding of property rights and their very welcoming attitude to investing in gold and silver.