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Owning Gold to Preserve Wealth

According to statistics compiled by GoldSwitzerland, you could purchase 50 oz of gold in 1911 for $1000 but in today’s context, you can only buy less than 1 oz of it. Due to loose government spending and immense monetary expansion programmes, the dollar has declined 99% since the creation of the Federal Reserve Bank in USA in 1913. However, the dollar is not alone in the value destruction. All major currencies faced the same crisis and have lost 97-99% against gold since 1913.

Since former US President Nixon abolished the gold backing system (Bretton-Woods Agreement) for the dollar in 1971, the aggressive money printing programme resulted in the dollar losing 98% in real terms. This dramatic decline is expected given the inflation caused by money printing programme. It reflects the diminishing power purchase of paper money over time and all investors should take note of such historic trend. This is because there are times, especially during financial crises, when protecting your wealth should be the primary objective of your investment strategy. Having too much savings or cash holdings can be a growing risk for individual investors due to the eroding purchasing power of currency. On the other hand, gold bullions have been used as money for thousands of years since civilisation and had maintained its purchasing power throughout history. Gold’s timeless and growing value confirmed its status as the ultimate asset that investors should hold in order to preserve their wealth.

BullionStar Singapore believes that the ultimate wealth preservation is physical gold stored in your name and outside the banking system. For the past decade, global financial system is becoming ever more fragile with major nations declaring massive deficits and bank bailouts. The trillions of dollars of government and bank debts can never be repaid with fiat currency. Therefore, governments and central banks all over the world have no choice but to create additional debts and accelerate money printing programmes. This unsustainable approach will only cause further inflation and lead to further destruction in the value of currencies. If you are holding to a lot of money right now, then you should be concerned because that amount of money that you are holding on to may not get you anywhere going forward. For example in Singapore, S$100,000 is a lot of money for many Singaporeans five years ago. In today’s context, you cannot even buy a HDB flat or a new car with that amount. Clearly, there is an imminent need for investors to reduce their cash holdings and look to gold as alternative stored-of-value.

The reason why gold has maintained its purchasing power throughout history is because it cannot be printed. You need to extract gold from earth and then refine it to a purity level deemed as investment grade. That is why gold is commonly known as one of the “precious metals”. This is because its supply is limited and its price is primarily driven by demands, not government policies. The rate of extraction, limited supply and increasing demand indicate that in the long run, gold prices would go up. For sure, in the short to moderate term, there are price fluctuations and market corrections. Investors should not view such developments as anomalies and steer away from gold assets. Instead, they should set an entry level to buy gold and view any price corrections as window of opportunities to accumulate wealth. BullionStar Singapore expect that with the support from government to establish Singapore as a major gold trading hub, gold will become a mainstream choice of asset for investors to preserve their wealth. It will become ever more popular to be traded among Singaporeans.

BullionStar Singapore encourages readers who are keen to preserve wealth to buy physical gold. This is because when you hold gold, there is no counterpart risk. There is no middleman whom you have to trust for preserving your wealth. A word of caution is that when buying physical gold from dealers, buyers should ensure that the gold dealer delivers the physical gold itself, and that the transaction process is completely safe and transparent. To this end, BullionStar Singapore management team has years of experience in the gold trade, so that buyers know that the gold is acquired at zero purchase risk, and can place orders for an assortment of products at the convenience of your home.

Always remember that in times of economic uncertainties and financial turmoil, the return of your money is far more important than the return on your money. So make sure you have strategies to preserve your wealth. Inaction may cost you dearly at times.

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