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Cashless Society, Negative Interest Rates and Hyperinflation – Part 2

Imagine a country in which banks hold virtually no cash at all. A country where if you walk into a bank branch, the clerk will not be able to help you make a deposit into your account. A country where there’s a good chance that if you grabbed a wad of cash and walked into an electronics store or a major nightclub, they wouldn’t be able to assist you in buying a new computer or giving you a drink.

Welcome to Sweden, the land of virtual cashlessness! Although the Swedish Riksbank recently launched a full array of new and very colorful bills featuring celebrities such as famous children's book author Astrid Lindgren and film director Ingmar Bergman, cash usage in Sweden is in absolute free fall, down from SEK 100 billion in 2010 to SEK 70 billion in 2015. Several factors have combined to lead to this development.

  • For many years now, most Swedes above the age of 16 use a VISA, Master or Maestro debit card to settle payments, even for small sums below $10.
  • Sweden is - and has been for many years - at the forefront of both developing and adopting new IT technology and is one of the most mobile phone dense countries in the world, with upwards of 60% of the Swedish population owning a mobile phone as early as 1999. 
  • The Swedes' willingness to adopt new technology is evident from the proliferation of a transfer system called ‘SWISH’. The SWISH app enables any two parties holding a Swedish bank account and a Swedish phone number to transfer money to each other instantly, all with no fees. Even merchants use SWISH to accept payments. There are homeless people selling newspapers in Sweden that accept payment via SWISH. In Stockholm, these homeless sellers have even been accepting credit card payments since as early as 2013 using a smart phone extension known as ‘iZettle’, also invented in Stockholm.  
  • Over the last few years, more than 70% of all bank branches in Sweden have gone cashless, meaning that if you walk into a bank branch in Sweden, there’s about a 70% chance (or higher) that they would not accept any cash you are trying to deposit.
  • In Sweden, there are virtually no payments made by cheques any more as banks stopped issuing cheque books years ago.

Tech loving Swedes

Some of these facts might sound unbelievable and even absurd for someone not living in Sweden: No cash in the bank? Homeless people accepting credit card payments?

But y es, Swedes seem extremely willing to accept new cashless payment technologies, such as credit/debit cards, as well as payment apps, while forgoing old ones, such as cash and cheques. All with little or no suspicion towards these new electronic payment methods.

Other countries have tried the same. Singapore tried, or at least planned to try a new electronic cash system named SELT or ‘Singapore Electronic Legal Tender’. In an OECD report issued in 2002, the Board of Commissioners of Currency (BCCS) - which was the sole currency issuing agency preceding the merger with MAS in 2002 - outlined the envisioned structure of the SELT system where the goal was said to be a reduction of physical cash usage and its handling costs.

As can be seen in the 2002 OECD report, the SELT system was in a very early conceptual stage and only outlined the concept in very broad strokes. But its interesting to note that as early as 1998, BCCS held a strategic planning seminar in which it set out its ‘corporate vision’ for the introduction of SELT within 10 years.

The 2002 report further stated that the SELT system was to be put in place in order to effectivize the cash currency system. The SELT system never came to fruition, and as is apparent  from statistics displayed further down in this article, the amount of cash currency circulating in Singapore has increased immensely since 2002. As have the amount of cash ATM machines, where there were far less than 2000 units at that time. The OECD report also mentions that although cash transaction costs in Singapore are extremely low, the cost to the economy of these ATMs was approximately SGD 656 million in 1998 and was projected to exceed SGD 1 billion by 2006.

BCCS envisioning a system such as SELT 15 years ago shows that they were ahead of their time and that Singapore government institutions are some of the very early adopters in trying to implement new technologies as well as eager to make their government institutions more effective. This is in line with the Smart Nation Objectives that Singapore has outlined. In contrast to Sweden, the Singaporean approach has been to adopt new payment methods such as e.g. card payments, while still being extremely welcoming for older payment modes such as cash or even cheques. Singapore's very safe environment with extremely low violent crime rates makes it a nation that conveniently lends itself to cash payments.

However, as absurd as it might sound, the abolition of cash is slowly unfolding in many countries, with Sweden is probably at the forefront of this trend. Although a majority of stores in Sweden still accept payment in cash, there are an increasing number who don't. Swedish law doesn't require a merchant to accept payment in cash, which is a bit ludicrous considering that cash is still legal tender in Sweden. After all, legal tender normally means that whatever is legal tender should be good for the payment of all debts.

Now, if a merchant doesn't want to accept cash in the form of nationally issued notes, then so be it. But what is shocking is that, as was mentioned at the beginning of this article, about 70-80% of all Swedish bank branches have removed all cash handling. All within just a few years. No, it's not a typo. Walk in to a random Swedish bank branch and try to deposit or withdraw a larger sum of cash and up to 80% of the time you'll get rejected with a polite "sorry, but this branch doesn't handle any cash".

Such branches only provide services such as financial advising, housing loans, credit cards services etc. The real aims of this strategy aimed to get money out of your pocket and into the pockets of the banks. Bank staff are pushed by their management to sell house loans, credit lines,  speculative paper instruments, and more savings accounts. This trend has also been evident in the extreme case of Wells Fargo's recent banking scandal involving the concept of cross-selling accounts with the goal of every Wells Fargo customer holding a minimum of eight Wells Fargo  accounts. Why? Because, in the words of former Wells Fargo's Chairman John Stumpf : 'Eight is great!'.

All this means that if you open an account at a Swedish bank branch, you can only fund your account by either going to a branch that does handle cash, or by transferring money to the new account from an already existing account.

During the last 5-10 years in Sweden, M0, which is an aggregate measuring the amount of physical cash in an economy, has collapsed from over SEK 100 billion down to about SEK 70 billion.

m0 sweden
M0 Money Supply in Sweden

In Singapore, cash money has increased from around SGD 21 billion in 2010 to SGD 33 billion in 2015.

m0singapore
Cash money in Singapore

Furthermore, statistics from the World Bank shows that the number for Automated Teller cash Machines has increased from less than 48 per 100K citizens, to more than 59 per 100k citizens in 2014. And the trend seems to be continually increasing.

ATMs in Singapore
Increasing number for ATMs in Singapore

The above data means that there are now more than 3200 ATMs island wide in Singapore as compared to less than 2000 units in 2004.

Cashless Means Less Crime!

One argument for making an economy totally cashless is that it would cripple crime. Crime syndicates, burglars, drug dealers, petty thieves all rely on an anonymous paper cash system to sell their contraband. If we just eliminated cash paper bills, then drug dealing, robbery, burglary, even tax fraud would almost totally disappear. Right?

One of the most avid proponents of a total cash ban is a famous Swedish musician by the name of Björn Ulvaeus. Ulvaeus, is known as a member and founder of the super group ABBA (that ironically wrote the song "Money, money money"). A few years back, Ulvaeus's son got robbed several times and some of his expensive music equipment was stolen. Ulvaeus' rationalse behind banning cash is that if there was no cash at all, but only electronically traceable payment systems, burglars would not be able to sell the stolen items on the black market, and as such, the theft would have never occurred.

Although slightly confused, Ulvaeus is still onto something. In two opinion articles published in a major Swedish newspapers a few years ago, he mentions barter and its limitations.

However, history shows time and time again that humans have overcome the limitations of barter in numerous ingenious ways. Be it through using precious shells, stones or metals - such as gold and silver - or be it through local and informal credit systems, the challenges of barter have always been vanquished as long as the need and demand for such a system exists.

For instance, cheques issued by the army and used by British soldiers stationed in Hong Kong in the 1950s, started to circulate as a cash currency. The faith and credit in these cheques among local merchants was universal, so why bother with the inconvenience of cashing them in when you could let your supplier do that instead. Anthropologist Keith Hart tells the story of his brother stationed in Hong Kong in the 1950s. Keith's brother was more than a little surprised when he one day he found a cheque signed by him 6 months earlier laying on the counter of a local bar with more than 40 other small signatures on the back stemming from each merchant that had legitimized the validity of the cheque. A game of confidence. A spontaneously arisen form of cash.

In jails, alcohol, sticks of cigarettes and more recently ramen noodles, are being used as currency. These goods arise spontaneously as the universally most sought after and can thereby be used as currency or money to buy anything else. No government, army, police or bank was needed to give these goods the status of money. They emerged spontaneously in the market place just as gold and silver have done so many times throughout history.

Today's banking system is therefore showing itself for what it really is: A pyramid scheme where your money is used to speculate in questionable asset classes whose value is propped up only by the very investors (banks) that are buying into these asset classes with the help of money emanating from an endless pool of credit fueled by central banks' artificially low or even negative interest rates.

Negative Interest Rates and Cashless Society: A Precursor to Hyperinflation?

When the negative interest rates of central banks spread to the commercial banks, a lot of people will naturally want to withdraw their money. As long as cash is readily available, this is not an issue. At least not as long as not everyone decides to withdraw their money all at once. But if cash use is highly limited, as per the example of Sweden, withdrawing your money will be hard or impossible. The resulting cashless or 'cash strapped' society is effectively hindering a bank run to happen, as this in reality gives the banks a debt cancellation or at least a massive debt forgiveness, because remember, the balance on your account is the banks debt owed to you. If there's no cash, then how can the bank pay its debt to you?

More on this in Part 3 of this series....

Sources:

http://www.oecd.org/futures/35391062.pdf
http://www.mas.gov.sg/currency.aspx
Debt: The First 5000 Years - David Graeber
http://www.scb.se/
https://www.riksdagen.se/sv/dokument-lagar/dokument/yttrande/nu2y_GN05NU2y

Singapore, Brunei, and the $10,000 banknote

In 2014, Singapore stopped printing the mammoth S$10,000 banknote, one of the world's largest value banknotes, citing "risks associated with large value cash transactions." Although it is no longer being printed, the S$10,000, which is worth around US$7,400, remains in circulation and continues to be accepted as legitimate legal tender. But once deposited in the banking system, all S$10,000 notes will be returned to the Monetary Authority of Singapore (MAS)—the institution responsible for issuing notes and setting monetary policy—to be destroyed. With no new ones being created, the supply of S$10,000 can be expected to steadily shrink.

The title of world's highest-denomination banknote in production now passes to neighboring Brunei, which issues the B$10,000, also worth about US$7,400. Brunei, a small nation on the island of Borneo with a population of 450,000, is the world's fourth richest country (ranked by GDP per capita) thanks to its oil & gas reserves. Interestingly, due to a long financial relationship between Brunei and Singapore, Brunei dollars are considered to be "customary tender" in Singapore (more on that later). So even as the S$10,000 is slowly phased out, the B$10,000 may still have a backup role to play.

Singapore $10,000 from 1980 (discontinued issue)

Singapore and Brunei have an agreement—the Currency Interchangeability Agreement—dating back to 1967 which obligates the monetary authority of each nation to accept the banknotes of the other nation at par with their own currency. Private Singaporean banks can thus safely accept Brunei dollar notes for deposit, knowing that the MAS will not only buy these foreign notes at a one-to-one rate with Singapore dollars but will do so without charging a fee. Vice versa with Bruneian banks.

Singapore dollar denominations

MAS ships all the Brunei paper dollars it receives back to Brunei. Likewise, the Autoriti Monetari Brunei Darussalam (AMBD), Brunei's monetary authority, flies Singaporean dollars back to Singapore. According to this 2017 article, MAS has sent some B$1.3 billion annually to AMBD over the last three years. This is actually quite a lot of cash. Recent data from the AMBD shows that there is only about B$1.26 billion worth of Brunei banknotes and coins in circulation, most of this in the form of the B$100 note. Given that B$1.3 billion is shipped back each year to Brunei, the entire stock of banknotes circulates through Singapore once-a-year. Incredible!

While the B$100 note is the most popular Bruneian denomination, this hasn't always been the case. Through late 2011 and 2012, demand for the gigantic B$10,000 note exploded to B$1.5 billion, up from its regular level of around B$50 million. This spike was so marked (see below) that the entire supply of Bruneian banknotes effectively doubled, a situation that lasted until 2013 when a large quantity of B$10,000 banknotes were redeposited into the banking system. There is no indication what caused this pattern.

Brunei's money supply since 2011

As I mentioned earlier, the Singapore-Brunei Currency Interchangeability Agreement describes each counterpart's banknotes as "customary tender", differentiated from "legal tender." In Singapore, all currency notes and coins issued by the MAS are deemed legal tender. This means that any debt or transaction can be settled using MAS-issued banknotes, although if a payee (the person taking a payment) notifies a payer ahead of time, they can choose to avoid using legal tender and settle on an alternative means for transacting, say gold or euros. Since Brunei dollars are only customary tender, there is no default legal obligation on the part of retailers to accept them.

Modern $10,000 Brunei banknote

While many retailers in Singapore accept Brunei dollars, not all do. Offending retailers can be reported to MAS. And when they are reported, they usually comply.  Presumably this acceptance isn't forced on retailers, since Brunei dollars aren't legal tender, but is asked of them in good faith. Come on guys, take one for the team.

The monetary relationship between Brunei and Singapore is an old one. Prior to their independence, Malaysia, Singapore, and Brunei were all members of British-run currency board, the Board of Commissioners of Currency, Malaya, which issued Malayan dollar banknotes. The Board of Commissioners was initially established in 1899 by the British colonial authority. A currency board is a monetary system in which the issuer of banknotes (and deposits) maintains a 100% reserve for the liabilities it has issued. In the case of the Malaya currency board, this reserve consisted entirely of assets denominated in British pounds. The advantage of a 100% reserve is that there is no way that the peg can break, so investors needn't worry about exchange rate fluctuations.

1941 note issued by the Board of Commissioners of Currency, Malaya

Already merged on a monetary level, Malaysia and Singapore embarked on a post-independence political merger in 1963, but this political union fell apart in 1965. Ongoing distrust of the Malaysian administration by Singapore led to the abandonment of the currency board arrangement in 1967, with Malaysia, Singapore, and Brunei all issuing their own currencies for the first time. The three then drew up the Currency Interchangeability Agreement, obligating each to accept the others' banknotes at par, but Malaysia dropped out in 1973, leaving Brunei and Singapore. And this is how things stand to this day.

While the Singapore dollar is no longer based on a currency board—the MAS operates what is referred to as a managed float regime—the Brunei dollar continues to be operated on the principles of the old currency board. Rather than pegging to the British pound, the AMBD fixes the Brunei dollar against the Singapore dollar. However, the AMBD does not operate an orthodox currency board because it maintains a slightly-less-than full reserve of Singaporean dollar assets.

The monetary relationship between Singapore and Brunei constitutes a currency union, much like the Eurozone. In the same way that the European Central Bank calls the shots for the group of euro-using nations, the MAS is in charge of the Singapore dollar zone. Brunei is a passenger in this relationship, much like how Greece is along for the ride in Europe. Put differently, whereas Greece imports the monetary policy of a much more powerful authority, the ECB, Brunei imports Singaporean monetary policy.

Which brings us back to the $10,000 note. The denomination structure of Bruneian coin and note issue is the one bit of monetary sovereignty that Brunei gets to control. And since the Interchangeability Agreement obligates Singapore to accept all Brunei banknotes, Singapore effectively imports the denomination policy of its smaller neighbour. The $10,000 note is dead, long live the $10,000 note!

 

To understand the history behind the Brunei-Singapore monetary relationship, I relied on the following sources:

  1.  MAS Macroeconomic Review, April 2017. Pgs 73-76 [link]
  2. The Malayan Currency Board, 1938-1967. By Josephine George, 2016 [link]
  3. The Dissolution of a Monetary Union: The Case of Malaysia and Singapore 1963–1974. By Catherine Schenk, 2013 [link]
  4. Second separation: Why Singapore rejected a common currency with Malaysia. The Strait Times, May 24, 2016 [link]

 

BullionStar accepts cash payment, including the SGD 10,000 for bullion purchasesBullionStar accepts cash payment, including the SGD 10,000 note, for bullion purchases

Investing in the Noble Metal of Platinum

Along with gold and silver, platinum is a recognized investment precious metal which is fabricated in the form of high quality bullion bars and bullion coins by some of the world's leading precious metals refineries and mints.

Importantly, as a recognized investment precious metal, platinum bars and platinum coins from these refineries and mints are exempt from Singapore's Good and Services Tax (GST). This means that there is no GST to pay when you buy platinum bars and coins from BullionStar in Singapore.

Platinum's High Intrinsic Value

Like gold, platinum is relatively scarce and has a relatively high intrinsic value and market value. And like gold and silver, platinum also has many industrial and technological applications. Platinum's value is thus based on a combination of its scarcity of supply and also on its physical and chemical properties. These properties in turn drive the diverse global demand sources for platinum across sectors such as the automotive, industrial and jewelry industries in addition to the investment sector.

For example, platinum has well-known catalytic properties which allow it to speed up chemical reactions without it being altered in the process. Hence platinum is used in autocatalysts, in the chemical industry and in fuel cells. Platinum is also a very strong attractive metal that does not corrode and that is both ductile and malleable, hence it is a very popular precious metal in the jewelry industry. Since platinum is resistant to corrosion and oxidation, it is classified, along with a small number of other metallic elements, as a noble metal.

Platinum - A Noble Metal
Platinum - A Noble Metal

Platinum is a relatively scarce metal in the earth's crust and even rarer than gold. In contrast to gold, annual platinum supply and platinum demand is far lower than annual supply and demand in the gold market. According to Thomson Reuters GFMS, supply of platinum in 2016 totaled 7661,000 ozs (238 tonnes) of which 188 tonnes came from platinum mining with a further 50 tonnes was derived from autocatalyst and platinum jewellery scrap recycling.

Within platinum extraction and mining, over 70% of global mine supply comes from South Africa, with a further 12% from Russia, 7% from North America, and the remaining 10 - 11% from elsewhere. South Africa's dominance of global platinum supply is also evident in the composition of the recently established World Platinum Investment Council (WPIC) which is a platinum investing advocacy association founded by six South African platinum mining companies, namely Anglo-American, Lonmin, Implats, Aquarius, Northam, and Royal Bafokeng.

On a country specific basis, platinum mining's concentration in a handful of countries can sometimes set up supply shocks, for example, platinum mining strikes in South Africa or geo-political risks/sanctions concerning Russia. These shocks can at times affect platinum prices to the upside.

On the demand side, according to GFMS, autocatalysts are the largest global demand driver for platinum. For example, autocatalysts accounted for 102 tonnes of platinum demand in 2016 followed by jewellery (68 tonnes) and other industrial applications (57 tonnes), with investment (bars, coins and platinum-backed Exchange Traded Funds) accounting for the remaining 16.8 tonnes.

Note that in its pure form, platinum is available as platinum grains (used in the jewelry sector) and as platinum sponge (used in industrial applications) in addition to platinum bars and coins. However, other forms of platinum are designed for further onward processing and should not be confused with investment-grade platinum. For investment and storage purposes, refineries and mints will always produce platinum in the form of platinum bars and platinum coins, and furthermore, only bars and coins from recognized refineries and mints can be classified as investment precious metals and be exempt from Goods and Services Tax (GST).

Heraeus Minted Platinum Bars
Heraeus Minted Platinum Bars

Singapore GST Exemption for Investment Platinum Bars and Coins

Since October 2012, the Singaporean Government has exempted Investment Precious Metals (IPM) from Singapore's Goods and Services Tax (GST). To qualify as IPM, precious metals must be in the form of a bar, ingot, wafer or coin which meets specific criteria. Platinum bars qualify as IPM in Singapore if the platinum bar has a platinum purity of at least 99%, can be traded on an international bullion market, and is produced by a platinum refiner listed on the current or former Good Delivery list of the London Platinum and Palladium Market (LPPM).

The LPPM is a London-based trade association for the global wholesale platinum and palladium markets. There are currently more than 30 refineries on the current LPPM Good Delivery List for Platinum including such refineries as Heraeus of Germany, Johnson Matthey of the UK, and the four large Swiss precious metals refineries Argor-Heraeus, PAMP, Valcambi, and Metalor.

Investment grade platinum bars produced by accredited refiners will generally carry the name of the refiner or refiner stamp or brand on the bar. If a refinery has the LPPM accreditation, the Singaporean IPM rules assume that the refinery's bars are capable of being traded on an international bullion market. Some platinum bars may in turn bear the name of a specific bank such as Credit Suisse or UBS. These bars are known as bank-branded bars and these bars also qualify as IPM if produced by a refiner on the LPPM Good Delivery List.

For platinum coins, a GST exemption applies if the coin is a bullion coin, has a platinum purity of at least 99%, and is listed on the GST schedule list of qualifying coins. Qualifying platinum coins include:

  • Royal Mint Platinum Canadian Maple Leaf
  • US Mint Platinum American Eagle
  • Austrian Mint Platinum Philharmonic
  • Perth Mint Platinum Platypus and Platinum Koala
  • Royal Mint Platinum Britannia, Platinum Lunar and Platinum Queens Beast

Physical platinum investment bars and coins are very popular in markets such as the US, Japan, China and the rest of Asia, and the market is a growing one on the back of the existing popularity of high quality platinum jewelry in these markets.

Platinum Bullion Bars

BullionStar's range of investment grade platinum bars is extensive and features platinum bars in a number of weights from the world's most prestigious platinum refineries. All platinum bars offered by BullionStar are exempt from Singapore's Goods and Services Tax as all bars have a platinum purity of 99.95% and are fabricated by platinum refineries such as Valcambi of Switzerland, Heraeus of Germany, and Argor-Heraeus of Switzerland. All of these refineries are listed on the current LPPM Good Delivery List for Platinum and additionally all of these refineries are also full members of the LPPM. Popular weights for platinum bars stocked by BullionStar include 1 kilogram, 500 grams, 100 grams and 1 oz.

Credit Suisse minted Platinum bar
Credit Suisse minted Platinum bar

For example, Valcambi produces a 1 oz minted platinum bar which is presented in its own secure blister pack which doubles as the bar's assay card. The Heraeus refinery of Germany produces minted platinum bars in a range of weights from a 100 gram minted platinum bar, through 500 gram minted platinum bars, and up to a 1 kilogram platinum bar. Swiss refiner Argor-Heraeus, now fully owned by Heraeus of Germany, fabricates its own minted platinum bars with the distinctive Argor-Heraeus logo, for example the Argor-Heraeus 1 kilogram minted platinum bar.

BullionStar at times also carries bank-branded platinum bars, such as a Credit Suisse 100 gram platinum bar which has been produced by Swiss refiner Valcambi on behalf of the Swiss Bank Credit Suisse. These platinum bars are also GST exempt in Singapore as they have been fabricated by a refiner, Valcambi, which is on the LPPM Good Delivery List for Platinum. Valcambi has in the past had a very close connection with Credit Suisse and was at various stages both fully-owned and partially owned by Credit Suisse.

Platinum Bullion Coins

Most of the world's best-known national precious metals mints produce a bullion coin in pure platinum. These include platinum coins from the Royal Canadian Mint (RCM), Austrian Mint, US Mint, and the Perth Mint. All of these mints are fully owned by their respective national governments and all of these mints stand over the authenticity and quality of their bullion coin products.

Some platinum bullion coins are produced every year, and some are produced with more sporadic production runs. Many of the bullion platinum coins offered by BullionStar are in similar designs to their gold and silver coin counterparts and are issued in the convenient and standard 1 ounce weight. All of these platinum bullion coins are also legal tender (non-circulating) in their countries of issue.

For example, the Royal Canadian Mint produces a 1 ounce Platinum Maple Leaf with the distinctive maple leaf design. This design will be familiar to investors in the Royal Canadian Mint's Gold Maple Leaf and Silver Maple Leaf coins. RCM Platinum Maple Leafs are produced on an annual basis, including the years 2018, 2017, and 2016.

Royal Canadian Mint 1 oz platinum Maple Leaf
Royal Canadian Mint 1 oz platinum Maple Leaf

The Austrian Mint also issues a 1 oz Platinum Philharmonic bullion coin each year which is intricately designed with highly-stylized motifs celebrating the world-famous Vienna Philharmonic orchestra.

Those who invest in silver and gold Eagle bullion coins from the US Mint will also be interested in the US Mint's flagship 1 oz Platinum Eagle bullion coin which is handsomely designed with imagery of the Statue of Liberty and a soaring American Eagle. The Platinum Eagle, which was first released in 1997, is the only platinum coin ever officially issued by the US, and has the highest face value (US $100) ever to appear on any US coin.

The Perth Mint's has produced a number of platinum bullion coins over the years although not in all sequential years. From 1988 to 2000, the Perth Mint issued a Platinum Koala bullion coin in a number of weight denominations. Then in 2011, the Mint began issuing its flagship 1 oz Australian Platypus Platinum coin. Production of the Platypus Platinum coin continued until 2017 when it was superseded by the Perth Mint's Australian Platinum Kangaroo coin 1 oz bullion coin.

Another option offered by BullionStar for those who wish to begin saving and investing in platinum is the Bullion Savings Program (BSP). With BullionStar's BSP, customers purchase grams of platinum, gold or silver which are fully-backed by physical precious metals held in BullionStar's stock inventory. These metal grams are available for a low price premium and low spread and are therefore a cost-efficient way to begin saving in precious metals. The metal grams can also be converted in precious metals bars once sufficient grams have been accumulated.

For example, with the Platinum Bullion Savings Program,  customers can purchase grams of platinum that are fully backed by platinum held in BullionStar's inventory. BSP platinum grams have a low-cost storage fee, and can be converted into 1 kg Heraeus Platinum bars at no extra cost. These bars can then be held by customers in BullionStar's Vault Storage, or physically withdrawn and delivered. Alternatively, investors in BSP platinum grams can sell their platinum grams back to BullionStar at any time.

Gold Demand in the Singapore Bullion Market

Singapore has evolved into one of the world’s most dynamic gold trading and storage hubs. Following sustained growth over the last five years backed by government initiatives to develop the country's investment precious metals (IPM) sector, Singapore now hosts a vibrant local and regionally focused gold market comprising a wide variety of precious metals participants. These participants range from retail bullion dealers to bullion wholesalers, from precious metals refineries to secure logistics providers, and from bullion banks to trading houses.

One of the early initiatives that transformed Singapore into a precious metals trading and storage hub came in February 2012, when during a budgetary speech to parliament, finance minister Tharman Shanmugaratnam announced that the importation and supply of investment-grade gold and other precious metals in Singapore would become exempt from Singapore’s Goods and Services Tax (GST). Previously the GST on precious metals in Singapore was 7%.

As reported by Reuters in February 2012, Shanmugaratnam in his budget speech envisaged that:

“We will facilitate the development of gold trading, which can draw on Singapore’s strengths as a financial and trading hub, to meet strong demand for investment-grade gold in Asia.”

The GST exemption on investment precious metals was first introduced on 01 October 2012, and applies to transactions in investment-grade gold, silver and platinum that are in the form of high purity bars, ingots and coins. This means that investment grade precious metals purchased in Singapore are free of GST.

International Enterprise (IE) Singapore, an office of the Singapore Government, has also been active in supporting Singapore’s precious metal sector, and in promoting the benefits of Singapore's gold market internationally. Overall, the main aim of IE Singapore and the government in the bullion sphere is to ensure that Singapore becomes and remains the region's primary bullion trading, storage and transport hub.

Jurisdictional Advantages of Singapore

Apart from the GST exemption on investment precious metals, there are a number of other jurisdictional advantages that have supported the growth of Singapore as a gold trading and storage hub, and that reinforce the logic for buying gold and storing gold in Singapore.

In Singapore, there are no other taxes when buying gold, silver or other precious metals. This means no capital gains tax, no other sales tax, no death tax, in short no taxes. There are no reporting requirements when buying or selling gold or silver or other precious metals in Singapore. This means no reporting requirements to any Singaporean authority and no reporting requirements to any international authority.

There is no GST when importing gold and other precious metals into Singapore, or exporting gold or other precious metals out of the country. Singapore is also famed for its strong rule of law, making the country one of the safest and most secure countries on earth to buy and store gold. If taking delivery or selling precious metals, it is quite safe, apart from the usual precautions, to walk in and out of bullion dealer shops in Singapore carrying your precious metals.

Furthermore, the Singapore legal system is very protective of private property rights, and the nation of Singapore has strong  military capabilities, both of which are reassuring when storing gold or silver in the city-state. Finally, because it's a thriving gold trading hub, with a buoyant wholesale and retail bullion market, Singapore has a very well-developed gold storage and vaulting infrastructure, and is very well serviced by secure transport companies.

Precious Metals Sector Participants

IE Singapore sometimes describes Singapore's bullion market participants as a precious metals ecosystem, not just because of the breath of entities present, but because of the way they interact as a sector. This ecosystem refers to the bullion wholesalers, precious metals refineries, retail bullion dealers and secure logistics providers mentioned above, as well as to the bullion banks and trading houses in the wholesale segment of the bullion market.

A large number of investment banks have a presence in Singapore, and many of these banks are active in Singapore’s gold market, either in a trading capacity or via their wealth management units, or both. Some of these banks include Standard Bank, ANZ, UBS, and JP Morgan. Colloquially, investment and merchant banks involved in the bullion market are referred to as bullion banks. United Overseas Bank (UOB), the Singaporean large-scale bank can also be added to this list.

Another group of players in Singapore’s wholesale gold market are referred to as the “trading houses”, and include names such as INTL Stone, Sumitomo Global Commodities, Mitsubishi, and MKS (the precious metals trading arm of the MKS PAMP group).

Since June 2014, Swiss based precious metals Metalor has also operated a precious metals refinery and production facility in Singapore. This move by Metalor to open a facility in Singapore was directly driven by the GST exemption on imports of precious metals that was introduced in 2012 at the same time as the GST exemption on transactions within Singapore. Apart from Metalor, the Dubai headquartered refinery group Kaloti metals also has a presence in Singapore with facilities for smelting gold.

In the secure logistics and transport providers segment, Brinks precious metals operates a regional base and secure storage facilities in Singapore serving Singapore, Malaysia, Brunei, Indonesia and the wider Asian region. Malca Amit also has a storage facility in Singapore, which is located in the Singapore Freeport, near Singapore's Changi International Airport. This Singapore Freeport, or 'Le Freeport' is a secure valuables warehouse complete with vaults which some of the bullion banks in Singapore also use to store precious metals.

Singapore, a thriving gold trading and gold storage hub

A Vibrant Gold Trading Hub

According to the latest precious metals industry survey of Singapore's IPM sector, approximately 656 tonnes of gold and 4253 tonnes of silver were traded in Singapore during 2015. See survey table in Metalor presentation here.  Much of these quantities would reflect trading activity between the large banks or involving the trading houses, and also gold flowing through the refineries operations of Metalor and Kaloti. For example, the trading house INTL could buy gold mining output from Indonesia and have it shipped to Metalor's refinery in Singapore for processing. Metalor is said by industry sources to trade over 100 tonnes of gold per annum.

The survey also notes that the figures reflect sales that were mainly to Singapore, Indonesia, Thailand and Hong Kong but also to China and India, the Philippines and Malaysia. As such, a lot of the physical precious metals trading that goes through Singapore is in the form of supply flows for the wholesale markets in South East Asia and the wider Asian region.

According to IE Singapore data, 291 tonnes of gold was imported into Singapore in 2016, and 397 tonnes was exported. This gives a combined 2 way flow of 618 tonnes.

Most recently, according to a recent Thomson Reuters GFMS report, “Singapore Bullion Flows Surprise to the Upside with a Surge in Shipments in 2017”, for the year to the end of September 2017, gold bullion imports into Singapore reached 224 tonnes. Major import sources were Switzerland, Japan, Hong Kong and Australia. Some of this import activity was gold flowing through Singapore being converted into kilo bars destined for China, but some of it was also gold being smuggled out of China that made its way to Singapore.

GFMS says that apart from China, other export destinations for gold that leaves Singapore includes Cambodia, Thailand and Malaysia. As the figures reveal, there is therefore a huge amount of gold trading in Singapore and a huge amount of physical gold moving in and out of Singapore on an annual basis.

Singapore Retail Gold Demand: Consultancy Estimates

The world's major physical gold wholesalers are also present and active in Singapore,. These wholesalers supply the retail sector in Singapore and the wider South-East Asian region with investment bars and coins and sometimes maintain local inventories of precious metals in Singapore to satisfy demand. These wholesalers include Dillon Gage, which has an office in Singapore, MKS, also with an office in Singapore, and A-Mark, which although it doesn't have an office in Singapore, is an active supplier into the Singaporean bullion market.

Singapore's retail bullion market is active and thriving, and has grown strongly since 2012. It is currently served by BullionStar and a number of other bullion dealers.

A number of precious metals consultancies make estimates on retail physical gold demand in the world's key gold markets, including estimates for retail gold demand in Singapore. These consultancies include Thomson Reuters GFMS, Metals Focus, and the World Gold Council (WGC). Note that the World Gold Council does not gather its own data, and since 2016, the WGC has used Metals Focus to provide all gold supply and demand data for WGC publications, such as the WGC’s ‘Gold Demand Trends’ publications.

In its supply and demand data, GFMS defines physical gold demand as a combination of jewelry, industrial, central bank and retail demand. Retail demand is further divided into gold bar demand and gold coin demand. The World Gold Council / Metals Focus definitions are mostly similar to GFMS, and define a demand category called investment gold, or which “total bar and coin demand” is a sub-sector, and further breaks this down into physical gold bar demand and official gold coin demand, 'official' referring to legal tender coins issued by or on behalf of national mints.

Although each consultancy has its own methodology, and although none of the consultancies publicise the exact way in which their estimates are arrived at (since the data methodologies are commercially valuable), their overall approaches to estimating retail gold demand (gold bar demand and gold coin demand) in a given national market would be similar, and would involve extensive 'field research', i.e. talking to the commercial entities that make up the gold market.

As an example, GFMS' first step is to identify which entities are present in that gold market, for example refineries, banks, wholesalers, and retailers. They then identify those entities that together could provide data giving a full picture of retail gold demand in that market, and then go out and actually interview and talk with representatives from the identified companies.

This also seems also to be the approach Metals Focus follows, since the World Gold Council confirms in its supply and demand data methodology note that Metals Focus uses extensive field research that consists of talking to a network of contacts in the physical gold supply chain. For estimating demand data, this would include talking to refiners, official mints, bullion banks bullion dealers, and secure transport companies. The WGC actually states in its methodology note that:

“Investment demand will be measured using information from mints, manufacturers, retailers, wholesale dealers, banks etc”

Surprisingly, for collecting data on retail gold demand in Singapore, the major consultancies such as GFMS and Metals Focus do not request this data from major retail bullion dealers in Singapore such as BullionStar. Who they actually collect their demand data from is unclear because this type of information is treated as a trade secret by the consultancies. But using a little guesswork, we assume that their logic is to talk to key players in the supply chain (such as refiners and wholesalers) who in their view will provide enough information and feedback with which to create their retail gold demand estimates.

So the consultancies probably talk to the main suppliers of gold into Singapore's retail gold market, such as the Swiss refineries, and the national mints (e.g.Perth Mint and Royal Canadian Mint) and ask them how much gold was sent into Singapore during the year. In a similar fashion, they most likely ask the main gold wholesalers such as A-Mark and Dillon Gage the same questions.

At times, the consultancies probably also chat to the bullion banks and trading houses to glean information on what gold, if any, these entities would have supplied into the ‘retail’ market. As to how the consultancies draw the line between the retail gold market and the high net worth gold market is unclear. Because if a high net worth wealth management client of a bank (such as UBS or UOB) buys physical gold in a transaction facilitated by UBS or UOB, is this captured as ‘retail’ demand. The answer is probably not according to the logic of the consultancies, but at the same time this demand is  not institutional demand either.

Note that in preparing this article, we talked to GFMS and Metals Focus briefly about their retail gold demand estimates. GFMS and Metals Focus were both courteous and helpful and responded speedily.

The World Gold Council's 'market intelligence group' was also approached with similar questions. After repeated attempts to approach the World Gold Council, they eventually acknowledged our request, but then refused to engage and ignored subsequent emails.

Gold Market Demand Figures

For 2016, GFMS estimates that Singapore retail gold bullion demand (comprising bar and coin demand) totaled 6.5 tonnes. For the current year up to the end of September (i.e. Q1 – Q3 2017), GFMS estimates retail demand was 5 tonnes.

For 2016, the WGC's 'Gold Demand Trends' data estimates that  total gold bar and gold coin demand in Singapore totalled 5 tonnes,  while its demand estimate for the first three-quarters of 2017 *Q1 - Q3) totalled 3.5 tonnes.

At first glance, these consultancy numbers look to be on the low side. This is because, based on internal data, BullionStar sold approximately 2.3 tonnes of gold bullion (bars and coins) during 2016. Based on the GFMS and World Gold Council figures, This would mean that BullionStar accounted for 35% of the total 2016 estimate of GFMS, and 46% of the total estimate from WGC / Metals Focus. This would also mean that based on GFMS data, all other bullion dealers in Singapore between them only sold 4.2 tonnes of gold in 2016, and based on WGC figures, all other bullion dealers in Singapore only sold a combined 2.7 tonnes of gold in 2016.

When the consultancies calculate retail gold demand, they claim to take into account the buy-back rate on gold, so as to estimate net gold demand for a particular year. This makes sense. For example, if a bullion dealer sold 1 tonne of gold to customers in a year, and if that same dealer bought back 0.4 tonnes of gold back from customers during the same year, then the net sale quantity would be 0.6 tonnes for that year. However realistically, its hard to understand how the consultancies would know buyback rates since they don't talk to all the major retail bullion dealers in Singapore.

For the record, BullionStar's internal data shows that for 2016, approximately 3 grams on every 10 grams sold was purchased back, meaning that the net tonnage of gold sold by BullionStar in 2016 would have been approximately 1.6 tonnes of gold during 2016.

Each year BullionStar publishes its annual financial results in a transparent and informative way, and also publishes commentary and infographics about these results where can be seen here.

General estimates can also be made on how much gold other bullion dealers in the Singapore gold retail market sold during 2016. This can be done by looking at the sales revenue of each dealer (since most of these companies file financial accounts with the Singapore companies office), and then making assumptions on what percentage of these annual sales were in gold bars and coins, as opposed to silver bars and coins and other products. Then the revenue figures representing gold can be divided by the average gold price during the year to yield quantities sold.

However, when this type of calculation is preformed on the revenue figures of the retail bullion dealer of the Singapore gold market, it yields figures that are higher than those of the consultancies.

Conclusion

So are the gold demand estimates of the major precious metals dealers accurate or under-estimated? The short answer is that the consultancy estimates look to be on the low side. However, the consultancies are not transparent about how they collect data, so the validity of their data collection techniques can't be appraised or tested. Only by giving a full disclosure would it be obvious that they are underestimating figures. However, they will never do this because they are in the business of selling data (i.e. monetising data). If it was proven that some of the consultancy data was inaccurate, it would lower the commercial value of all of their data offerings.

Another issue is how to define the retail segment and retail demand in Singapore and elsewhere. Again this comes back to the fact that the consultancies don't divulge what their data is based on. If we said that the consultancies are under-estimating retail demand because of X and Y, they could theoretically respond by saying "Ahh, but we don't define X and Y as retail demand". But because no one except the consultancies knows how they collect their data, and they will never divulge the sources of their data, such a debate would be virtually impossible to ever have.

Store Gold in Minced Meat? 26 Ways to Store Gold

Gold is a highly valuable asset. When your buy gold, It is critical to store your gold bars and gold coins in a location that is secure but at the same time accessible.

Inside a Home

There are many places to store gold and other precious metals in your home, with some places more secure and covert than others. Luckily, since physical gold has a high value-to-weight ratio, for most people, storing their gold bars and gold coins won’t take up too much space.

Hide Your Gold Inside Food Items and Store them in the Freezer 

1. Floorboards: Gold can be hidden under floorboards between joists, preferably under a short section of board covered by a rug or carpet.

2. Chimney: Positioning gold in a recess within a disused fireplace chimney stack is also an option.

Gold and other Precious Metals such as Silver can be Stored under Floor Boards

3. Within a Wall: A natural hollow or cavity in an internal wall, or a hidden panel in a wall, are also worth considering.

4. Frozen Food: Hiding gold bars and gold coins within frozen food in a freezer is possible, for example, actually buried and frozen within minced meat or in a large tub of ice-cream. Horizontal chest freezers used for long-term deep freeze storage of supermarket produce are ideal for this tactic.

Gold can be hidden inside Minced Meat and Stored in your Freezer

5. Piping: In a kitchen, possible covert storage locations include within a section of disused kitchen piping, or indeed within a section of false piping that has been specifically designed to accommodate your gold bars and coins, but which does not function as a real pipe.

6. Air-Conditioning: Gold can be concealed within an air-conditioning duct, which has the added benefit of usually being above head height.

7. Furniture: Heavy objects such as immovable furniture can also be considered as hiding places for gold, places that may not be obvious to time constrained intruders. For example, gold bars and gold coins could be securely attached within a compartment inside a chest of drawers or even stored inside a piano. A large cache of Gold Sovereigns was actually found inside an old piano in England in 2017.

8. Aquarium: For those with the option, storing a gold bar / gold coin cache inside an aquarium or fish tank is worth considering, among aquatic plants and fish tank paraphernalia.

9. Large Plant Pots: Large indoor plant pots on a veranda, patio or balcony provide another covet place for hiding gold. with the gold within the pots under the actual plants. These pots are always difficult to move, and would not normally be on the radar of a burglar.

Attics and Basements

Attics and basements provide further practical options for covert storage, and the inconvenience and difficulty of accessing such locations could act as a secondary deterrent to thieves.

10. Water Tank: In an attic, one possible place to hide your gold bars and coins is in a covered water tank.

11. Insulation: Another option is to secure your gold under ceiling insulation, preferably on ceiling joists that can support the weight of the gold.

12. Basement: Within the basement of a house, the choices for hiding gold are varied and include alcoves behind walls and under a basement floor.

13. Basement Junk: A gold cache can strategically be placed in one of the many large junk items or boxes that invariably end up being stored in basements - as long as you make a record of which item or box you have stored your gold in.

Garden Shed / Workshop

14. Paint Tin: Gold coins or gold bars can be hidden in an old paint tin in a garden shed or workshop, a tin that is securely sealed and looks to have not been opened in a long time. The sheer difficulty for intruders to search numerous old paint tins in a shed or workshop makes it highly improbable that anyone would spend time doing so during a break-in or robbery.

Hiding your Gold Bars in an Old Paint Tin and Storing it in a Shed is one option

On Your Land or Property

Apartments will in most cases lack a garden, a location which can offer the adventurous multiple cunning places in which to covertly store their gold.

15. Buried in Garden: If your property has a garden, you can dig down into the ground on your land, wrap your gold securely, and bury it deep enough in the hole under soil.

16. Fishpond: Those with a large enough fish pond could also consider storing their gold cache at the bottom of the fish pond preferably among pond plants or reeds.

17. Under and In Trees: Under a tree in your garden or in the hollow of an old tree trunk on your property provide further concealment opportunities for gold. Indeed, in 2014, a US$10 million cache of 19th century gold coins was discovered under a tree on a property in Northern California.

18. RVs and Caravans: Those with RVs or caravans or rarely used boats that are stored on their properties could consider the possibility of storing their gold in these vehicles. However, this is presuming the entire property is secure and inaccessible to intruders, and runs the risk that the RV or boat or caravan might itself be the target of a robbery.

Hidden Rooms, Home Safes, Display Cases

19. Hidden Room: For those lucky enough to have a panic room (or other hidden room) in their house or apartment, this would obviously be a ready-made location to store their gold, as it is both secure and concealed. But would this be the first place a team of sophisticated intruders would try to locate and access if they had suspicions that such a room existed?

20. Home Safe: A home safe will offer a secure location in which to store gold bars and coins. Home safes rang from the small models such as those found in hotel rooms with digital keypads, to larger safes with combination locks, to large models that are fireproof and waterproof. The main consideration with a home safe is whether the safe itself is hidden and concealed within a house or apartment, or whether it is installed in a location which is easier to access but which could be discovered by burglars.

An Electronic Keypad Home Safe, also popular in Hotels

21: Display Cases: A final home option for those with the means and security, would be to store your gold bars and gold coins in museum style high-security and alarmed display cases within your house or apartment. While this will impress friends and visitors, you would need to be confident that your property is fairly impenetrable.

Public Land

22. On Public Land: A less used and unusual tactic would be to hide your gold bars or gold coins in a secure and remote location which is on public land, for example in a forest, mountainous area, or coastal location. These locations have the benefit of being completely off the radar, but could by chance be inadvertently discovered by passers by, or disturbed by wildlife. A public location also runs the risk that it could be developed in the future, for example for road or path construction, so your gold could end up being buried under asphalt.

Hide your Gold on Public Land, such as in a Forest

Safety Deposit Boxes

23. Safe Deposit Boxes: Renting and using a safety deposit box is a common way to store valuables including gold bars, gold coins, and other precious metals.

While safety deposit box companies and banks will pitch the fact that only the key holder has access to and knowledge of the box contents, this is a two-edged sword in some jurisdictions because of the following.

If police or other law enforcement officials raid a safety deposit box company in the pursuit of criminal assets, and seize all the contents of all the boxes, then your legitimate valuables could be confiscated and be extremely difficult to get back. For example, a number of safety deposit box companies in central London were raided by Metropolitan police in 2008, events in which everything in every box was seized. In typical government style, gold, jewels and other high value assets were the most of interest to law enforcement. This type of operation undermines the entire premise of deposit box confidentiality and is a disaster for those storing legitimate assets in these locations.

Safety Deposit Boxes - Run the Risk of Theft or Confiscation?

Safety deposit box companies can also be the target of professional thieves. Again, London provides a prime example, when in 2015 the vault of a safety deposit company in the famous Hatton Garden jewelry district was robbed by a gang of professional thieves over an Easter weekend and million of pounds worth of assets were taken from a large number of safety deposit boxes in the vault.

Safety deposit boxes within bank properties also pose another concern, in that since the box location is within a bank premises, the location could become inaccessible in the event banks remained closed during a financial crisis (think Cyprus in 2013), or fall under dictatorial government directives that the contents of safety deposit boxes would be in accessible due to capital controls (think Greece in 2015).

A final point to note is that safety deposit box companies can eventually open your box if you fail to pay the storage charges, and sell whatever is needed to pay the outstanding storage fees.

Stored with Family or Attorney / Solicitor

24. Family Member A less obvious option would be to ask a trusted family member to take care of the storage arrangements for some or all of your gold bars and / or gold coins. Storing portions of your gold in various locations could be considered a 'location diversification strategy.'

This  arrangement would obviously be based on trust and you would need to ensure that wherever they stored the gold at their property was itself a secure and sensible place.

25. Attorney / Lawyer / Solicitor: In a similar vein, you could instruct your attorney / lawyer / solicitor to take care of storage arrangements for some or all of your gold. This arrangement would have to be based on a formal contractual arrangement or understanding and could involve a legal trust in some instances. It would probably also involve another layer of costs. Again, you would need to determine that the storage location used by the lawyer or attorney was practical, smart and secure.

External Secure Vault

26. Secure Vault Storage: Beyond home storage options, a popular choice for many is to store their gold in the vault of an external precious metals storage provider. When using such a service, a number of considerations are critical, such as the jurisdiction of the provider, its reputation within the industry,  the cost of the storage service, whether the storage is allocated, and the flexibility and access offered to customers to keep track of, view, audit and withdraw their gold.

BullionStar's Secure Singapore Vault

BullionStar in Singapore operates a secure precious metals vault which is integrated into BullionStar's bullion shop and showroom in central Singapore. The storage vault itself is a high security old style steel bar concrete vault with a modern vault door.

Singapore is one of the safest and most secure countries in the world for storing gold bars and gold coins. With virtually no crime, a strong rule of law, and inviolable property rights, the Singapore jurisdiction is a natural gold storage location. Furthermore, the Government of Singapore actively supports and promotes the country as a gold trading and storage hub. There are no reporting requirements on buying, selling or storing gold or other precious metals in Singapore. There are also no sales taxes, no GST, or no taxes whatsoever on buying or selling gold in Singapore.

BullionStar Vault Storage - Documenting Customer Inventory

All customer gold stored in BullionStar’s vault in Singapore is stored on an allocated basis. Customers have full unencumbered legal ownership of their gold. All gold stored in the vault is fully insured for all insurable risks as evidenced by the Insurance Certificate.

All customer bullion product handling is meticulously documented, and all bullion is handled under camera surveillance. All customer bullion is photographed and photos of each customer’s bullion are uploaded to his /her online account.

Customers have full online control to view their gold holdings, view photographs of their gold bars and gold coins, see a transaction history, view the vault insurance certificate, generate a personalized vault certificate, and request withdrawals of gold bullion from the vault.

BullionStar employs a series of audit approaches which provide full confidence to vault customers. Via the 'Live audit report', customers can view photos of their own bullion.

BullionStar employs 5 levels of auditing to bullion products stored in the vault:

  • The ‘Live audit report’ allows customers to verify their stored bullion online and it view it visually via photographs.
  • Vault customers can also inspect their own bullion via a personal on-site customer audit at BullionStar's Singapore shop and showroom.
  • Physical audits of all customer owned bullion are conducted twice a year by LBMA approved independent auditor Bureau Veritas.
  • A physical stock inventory report is conducted each year as part of BullionStar's financial audit.
  • BullionStar futhermore conducts its own internal inventory audits.

Finally, BullionStar vault storage customers can withdraw their gold bars or gold coins at any time and have their gold delivered to them, or alternatively collect it in person at the BullionStar shop and showroom in Singapore.

28 Reasons to Buy Physical Gold

Throughout human history, gold has constantly emerged as an unparalleled form of savings, investment and wealth preservation. Due to its unique characteristics and features, gold has inherent value and cannot be debased. When holding physical gold, there is no counterparty risk or default risk. Wealth in the form of gold can also be held and stored anonymously.

From its ability to retain its purchasing power over time, to its safe haven status in times of financial turmoil and uncertainty, to gold's ability to diversify investment risk, there are many and varied reasons to own physical gold in the form of investment grade gold bars and gold coins.

1. Tangible with Inherent Value

Physical gold is real and tangible. It is indestructible, impossible to create artificially, and difficult to counterfeit. Mining physical gold is arduous and costly. Physical gold therefore has inherent value and worth. In contrast, paper money doesn't have any inherent value.

2. No Counterparty Risk

Physical gold has no counterparty risk. When you hold and own gold bars and gold coins outright, there is no counterparty. In contrast, paper gold (gold futures, gold certificates, gold-backed ETFs) all involve counterparty risk.

3. Scarcity

Gold deposits are relatively scarce across the world and difficult to mine and extract. New supply of physical gold is therefore limited and explains why gold is a precious metal. Gold's scarcity reinforces it's inherent value.

4. Cannot be Debased

Because of its physical characteristics and features, gold cannot be debased, and gold supply is immune to political meddling. Compare this to fiat money supplies which are constantly being debased and destroyed via deficit government spending, central bank quantitative easing and financial system bailouts. On a survivorship scale, gold has far outlived all fiat currencies by thousands of years.

5. A 6000 Year History

Gold has played a central role in society for thousands of years from the early civilizations of ancient Egypt, right up to the contemporary era. Gold has facilitated international trade throughout history, has been directly responsible for the economic expansion and prosperity of numerous civilizations throughout history, and has even been, due to gold exploration and mining, the direct catalyst for the growth of some of today’s best-known cities such as San Francisco, Johannesburg, and Sydney.

6. Store of Value

Gold is a preeminent store of value. Physical gold, in the form of gold bars or gold coins, retains its purchasing power over long periods of time despite general increases in the price of goods and services.

In contrast, fiat currencies such as the US Dollar are not stores of value and their purchasing power consistently becomes eroded by inflation or the general increase in the price level. Fiat currencies have a long history of either becoming totally worthless and going out of circulation, or else becoming completely debased, such as the US dollar, while remaining in circulation.

Since the creation of the US Federal Reserve in 1913, the US dollar has lost over 98% of its value relative to gold, i.e. the US dollar has lost over 98% of its purchasing power relative to gold.

Since 1913, the US Dollar has lost more than 98% of its value, while gold has retained its value.

7. Long- Term Inflation Hedge

Physical gold’s ability to retain its purchasing power over time is sometimes referred to as the “Golden Constant”. This reflects the fact that gold’s purchasing power is constant over long periods of time. This ‘constant’ exists because the gold price adjusts to changes in inflation and future inflation expectations. Therefore, physical gold is a long-term hedge against inflation.

8. A 2500 Year Track Record as Money

Because of its ability to retain value and act as a store of value, physical gold has been used as money for over 2500 years. Gold coins were first issued in the Lydian civilization in what is now modern Turkey. Subsequently gold was used as a stable form of money in Persia, ancient Greece, ancient Rome, the Spanish and Portuguese Empires, the British Empire, and right through to the various international gold standards of the 20th century.

It was only in August 1971 that the US famously suspended the convertibility of the US dollar into gold, a move which triggered the debt fueled expansion that is still having repercussions within today’s monetary system.

To put gold’s monetary importance into perspective, for 97% of the last 2500 years, gold has been chosen by numerous sophisticated civilizations as the form of money par excellence and an anchor of stability, precisely because of its ability to retain its value.

9. Safe Haven

Physical gold acts as a safe haven asset in times of conflict, war and geopolitical turmoil. During the financial market stresses and heightened uncertainties caused by wars, conflicts and turmoil, the counterparty risk of most financial assets spikes. But since physical gold does not have any counterparty risk, investors rush to gold during these periods so as to preserve their wealth. This is analogous to sheltering in a safe harbor. Gold can thus be seen as a form of financial insurance against catastrophe.

10. Portable Anonymous Wealth

Gold bars and gold coins combine high value with high portability. In times of conflict and war, gold bars and gold coins are ideal for transporting wealth and savings across borders and within conflict zones in an anonymous fashion.

11. Universal Acceptance

Gold is universally accepted as money across the world, with the highly liquid global market always providing ample sales opportunities for gold bars and gold coins. This means that whichever city you are in across the world, you can always sell or trade your gold bars and gold coins.

12. Emergency Money

Military personnel are often issued with gold coins that they carry with them in conflicts zones as a form of emergency universal money. For example, the British Ministry of Defense often issues RAF pilots and SAS soldiers with Gold Sovereign coins to carry on their persons during combat missions and activities, such as in the Middle East.

Worthless paper Currencies vs the Inherent Value of Owning Physical Gold

13. Outside the Banking System

In the current era of global financial repression, physical gold is one of the few assets outside the financial system. Gold is not issued by any monetary authority or central bank or government. Because its not issued by any government or central bank, gold is independent of the banking system. Fully owned physical gold, if stored in a non-bank vault or held in one’s possession, is outside the banking system.

14. No Default Risk

Unlike a government bond, there is also no default risk with gold because it is not issued by any authority that could default. Gold bars and gold coins are no one else’s liability. Physical gold cannot go bankrupt or become insolvent. Therefore, there is no need to have to trust any other party when holding physical gold.

15. Portfolio Diversification

Adding an investment in gold to an existing portfolio of other investment assets such as stocks and bonds, reduces the volatility (risk) of the investment portfolio and can increase portfolio returns. This is because the gold price has a low to negative correlation with the prices of most other financial assets, because gold is less influenced by business cycles and macro-economic cycles than most other assets.

Numerous empirical studies by financial academics, as well as industry bodies, such as the World Gold Council, have validated gold’s role as a strategic portfolio diversifier. Optimal allocations to gold in multi-asset portfolios have found to be in the 5% to 10% range.

16. Currency Hedge

There is generally an inverse relationship between the gold price and the US dollar, in that the gold price generally moves in opposite directions to the US dollar. Therefore, holding gold can act as a currency hedge of the US dollar, and help manage the currency risk of portfolios denominated in US dollars.

17. Gold's Metallic Properties

Gold has many and varied metallic properties. These properties provide gold with many technological and commercial applications and uses, which in turn contribute as additional demand drivers in addition to the investment and monetary demand for gold.

Gold is highly ductile (can be drawn into very thin wire). It is also highly malleable (can be hammered and flattened into very thin film). Gold is a very good conductor of electricity and heat. Gold does not corrode or tarnish. It is chemically unreactive and non-toxic to the human body. Gold has a high luster and shine, and an attractive yellow glow.

These properties explain gold’s use in electrical and electronic wiring and circuits (e.g. computers and internet switches), its use in the medical and dental fields, gold’s use in solar panels, space travel, and gold’s traditional uses in jewelry, decoration, and ornamentation. With new technological uses being found for gold all the time, gold's demand pattern is diversified and underpinned by its commercial importance.

18. Physical gold - A tiny fraction of Paper Gold

The London wholesale gold market and the US-based COMEX gold futures market generate huge trading volumes of paper gold that dwarf the size of the physical gold market. However, these markets only trade derivatives on gold (futures and unallocated positions), representing fractionally-backed and unbacked claims on gold that could never be convertible into physical gold by claim holders.

In a scenario under which these paper gold markets became unsustainable, the prices of paper gold and physical gold would diverge, with the paper gold markets ceasing to trade and collapsing, and only physical gold retaining any real value. Physical gold is therefore an insurance against the collapse of the world's vast paper gold markets.

19. By Definition - Not an ETF

Physical gold Provides all the benefits that gold-backed Exchange Traded Funds (ETFs) do not. ETFs provide exposure to the gold price, not to gold. Holding physical gold is by definition direct exposure to gold. With most gold-backed ETFs, you cannot convert the units into gold and take delivery of the gold, and in many cases, the locations of the vaults are not even known. If holding physical allocated gold bars or gold coins in a vault, such as with BullionStar in Singapore, you can always take delivery.

Gold ETFs have many counterparty risks since there are many moving parts in an ETF such as a trustee, a custodian, and a sponsor / issuer. Physical gold has no counterparty risks. When you hold a gold-backed ETF, the quantity of gold backing the ETF declines over time due to management fees being offset against the gold holdings. When you hold physical gold, you always remain with 100% of the actual gold you first purchased. There is no erosion of holdings.

20. Anonymous Storage

Gold can be stored anonymously, either in your possession within your house or property, or in a vault in a jurisdiction, such as Singapore, that has no reporting requirements. Since gold has a high value to weight ratio, storing gold does not take up much space.

21. Independent of Internet

Owning physical gold is not reliant on having internet access and access to electronic wallets and cryptocurrency exchanges. Furthermore, gold cannot be stolen by hacking an electronic address or by transferring or deleting a number in a computer.

The Benefits of Owning Gold Coins and Gold Bars

22. Real Gold is Measured by Weight

Physical gold is measured in weight, not through a number set by a politician or central banker. When you buy a 1 Kilo gold bar, or a 10 Tola gold bar, or a 1 troy ounce gold coin, or a 5 Tael gold bar, you will always have that gold bar or gold coin, irrespective of the fluctuations of fiat currencies.

While thinking of the value of physical gold in terms of a fiat currency might be convenient, a better way is to think of a gold holding in terms of weight.

23. Coins and Bars - Build a Collection

Buying investment gold bars and bullion gold coins allows you to build a diverse collection of bars and coins that are at the same time a fascinating pastime and a form of investment and saving.

Bullion gold coins from the world’s major mints are beautifully illustrated and often have a connection to history. Investment gold bars from the world's major gold refineries are distinctively different from each other and you can vary a collection by cast or minted bars, and a selection of weights.

24. Physical Gold Feels like Real Wealth

Physical gold feels like real wealth. When you hold ten 1 ounce gold coins in your hand, you intrinsically know that you are holding real wealth, gold that is scarce and that has been costly to produce.

25. Gold as Loan Collateral

Gold can be used as loan collateral. Since gold is highly liquid and valuable, it can be lent and used as a form of financing, and as a way of generating interest. The wholesale gold lending market between central banks and bullion banks is highly active. Likewise, retail gold holders can also in various ways lend their gold to receive financing or interest, with new innovations to do this arising all the time.

26. Central Banks hold Gold

Although the world’s central banks like to downplay the importance of gold because it competes with their fiat currencies, most central banks continue to hold substantial amounts of physical gold bars and gold coins in vaults around the world. They hold this gold as a reserve asset on their balance sheets, and they value this gold at market prices.

Like private gold investors, central banks hold physical gold because it is highly liquid, it lacks counterparty risk, and because gold is a safe haven or ‘war chest’ asset that acts as a financial insurance in times of crisis. Central banks also hold gold for the unpublished reason that if and when gold re-emerges at the centre of a new monetary system, these very same central banks will not be caught out having no gold.

27. Gold for Gifting

Gold coins and small gold bars make great gifts and presents, and gold is a traditional form of gifting in many societies around the world. Gifting a gold coin or small gold bar to mark a birth, or anniversary, or a wedding or other special occasion, is an ideal present that will be highly appreciated by the recipient.

28. Gold for Inheritance

Gold bars and gold coins are a great form of inheritance for your children and family members. Because gold is real, tangible, valuable, and has a highly liquid trading market, it is an ideal asset for inter-generational wealth transfers. Because physical gold is fabricated in convenient weight denominations, such as troy ounces and kilograms, it can be distributed equitably among recipients, and specified equitably in wills and trusts.

New Release Now Available! Australian Lunar Series 2018

Background

It's that time of the year again where the Perth Mint unveils its' lineup for the year ahead. Today, we will be focusing on the latest release of the much loved Lunar Series – the 2018 Australian Lunar Series Year of the Dog. This release is part of the second lunar series released by the Perth Mint, which consists of lunar coins minted from 2008 to 2019. We are excited to bring in these coins and they are available for ordering now.

The Chinese Zodiac series, or the “Sheng Xiao”, is a circle of 12 animals that links each year to a particular animal. Each animal is thought to possess different character and personality traits that are often seen in individuals born that year. Those who are born in the Year of the Dog are said to be honest, friendly and have a strong sense of responsibility. People born in 1922, 1934, 1946, 1958, 1970, 1982, 1994, 2006 and 2018 are said to be born in the Year of the Dog.

First Look: Gold

gold_coin_perth_mint_lunar_dog_2018_1oz_front

The Lunar Dog coins have continued the tradition of “less is more” and we think it looks great! The gold coins feature a Labrador retriever proudly standing on rocks with a stylized pine tree in the background. The design also incorporates the Chinese character for "Dog", the inscription "Year of the Dog", and The Perth Mint's traditional "P" mintmark. Kudos to the Perth Mint for going with a classic interpretation of the animal. The designer portrayed the animal in its’ natural surroundings with a clean and simple background. By continuing with the classic design seen in the previous editions, the Lunar Dog coins should perform well in terms of sales.

Mintage

As with previous editions, the one ounce denomination has a limited mintage of just 30,000 globally and is expected to sell out quickly like the previous years. For the other denominations, the mintage is unlimited. That means that the Perth Mint will mint the coins for the entire of 2018 and will declare the final mintage at the end of the year. Mintages for fractionals are usually low. For example, the 2016 Year of the Monkey ½ oz gold coin had a mintage of only 11,947.

First Look: Silver

silver_coin_perth_mint_lunar_dog_1oz_front

The silver edition is equally stunning. As with previous editions, The Perth Mint has created two different interpretations for the gold and silver editions. The silver coin depicts a German shepherd dog and its’ puppy lying on grass with Chinese peony flowers in the background. The design also incorporates the Chinese character for Dog, the inscription "Year of the Dog" and The Perth Mint's traditional "P" mintmark.

Mintage

As with previous editions, the one ounce denomination has a limited mintage of 300,000 that is guaranteed to sell out. For the other denominations, the mintage is unlimited. This means that the Perth Mint will mint the coins for the entire of 2018 and will declare the final mintage at the end of the year. Mintages for other denominations are usually low. For example, the 2016 Year of the Monkey 2 oz silver coin had a mintage of only 34,368.

Availability

Our first shipment of lunar gold and silver coins will be arriving soon and the following denominations are ready for ordering:

Gold
2 oz Australian Gold Lunar 2018
0.5 oz Australian Gold Lunar 2018
0.25 oz Australian Gold Lunar 2018
0.10 oz Australian Gold Lunar 2018
0.05 oz Australian Gold Lunar 2018

Silver
1 kg Australian Silver Lunar 2018
10 oz Australian Silver Lunar 2018
5 oz Australian Silver Lunar 2018
2 oz Australian Silver Lunar 2018
1 oz Australian Silver Lunar 2018
0.5 oz Australian Silver Lunar 2018

Collectors always lament how the prices for previous editions are much higher after the year has passed. It is noteworthy how the high premiums of past editions are resilient even during periods of lower spot prices. Hence, if you are looking to collect yearly and complete your set, don't wait! For the Perth Mint Lunar Series coins, waiting is not a good idea if you want to get the coins at a reasonable price as they tend to trade at a higher premium above spot compared to other coins due to their relative rarity.

We only have a limited quantity for each denomination available so place your orders now before the coins sell out!

Gold Price: USD 65,000/oz in 5 years? Speech by Torgny Persson

Gold Price: USD 65,000/oz in 5 years? Is it realistic that the price of gold could reach this level in the foreseeable future?

This speech by BullionStar's CEO, Mr. Torgny Persson, was recorded during FreedomFest 2017. FreedomFest is the world's largest gathering for freedom oriented people. BullionStar participated by exhibiting and educating about the monetary system.

The following topics were covered in Mr. Persson's speech:

1) Money System of Today

How does our monetary system work - or doesn't work? Do fiat currencies like the US Dollar have any real intrinsic value?

Mr. Persson describes the purposes and characteristics of money and explains why fiat currencies are not true money per definition. Mr. Persson educates about how money is created and how most money of today only exists in electronic form.

2) Gold Manipulation - Gold Price

Is the price of gold dictated and artificially suppressed? What happens if the current system for gold price discovery fails? Is a gold price of USD 65,000/oz in 5 years realistic?

Mr. Persson discusses how the price of gold is set/discovered on the gold marketplace and how it is vulnerable to manipulation.

3) Singapore 

Why is Singapore the best country in the world for asset preservation and wealth protection?

Mr. Persson presents the advantages of Singapore as a safe jurisdiction for buying and storing bullion. No taxes on bullion in Singapore, no reporting requirements, strong property ownership rights and safety are some of the properties that makes Singapore uniquely positioned as the best country in the world for asset and wealth protection and preservation.

4) Offshore Bullion Protection with BullionStar 

Mr. Persson introduces BullionStar's products and services such as bullion vault storage in Singapore, Bullionstar Gold Bars and Silver Bars that can be traded without any spread in between the buy and sell price, cash & bullion on the same account and more.

The slides from Mr. Persson's speech are accessible below.

BullionStar Media

As well as offering a full transactional platform for buying gold and buying silver, the BullionStar website features a wide variety of original research, analysis and other content addressing the global precious metals markets. BullionStar's aim with this analysis and content is to provide readers and viewers with unique and up-to-date insights into the precious metals markets that are not available elsewhere.

A case in point is the BullionStar Perspectives video series which provides viewers with free access to leading independent views of the precious metals markets. In July, BullionStar had the privilege of hosting an exclusive interview in Singapore with legendary investor, author and financial commentator Jim Rogers, and this interview has now been published under the BullionStar Perspectives series.

Jim Rogers - Catastrophe and Opportunity

Rogers, who currently resides in Singapore, co-founded the famous Quantum Fund in 1973, and has written a number of best-selling investment and travel themed books.

The interview touches on potential crises that Rogers thinks could impact the global economy and the opportunities that such crisis may offer investors. Catastrophe and Opportunity can be viewed as the same phenomenon, and panic creates buying opportunities.

Ideally, Rogers thinks the Federal Reserve should stand aside since it has created many problems such as driving interest rates to zero and wiping out savers. Realistically, he doubts the Fed would be abolished, and in a future acute crisis, it will be pressured into generating ultimately futile financial market rallies.

Crucially, Rogers believes in the importance of acquiring physical gold and silver as an insurance policy, and in understanding what you are investing in. Everybody, he says, should have some gold and silver as an insurance policy if nothing else. “You hope you never need it”, but “its the best insurance policy in the world”.

Rogers owns physical gold and thinks that due to future financial market instabilities, gold could well turn into its own bubble. This is because, when financial crises hit, people go to gold and silver as a safe haven asset. "That’s what they do", he says.

Rogers appreciates that the gold market is a fractional-reserve market, with only partial backing by real physical metal. On the subject of paper gold versus physical gold, Rogers envisages that in a real crisis, there won’t be a paper gold market - the paper gold markets will close down due to widespread chaos. That is why there is a need for physical gold ownership, in your pocket or in a vault.

Jim, who has some gold stored in Singapore, thinks that Singapore is better than most as a gold storage jurisdiction, and an added attraction is that buying investment gold and silver in Singapore is tax free (GST free).

The interview with Jim Rogers is published as part of the BullionStar Perspectives series, a series which aims to provide viewers with free access to original and independent views and analysis of the precious metals markets.

The Jim Rogers Interview, which is just over 14 minutes long, can be viewed here

Other videos in the BullionStar Perspectives videos series include Marcus Grubb of the World Platinum Investment Council on the Case for Platinum. Bron Suchecki of Monetary Metals on the intricacies between the physical and paper gold markets, Chris Powell of GATA on price manipulation in the gold market,  analyst Jayant Bhandari on the Indian gold market, and Ronan Manly of BullionStar on Secrecy vs Transparency in the gold market.

The BullionStar website also features in-depth factual gold market information in BullionStar's Gold University portal, original research and analysis of the global precious metals markets by BullionStar analysts Koos Jansen and Ronan Manly, a unique monthly review of the world's most important physical gold markets in chart form in BullionStar's Gold Market Charts series, and a specific company-focused blog series known as BullionStar Blogs (also known as 'Inside BullionStar').

BullionStar's Gold University is a Wikipedia-style resource for use by the gold industry, by financial media and reporters and by general readers. It features contemporary factual information covering the world's gold markets, a selection of the world's largest gold vaults, profiles of the world's largest precious metals refineries and mints, and profiles gold industry associations. It also contains sections addressing the core concepts of the Chinese gold market, central bank policies on gold, and the mechanics of bullion banking and gold ETFs.

Articles and analysis by BullionStar analysts Koos Jansen and Ronan Manly, published in the form of blogs, keep readers up to date with developments in the precious metals markets. These blogs contain original research, such as on the Chinese and London gold markets, and are popular across the precious metals industry as well as being frequently featured across many other websites.

BullionStar's Gold Market Charts uses charts to capture current developments and demand and flow trends in the world’s most important physical gold markets including China, India, Russia and Switzerland.

The BullionStar Blog's series (Inside BullionStar) features posts relevant to the company BullionStar and its products, but also extends to hosting interesting articles on aspects of the gold market and BullionStar's unique Infographics on the gold market.

All of the above content can be found on the BullionStar site under the 'BullionStar Research' menu.

BullionStar in the Media

BullionStar and its team members are also frequently quoted in the wider financial media, and have appeared in coverage by well-known publications such as the Wall Street Journal, Bloomberg, Straits Times of Singapore, and CityWire Asia. Media Coverage of BullionStar is summaried in a Press Room page on BullionStar's website.

Bullion Banking 101 – Speech by BullionStar CEO, Torgny Persson

The following speech, by BullionStar CEO Torgny Persson, was given to an audience during a Precious Metals Seminar held at BullionStar's shop and showroom premises in Singapore on 19 October 2016.

BullionStars CEO Torgny Persson Precious Metals Seminar at BullionStarBullionstar shop during precious metals seminar Precious Metals Seminar at BullionStar

Introduction

What have I got here?

It’s 87 grams of gold.

As many of you know, we have our own bullion vault integrated in BullionStar's bullion centre here in Singapore. What if I told you that every day we sell 6 kgs (6000 grams of gold), meaning that we sell about 1500 kgs gold per year to customers storing with us, but that we actually only keep 87 grams of gold in storage as reserves.

You would call it fraud and have me arrested, right? I’m obviously running a Ponzi scheme with very small fractionalised reserves backing up huge trading of unallocated paper gold.

Now, for clarity, that's not how we conduct business. When you buy and store bullion with BullionStar, your bullion is fully allocated and you can withdraw your metals at any time by just walking into BullionStar's bullion centre. You don’t even have to notify us beforehand.

What I just explained to you is something else - it’s bullion banking per definition - more precisely it’s unallocated gold trading by bullion banks.

As most of you know, the London Bullion Market Association (LBMA) has held its annual Precious Metals Conference in Singapore over the last two days. The LBMA is at the core of the world’s bullion trading system, a system which generates extremely large trading volumes every trading day. To understand the gold market, one has to understand the LBMA system as it is of great significance to both the price of gold and also to the physical movements of gold around the world. I will therefore provide you with an introduction to bullion banking and this LBMA system, and talk about how bullion banking operates.

Bullion Banking - Unallocated Gold

Almost all gold traded in the LBMA system today is in the form of unallocated gold which is accounted for in unallocated accounts. The definition of an unallocated gold account, as we can read on the LMBA’s website, is that the holder of such an account with a LBMA bullion bank does not have any ownership interest in any specific gold bars.

Instead, the account holder is merely an unsecured creditor of the bullion bank and holds a claim on the bullion bank for an amount of gold. At the same time, the bullion bank has a liability to this customer for this same amount of gold. Therefore unallocated gold is essentially paper gold. It is gold that doesn’t exist in the physical realm.

The creation of unallocated gold is in fact very similar to how fiat currency is created in the fractional reserve banking system. The fractional reserve banking system provides a good gateway into understanding bullion banking.

How is Fiat Money Created Today?

Let’s quickly recap on how fiat money is created in the fractional reserve banking system.

Money is created out of thin air. When a bank extends a loan, the money is created out of thin air.

Let’s take an example:

1) Robert plan to buy a house for $1 million.

2) Robert goes to a bank and the bank takes a look at Robert and deems him credible. With today’s low lending standards, it is rather easy for Robert to secure a loan. The bank deposits $1 million into Robert's account.

3) Where does this $1 million come from? The answer is 'nowhere'. It doesn't come from anywhere. The money is created out of thin air when loaned out to Robert.

This is easy to understand but hard to believe for some people. But it is true that this money is created out of thin air and lent into existence. About 92% of our money today is lent into existence in this fashion.

Banks keep a very small amounts of money in reserve to cover withdrawals, but they face liabilities which are far larger in size that their reserves.

The term "loan" as used in banking has been corrupted and twisted by banks. When a bank extends a loan, there is nothing loaned. To loan something you need to be in possession of it first, but when banks make loans, there is no countervailing transaction - The money is just created when the loan is extended.

How is Paper Gold Created?

Now, what about gold? How is gold created? You might say gold can’t be created, it has to be mined, right? Yes, you would be correct, physical gold cannot be created, but gold as an investment product definitely can be created and is created on a massive scale.

When a bullion bank customer goes to the bank and requests to buy gold, the standard procedure is for the bullion bank to create unallocated paper gold and credit this paper gold to the customer’s account. This ’gold’ is simply created out of thin air as a book-keeping entry in the bank’s accounting system.

paper-gold

Similarly, if actual physical gold is deposited into an unallocated account operated by a bullion bank, this deposit of gold is also in fact very similar to a deposit of fiat money. Just as a bank keeps deposited fiat money on its own balance sheet, a bullion bank keeps deposited physical bullion on its own balance sheet.

Bullion banks don’t generally safeguard or segregate gold deposited with them or held by them unless they are specifically instructed to do so if a customer opens an allocated gold account.

This means that depositors of gold into bullion banks' unallocated accounts are no longer the legal owners of the gold that they have deposited. Instead, they are just one of the general creditors to the bank, and they merely hold a claim for gold against the bank.

By depositing gold into an unallocated account at a bullion bank, you therefore lose ownership of your gold in return for a mere claim on gold.

Trading in unallocated gold by the bullion banks is thus based on book-keeping entries denominated in gold. The gold is fractionally reserved. Gold is created out of thin air as book-keeping entries in the banks' ledger systems, and even gold that is deposited into an unallocated account becomes the property of the bank.

LBMA Unallocated Gold Trading Volumes

From the LBMA’s published clearing statistics, which is one of the only transactional statistics that the LBMA does publish, we know that 600 tonnes of gold are "cleared" in the London Gold Market each and every trading day. Cleared means that it’s 600 tonnes of gold that's transferred between participants after netting out all trades between all trading participants.

According to a LBMA gold trading survey conducted in 2011 (the last such survey), the ratio between trading turnover and clearing on the London Gold Market was about 10 to 1. This means that the total amount of gold traded in the LBMA system each day is about the equivalent of 6,000 tonnes!

In other words, almost twice as much gold is traded in the LBMA system in a single trading day than is physically mined globally during an entire year.

LBMA Unallocated Gold Trading Volumes

But what is backing this 6,000 tonnes of unallocated gold traded each day, or 1.5 million tonnes of gold traded each year?

Let’s take a look at the reserve side of bullion banking in the LBMA system.

Bullion Bank Gold Reserves

The LBMA bullion banks' outstanding gold liabilities, and the unallocated trading system in the London Gold Market are ultimately backed by a quantity of 400 oz Good Delivery gold bars.

However, bullion banks don’t really want to hold physical gold. They will buy it if someone forces it on them but bullion banks have no real need for physical gold and are therefore incentivised to keep as little gold as possible in reserve, and lend out the gold they hold in reserve so as not to incur storage fees and handling costs. Banking reserves are looked upon as a dead asset so the banks minimise these reserves and try to make them into live assets by loaning them out.

When a bullion bank receives a gold bar by buying or borrowing it, it either sells, leases or allocates that bar elsewhere.

This sets a bullion bank apart from any other bullion entity because a bullion bank can hold deposits of gold on its balance sheet as assets even if it no longer has, or never had, the actual physical gold in its possession.

How much backing is there for all the unallocated gold traded in the LBMA-system?

We don’t exactly know as there are no reserve figures published but we can make an educated guess.

Vaulted Gold in London

How much gold is actually vaulted in London? The LBMA recently said on its website that there was approximately 6,500 tonnes of gold stored in London, about three-quarters of which was at the Bank of England. The Bank of England recently revealed that it was custodian for 4,734 tonnes of gold in its vaults.

This would leave 1,766 tonnes of gold privately stored in the LBMA vaulting system outside the Bank of England.

BullionStar research recently calculated (30 September 2016) that ETF gold holdings held in London accounted for 1,679 tonnes. This would mean that there are only 1,766 - 1,679 = 87 tonnes of gold in the LBMA system which is not allocated to ETFs!

Therefore, nearly all of the LBMA reserves are allocated to the ETFs with only 87 tonnes of gold left to back up the vast amorphous of unallocated gold trading amounting to 6,000 tonnes per day or 1.5 million tonnes per year!

gold-vaulted-in-london

Chart layout inspired by GoldChartsrus /Nick Laird. Data gathered by Goldchartsrus/BullionStar's Ronan Manly

Physical gold in the LBMA bullion banking system is therefore like physical cash in the monetary system. It is rarely seen!

london-gold-etfs

Double-counted Reserves

LBMA is a banking system that by definition is based on fractional reserve banking.

HSBC, JP Morgan and ICBC Standard Bank are the only LBMA bank custodians with their own precious metals vaults in London. Most of the circa 42 LBMA bullion banks don’t even have their own gold vaults but still keep books denominated in gold ounces. A bullion bank without a gold vaults instead holds its gold reserves with a bullion bank that does have a gold vault.

For example, if Citibank keeps its reserves with a bank with a vault such as JP Morgan, then Citibank merely holds a gold claim for which JP Morgan has a gold liability. These unallocated gold reserves are therefore just pooled with the bullion banks that do have vaults.

The bullion banks without a vault never see or touch the metal they keep in reserves. If a bullion bank stores its gold reserves at another bullion bank’s vault, this means that the reserves are unallocated credits/claims which are standing behind the bank’s own liabilities. So even the reserves are fractionalised. So not only are bullion banks’ liabilities to their customers unallocated, even the reserves are unallocated inter-bank liabilities which are fractionalised.

Paper gold thus stands behind the liabilities of paper gold.

The LBMA system serves as a pool of reserves and uses coordinated reserve management where the different participating bullion banks can loan and lend to each other the few physical reserves that there are in the system so as to meet any demand for physical bullion.

Gold Bank Run

The bullion banks face massive liabilities in the form of unallocated gold credits. Bullion banks are thus, just like normal banks, susceptible to bank runs.

gold-fiat-comparison

The difference between bullion banks and normal commercial banks is that whereas central banks are the ultimate lenders of last resort to commercial banks, most central banks no longer back-stop bullion banks as the lender of last resort because most central banks no longer sell or lease bullion that can be used to prop up bullion banks' reserves.

In case of the LBMA, the central bank is replaced by a private company called London Precious Metal Clearing Limited (LPMCL) which is run by 5 clearing bullion banks and whose clearing system AURUM nets out all gold claims and liabilities in the LBMA system. The clearing system functions as a pooled system in that only net balances are cleared and the bullion banks' gold reserves are essentially pooled and can be leased and double counted whenever necessary.

When they no longer have any physical gold to deliver, the ultimate rescue plan for bullion banks is to use cash settlement instead.

In the same way that banks increasingly promote cashless solutions as a means to reduce cash handling costs, earn credit card fees, reduce the risk of bank runs and lock in customers, LBMA system bullion banks promote gold-less gold transacting.

Just as the banking system inherently incentivises reckless debt behavior, the bullion banking system inherently incentivises the reckless creation of paper gold assets.

LBMA – The Paper Gold Protector

In creating artificial paper gold, bullion banking protects the fiat money system.

If even a small minority of the paper gold traded today was backed up by physical gold, the price of gold would have skyrocketed. A gold price significantly higher than today would point towards the inferiority of the fiat money system, and possibly the collapse or implosion of the current monetary system.

bb-protecting-monetary-system

Bullion banks and gold industry organisations, such as the LBMA and the World Gold Council, which itself has developed and owns securitized gold products, can profit from gold trading volumes that are far higher than they would be if they were limited to the constraints imposed by the availability of physical gold to trade.

The bullion banks and the LBMA work hard to overcome the tangible limitations of physical gold mining. By promoting gold-less gold transacting, the LBMA unallocated system artificially increases the supply of gold, earning the banks higher fees from artificially large trading volumes.

To reiterate, the LBMA unallocated gold trading is a banking system based on fractional reserve banking which is all about exposure to the price of gold but not to gold itself.

The LBMA system is used to coordinate unallocated paper gold trading where ‘gold’ is created out of thin air, and the tiny physical reserves held are pooled and shared out among participants so as to minimise costly reserves and avoid gold bank runs.

When bullion banks need to allocate gold to the ETFs, such as to the SPDR Gold Trust (GLD) in London, they use credits from the same unallocated gold credit system as was previously used to offset other gold liabilities. Even though the ETF may own the gold outright, the gold is still being double counted within the system because its being allocated out of a bullion bank pooled systems of credits.

To summarize what the LBMA is all about, it is a paper gold protector for the bullion banks which allows the bullion banks to earn fees from an artificially high trade turnover while at the same time protecting the fiat currency system.

The Guarded Secret of no Gold

The fractionally-reserved bullion banking system is a fragile system. Many investors and savers holding paper gold believe that the gold they are holding is backed up by real physical gold. But if the bullion banking system implodes, which it will do if the high demand for real physical gold in Asia is sustained at anywhere near today’s levels, these holders of paper gold will at best end up holding paper claims which will be cash-settled, or at worst these paper gold holders will be empty-handed.

Demand for ETF’s and unallocated gold will likely not stress the system systemically since the pooled LBMA gold reserves are used for leasing and double counting. It is the demand for real physical gold, draining bank gold reserves, that stresses the system.

Many gold investors/savers buy various paper gold products as a means of protecting themselves against the fiat currency Ponzi scheme. It may therefore come as a surprise to some holders that these investments are no safer or even less safe than the fiat currency against from which they are seeking to protect themselves. Bullion banks give the impression that these investors into unallocated gold are actually holding gold, whereas in reality they are just unsecured creditors holding paper gold, gold that is created out of thin air, in a fractionally-reserved Ponzi scheme.

As long as everyone is happy to buy and sell ledger entries/book-keeping entries, this fragile system can continue to balance on a thin thread. The systemic problem arises when larger entities start to demand physical delivery, a trend which has been happening in the last few years, most notably in Asia and Russia. There is therefore an imminent risk of the bullion banking system collapsing in the next few years.

vault

This is an accident waiting to happen, because when enough holders of paper gold ask for delivery, the default that will follow will trigger the biggest bank run for gold in history, which due to gold’s significance as a monetary proxy, will shake the entire monetary system.

When there is no longer any physical metal to deliver, the ensuing shortage will result in a disconnect between prices, in which paper gold will become worthless while the price of real physical gold will be revalued at a much higher level based on the market equilibrium for physical supply and demand of gold.

Thank you!

BullionStar attends LBMA Conference in Singapore, October 2016

Introduction

This year, the well-known annual conference of the London Bullion Market Association (LBMA) was held in Singapore between Sunday 16 October and Tuesday 18 October at the impressive Shangri-La Hotel. The conference attracts delegates and speakers from across the world of bullion, with representatives from precious metals refiners, mints, bullion banks, brokers, trading and technology providers, bullion dealers and bullion wholesalers. This year over 700 delegates attended.

The main speaker sessions, presentation and panel sessions of industry representatives ran over two days, between Monday 17 October and Tuesday 18 October. Topics covered in the speaker sessions were numerous and varied and included the bullion market in China, developments in the Indian gold market, responsible gold guidance, LBMA updates and developments, a dedicated session on platinum group metals, and a session on the financing of refineries.

As interesting as the speaker sessions and presentations are, many of the conference attendees use at least some of their time at the LBMA conference to engage in meetings with each other on the sidelines. This explains the constant stream of small breakout meetings that took place in the hotel lobby's seating areas, as well as in dedicated meeting rooms around the hotel. BullionStar also used the occasion to meet with existing suppliers from the refining, minting and wholesaling world, as well as to discuss potential business opportunities with new suppliers.

There were also approximately 20 exhibitor stands at the conference, including stands hosted by CME Group, Brinks, the World Gold Council, IE Singapore (Singapore's trade development authority), Istanbul Gold Refinery (IGR), Metals Focus consultancy, Cinnober, and Nadir Refinery.

sl
Shangri-La Hotel, Singapore

Hong Kong - Shenzhen Gold Connect

On the Sunday prior to the conference, the Chinese Gold and Silver Exchange (CGSE) and the Singapore Bullion Market Association (SBMA) co-hosted a pre-conference presentation titled “Building a physical gold corridor in Asia: Shanghai – Hong Kong / Qianhai – Singapore”, at the hotel, which featured a series of discussions about the CGSE’s new gold trading and vaulting project located in the Shenzhen free trade zone at Qianhai, just across the border from Hong Kong.

Haywood Cheung, Permanent President of CGSE, gave an introductory overview of the Qianhai project, showcasing it as part of China’s “One Belt, One Road” plan, after which Dong Feng, Ping An Commodities Trading in Shenzhen presented a detailed explanation of how the linkages between the CGSE’s trading platform in Hong Kong and Qianhai’s clearing and settlement will for the first time enable the trading of both onshore and offshore Renminbi and the trading of onshore and offshore gold. The Qianhai project integrates trading, clearing, settlement and vaulting, with a 1500 tonne capacity vault, and a trading hall. ICBC will provide settlement of both onshore (Shenzhen) and offshore (Macau) Renminbi as well as providing use of its Shenzhen gold vault (onshore gold settlement) until the CGSE Qianhai vault is completed.

This onshore and offshore trading and settlement of Yuan and physical gold will facilitate arbitrage trading, and is another step in China’s liberalisation of its currency and its gold market as it links the Chinese currency to physical settlement of gold inside and outside of China. This initiative is one to watch and will demonstrate the Chinese government’s gradual easing of cross-border restrictions on currency and gold flow. Next phase gold trading in Qianhai by CGSE member companies will commence on 7 December.

With the CGSE having already established a gold trading link with the Shanghai Gold Exchange (SGE) though its Shanghai-Hong Kong Connect, and with the Shenzhen (Qianhai) - Hong Kong Connect now coming on stream, the CGSE is also planning a Singapore - Hong Kong Connect, and a Dubai - Hong Kong Connect, which, if they materialise, will extend physical gold corridor (trading and vaulting connections) across the Asian region and beyond.

Albert Cheng, CEO of the SBMA, wrapped up the afternoon with an overview presentation of SBMA’s aspirations to evolve Singapore into a bullion market hub for the entire ASEAN region, including countries such as Indonesia, Vietnam and Myanmar. However, details of how this plan will be implemented were not addressed. Cheng also showcased the SGX gold contract which is backed by the SBMA, but which has yet to take off despite being launched over 2 years ago.

Singapore Skyline - Central Business District
Singapore Skyline - Central Business District

LMEprecious gold Futures

The first event we attended on Monday was an early morning presentation by the London Metal Exchange (LME) about LMEprecious, its new suite of spot, daily, and monthly gold and silver futures contracts to be launched in the first half of 2017, that will trade on LME’s trading platform, with market-making offered by 5 investment banks such as Goldman Sachs and ICBC Standard Bank. These futures are for delivery of unallocated metal in the London market and the contracts will still clear through the London bullion market's LPMCL unallocated bullion clearing system. In time, the LME plans to launch platinum and palladium futures contracts on LMEprecious, as well as options contracts on all 4 metals. The LMEprecious platform will also link into LBMA’s planned trade reporting system.

ICE gold Futures

On Monday morning, ICE Benchmark Administration (IBA), a direct competitor to LME in the precious metals trading and clearing space, used the LBMA conference to make a very well-timed announcement that it too will be launching a new gold futures contract for delivery of unallocated gold in London (loco London). The ICE contract will trade on the ICE US futures platform and will begin trading in February 2017, in advance of the LME contracts. This contract is being designed to be compatible for settlement within the LBMA Gold Price auction which IBA administers in London, and it will, according to IBA, allow the introduction of central clearing into the auctions, and thus facilitate wider auction participation. Currently,the direct auction is exclusively open  to a handful of large banks that have large bi-lateral credit lines with each other. At this stage it’s unclear how the connections between the futures contract and the LBMA Gold Price auction will work, but BullionStar plans to examine this development in future coverage.

Unallocated Gold, Gold Lending and Central Banks

Given that the LBMA Conference is attended by dozens and dozens of precious metals refineries and mints, it was notable that the subject of "unallocated gold" cropped up in the discussion of LMEprecious and ICE futures contracts, but that there was no discussion in the actual LBMA conference programme schedule of 'unallocated gold' as the term is used by the LBMA. An unallocated gold position in an account in the London gold market is merely a contractual claim for gold against the bank that the account is held with. As such, it is a synthetic gold position.

It was also odd in our view that there was no seminar or discussion about the London gold lending market within the conference programme. As gold lending is an important and influential area of the London gold market, it affects marginal gold supply, and it has an impact on gold price formation.  Notably, the topic of central bank activities in the gold market was completely missing from the conference schedule this year,  a notable omission compared to previous years.

Gold price benchmark for Singapore revisited

In another announcement on Monday morning at the conference, the Singapore minister for trade and industry announced that the SBMA in conjunction with the LBMA and ICE Benchmark Administration (IBA), they'll begin a feasibility study on launching a “pre-AM gold price” auction, which would serve as a benchmark for the Asian region and which would be held at 2pm Singapore time, in advance of the European trading day. This Singapore benchmark was already discussed and announced over 3 years ago, but has put on hold in 2014 due to European regulatory investigations at that time into manipulation of the London Gold Fix.

LBMA Trade Reporting

The conference speaker programme opened on Monday morning with introductory remarks from Lim Hng Kiang, Singapore Minister for Trade and Industry, outgoing LBMA chairman Grant Angwin, incoming newly appointed Chairman Paul Fisher who recently arrived from the Bank of England, Tim Pearce, the chairman of the London Platinum and Palladium Market (LPPM), and LBMA CEO Ruth Crowell.

The LBMA CEO’s introductory speech touch on the planned launch of trade reporting services for the London Gold Market. This trade reporting contract has been awarded to financial technology providers Cinnober – BOAT Services – Autilla, after those partners won the LBMA’s recent RfP tender which had been launched in October 2015. Ruth Crowell referred to trade reporting as ‘Phase 1’ of a new suite of technology services. Trade reporting  will be launched in Q1 2017, and will, according to the LBMA “demonstrate of the size and liquidity of the market for clients, investors and regulators”. Phase 2 of this project refers to services such as central clearing in the London bullion market.

Further background to the chosen trade reporting solution was provided by Jamie Khurshid, the CEO of BOAT Services. Surprisingly, even though this RfP took the LBMA over 1 year to complete, it will still now require a 'design phase' where BOAT/Cinnober needs to meet with LBMA member firms to discuss the scope of reporting, followed by a period of customisation and configuration of the implementation. Details on what exactly will be reported (the scope) remain sketchy, and since full London gold and silver trade reporting by all participants (including central banks) is not mandatory in a regulatory sense, it remains to be seen to what extent transparency will be improved.  Because if you don't have full mandatory reporting, you don't have transparency. In another related presentation, Sakhila Mirza, LBMA General Counsel stated that trade reporting will apply to loco London spot trades, forwards and options, but that "LBMA and its members retain control over the scope of reporting", which highlights the self-regulatory nature of the reporting, and again may suggest that the trade reporting may not be as granular or have as much informational value as some may think, especially given that central banks will be exempt from trade reporting.

The Shanghai Gold Exchange and Chinese Gold Market

Monday's schedule also included an  informative series of presentations titled "The Bullion Market in China" from an impressive list of experts. Jiao Jinpu, chairman of the Shanghai Gold Exchange (SGE), provided an overview of the latest developments from the SGE, which has a network of 61 vaults across 35 cities in China, and where physical trading volume reached 34,100 tonnes of gold in 2015. Jinpu revealed that the International Board of the SGE (known as SGEI) has, since launch in September 2014, traded 7,838 tonnes of gold, while the daily Shanghai Gold Price auction, only launched in April 2016, has already traded 384 tonnes, worth RMB 105.5 billion, giving it an average daily trading volume of 3.4 tonnes. Jinpu also vindicated BullionStar's estimates of 2015 SGE gold withdrawals, because, in the words of Jinpu, he sits on the SGE tap, and knows exactly how much gold has been withdrawn from the Exchange vaults.

In his speech, Jinpu announced that in the near future, the SGE and other exchanges will begin using the SGE Gold Price benchmark to develop gold price derivative products.

SGE Chairman Jiao Jinpu
SGE Chairman Jiao Jinpu

In another notable confirmation, Yang Qing, from the Bank of China, one of China's largest commercial banks involved in the global gold market, responding to a question posed by BullionStar, said that he thinks that in future, the Chinese currency, the Renminbi, should have an element of gold backing.

In what was probably one of the most interesting and revealing presentations from BullionStar's perspective, and which vindicates the extensive research and analysis that BullionStar's precious metals analyst Koos Jansen has done on the Chinese gold market, Matthew Turner from Macquarie Commodities Research in London gave a presentation about how to accurately capture and estimate the total trade flows of gold into China given that China does not publish this data itself.

One of Turner's approaches is to use the trade data of all other countries which do report gold exports to China. This approach reveals that China imported 1626 tonnes of gold in 2015 from a number of countries, primarily Hong Kong, Switzerland, the UK and Australia. Another more elegant Turner approach is to take China's total import figure which it does publish, as well as the summated figures of  all of China's other import categories of data, which China also does publish, and then derive the gold import quantities as the delta.

This approach yields a net gold import figure of 1693 tonnes in 2015. Both of these figures are very close to BullionStar's previously published Chinese gold import data estimates, as calculated by Koos Jansen. Adding 2015 Chinese gold mining production to imports gives total new supply coming into the Chinese market in 2015 in excess of 2000 tonnes, which is over 1000 tonnes higher than consumer gold demand as estimated by consultancies such as GFMS and the World Gold Council.

LBMA and SGE familiar with BullionStar's research

On the Monday evening we attended a dinner hosted by Australia and New Zealand Bank (ANZ) at Singapore’s famous Raffles Hotel. Just after arriving we had the privilege of chatting for a few minutes to Jiao Jinpu, chairman of the Shanghai Gold Exchange (SGE) via his colleague and interpreter Jess Yang, and we highlighted to him BullionStar’s extensive research from Koos Jansen on the China gold market and the SGE, which we were impressed that he was already familiar with. Dinner conservation was interesting and varied as we were seated at a table with representatives of the London Metal Exchange, ICE Benchmark Administration (IBA), the CME Group, GFMS, Metalor Singapore, and the Royal Canadian Mint.

During the conference, we also learned that the LBMA is familiar with BullionStar's research into the London gold market, another confirmation that the analysis that we publish is read widely within the bullion industry.

As the conference wrapped up on the Tuesday afternoon, delegates were asked to forecast what the US Dollar gold price will be this time next year. Audience members submitted their forecasts via a special handheld device in the auditorium, which resulted in an average forecast of US$ 1347.

BullionStar Seminar during LBMA Week

To coincide with the fact that the LBMA conference was located in Singapore this year, BullionStar hosted a number of events at its shop and showroom premises on New Bridge Road, Singapore. On the Saturday prior to the conference,  15 October, BullionStar held a 'meet and greet' morning, where customers and anyone in town for the conference could pop in and chat with BullionStar staff. On Wednesday 19 October, BullionStar held a precious metals seminar in its showroom premises at which BullionStar CEO Torgny Persson and Precious Metals Analyst Ronan Manly presented to an audience on the topics of Bullion Banking, and Transparency vs Secrecy in the gold market, respectively. The presentations and transcripts of the speeches will be published on the BullionStar website in the near future.

“How Safe is your Gold?” – Transcript of Speech by BullionStar CEO

The following is the transcript of a presentation made by BullionStar's CEO Torgny Persson on 14 July 2016 to an audience at the FreedomFest conference in Las Vegas, USA:

Liberty is Prevailing

Freedom, ladies and gentleman.

Freedom is the right to think, speak and act the way that we want.

I think I speak for a lot of us here today in saying that we no longer believe in the imposed concept of a government taking care of us from cradle to grave.

I love the principles on which this country was founded.

Freedom of Speech,
Freedom of Thought,
Freedom of Movement,
Capitalism,
and Property Rights

But a lot has changed since. Authoritarian tyrants have kidnapped free society. But make no mistake, people across the globe are waking up. The tyrants are losing.

We can see clearly that the tide has turned. Political correctness is crumbling.

We had Brexit in the UK a couple of weeks ago. The end of the world according to mainstream media. We have the rise of Donald Trump here in the US. Love him or hate him but he’s breaking political correctness. He’s saying the unsayable.

It is starting to dawn on the tyrants that it’s all over.

More speech is always better than less speech.

So people are rising up, finally, people are rising up.

Liberty is prevailing! Liberty will always prevail. Freedom is a powerful concept. Freedom to think, say, read and do what you want.

We don’t need to be instructed how to live our lives. We have been oppressed by the government and lied to by the media long enough. Freedom is a force that can’t be stopped.

We don’t need anyone’s authority to govern our own lives. Freedom, think about it, is simply the concept of living your life the way you desire.

Introduction

My name is Torgny. I’m an economist by training. I’m the founder of 3 different precious metals dealers worldwide. Being Swedish by origin, I first started the Swedish bullion dealer LibertySilver.se in 2008. Liberty because if you own precious metals, you can gain independence and liberty from the oppressive financial system as you’re not locked in to the fraudulent banking system.

I have a Master’s Degree in Economics. If you ever get the chance to study economics, don’t do it. Economics is upside down. Instead of modelling what is actually happening in the real world, economics is a product of professors peer reviewing each other, holding each other’s hands, coming up with obscure models that they try to push onto the world.

I subsequently started Liberty Silver in Estonia in 2011, and most importantly BullionStar in Singapore in 2012. Today I’m looking to cover three different topics.

First, I will cover what is happening on the gold market by looking at the most important gold trends of 2016. What’s happening in the gold market and what can we expect ahead?

Then I will talk about Singapore because Singapore is the very best place in the world for wealth preservation and asset protection and it’s the best place in the world to buy and store precious metals.

And I will conclude by talking about how I have set up BullionStar with the purpose of servicing offshore bullion protection. I moved to Singapore with my family 3 years ago to establish BullionStar in Singapore simply because it is the best country in the world from which to offer precious metals services for international diversification, and asset and wealth protection.

Global Economy 2016

To understand the gold market, we have to understand what is happening in the global economy - and the relative ‘health’ of the global economy today.

Stock and bond markets have been performing well over the last years but the underlying economies are struggling. Record low interest rates, sub-zero in many countries, and massive money printing have’t triggered any real economic or trade growth.

We can even see that the viability of innovating, of creating new products, of selling products for a profit has become secondary to the goal of just having a corporate presence on the public investment markets. Today, it’s more important for company managers to list their company on the stock exchange than it is to actually create an innovative product that makes money.

So we have an economic system that incentivizes reckless debt behaviour, which leads to asset bubbles, boom-bust cycles, massive debt, mal-investment and inflation.

But how has this monster of debt and inflation been created? What’s at the core of our current economic system?

Today’s Monetary System

It’s the monetary system that allows government to steal through taxation and inflation. Taxation is of course the same as theft. They just had to invent another world of it. Income tax of 30% sounds a hell of a lot better than income theft of 30%. Everyone agrees that it would be wrong for me to go up to someone in this room with $100 and steal $30.

Just because a group of people get together and call themselves the government, it doesn’t change the immorality in stealing.

The monetary system, of course, also redistributes wealth via inflation. Inflation is also theft but in a discreet way as it happens slowly without the general population being aware of it. What did a gallon of milk cost when you were young? What did an ice cream cost?

Inflation is a redistribution of wealth from late receivers of newly printed money i.e. you and I, normal people, to the early receivers. i.e. the government, the central banks and the commercial banks.

Dollar 99

The US Dollar is important in this context because the US Dollar is the reserve currency of the world. As we can see from this chart, the US Dollar actually did pretty well until the beginning of the 20th century. But what happened in the beginning of the 20th century?

The Federal Reserve was created in 1913 and the world went off the gold standard.

Since then the world’s currencies have lost 99% or more of their value.

We have been indoctrinated into believing that the world’s current monetary system is a natural system, but nothing is further from the truth. We should have moved on from it a long time ago as this monetary system really is the root cause of the financial debt disease that we are seeing today.

How is Money Created Today?

Today more and more people are becoming aware of the Federal Reserve’s counterfeiting of money through Quantitative Easing (QE). However, it’s still a mystery to many how most of our money is created today.

Most of today’s money is created not by central banks, but by normal commercial banks. It’s just created out of thin air when the commercial bank extends a loan. There’s nothing backing this money creation, there’s nothing tangible to it.

Let’s illustrate how it works with an example. We have Robert who is in the market for a 1 million dollar house. Robert’s career choice is as a fast food restaurant worker, part-time, on minimum wage. But Robert knows he has to look credit worthy when meeting his bankster so he dusts off his tie for the occasion.

The bankster takes a quick look at Robert and judges him as credible. No problem. You’ll get the mortgage. Now, where did the USD 1 million that the bank lent Robert come from?

Nowhere.

It was created out of thin air when the bank extended the loan to Robert. It was just created as a book-keeping entry in the bank’s accounting system out of thin air.

This is how approximately 92% of US money supply is created today. It’s created by banks out of thin air when lending. It’s easy to understand, but for some people hard to believe as it’s just too absurd.

92% Electronic Currency

Only 8% of the US Dollar money supply today exists in physical form and even this 8% are just worthless pieces of paper that only have a value as long as people can be brainwashed into believing they have a value.

Some people actually still think that the US Dollar is gold backed. As a thought experiment, let’s calculate what the price of gold would have to be for the US Dollar to be backed by gold.

The Federal Reserve claims to hold, and note that I say claims to hold because there has never been any independent proper audit of the US Treasury vault holdings, 8133 metric tons of gold. At the same time there’s about 17 trillion of US Dollars in circulation. The price of gold is currently about USD 1300 per troy ounce. The US gold reserves as valued in US Dollars would therefore be worth about 340 billion dollars. This means that the price of gold would have to rise 50-fold for all outstanding US Dollars to be backed by gold today. 50-fold. This is how much the value of our currencies have been eroded.

What is Money?

We can thus see that the world’s current money system isn’t serving us the people. But what is money in the true sense?

For something to emerge as money on a free market, it needs to serve three purposes.

  • Medium of Exchange – Money is the intermediary in the exchange of goods and services. If we don’t have money, we’re back to barter systems of medieval times which is very impractical.
  • Unit of Account – Money is supposed to serve as a measuring stick that everyone understands. Money is a frame of reference. And sure, if I tell you that something costs $100 you have a pretty good idea how much that is, but the problem is that it takes $100 today to buy something that cost $1 a hundred years ago.
  • Store of Value – Money is supposed to keep its purchasing power over time, to keep its value.

Let’s now compare paper currency and gold to see which has the best monetary characteristics.

Durability – Money is not supposed to corrode, oxidize or burn. Well, paper money burns easily whereas gold melts under heat but isn’t destroyed.

Portability: Paper money and gold can both be moved. Electronic currency can be moved very easily but can also be deleted by the stroke of a key.

Divisibility – Let’s do an experiment. I have here a 10 dollar note and a 1 gram gold bar. Now what happens if a split this 10 dollar note, what does it become? Does it become two 5 dollar notes? No it doesn’t, it becomes two worthless pieces of paper. Now what if I instead split this 1 gram gold bar into two equally sized pieces, what does it become? It becomes 2 bars of 0.5 grams each which together is still what I had at the beginning i.e. 1 gram! This tells us a lot about the worthlessness of our paper money.

Fungibility – Fungibility means that each and every unit is indistinguishable from the other

Intrinsic Value – Gold has a high value because of its metallic characteristics. It has high density, it’s soft but still strong, and it’s what’s called malleable, meaning that it can be stretched without breaking. A 1 oz gold coin can actually be stretched out 50 miles without breaking. That’s 6 times all the way up and down the Las Vegas strip!

Imbalances from Using Dishonest Money

By using dishonest money as the world is doing today, we get huge global imbalances.

The US is running a massive trade deficit. There’s much more stuff coming into the US than there is leaving. How are the excess imports paid for? The answer is that it’s paid for by newly created money.

It’s interesting to note that it’s only possible to run trade deficits to this enormous extent if you issue the currency that is used as reserve currency. This is thus only possible in the US, as the US Dollar is used as the world’s reserve currency. In any other, non-US country, it wouldn’t have been possible because the currency would depreciate when there’s a continuous trade deficit.

When the currency is depreciating, it becomes more expensive to import goods and it becomes cheaper for others to buy exported goods. Trade is therefore rebalancing.

This is not happening in the US though and the reason for it is that the US Dollar itself is demanded as reserve currency around the world.

There’s a lot of finger-pointing towards the US because of this, blaming the US for living beyond its means. I don’t agree with that though as it is the rest of the world, i.e. non-US countries, that is demanding US Dollar as reserves which they don’t necessarily have to do. So this is what’s called an exorbitant privilege.

China & US Debt

Things are changing rapidly though as structural changes to the system are long overdue. The system we have today is in no way sustainable. The US Dollar is losing structural support from surplus countries, most notably from China.

Foreign countries are no longer increasing their reserves of US Dollars. China is no longer increasing its holdings of US Treasuries. They stopped buying them. So the system of the US Dollar acting as a reserve currency is very fragile and is only holding together based on the premise of more bribes. Private investors, especially in countries where the markets and currencies are failing such as in South America, buy bonds but they only do so on the promise of more and more easy money to come. People have been conditioned for many decades to run to the US Dollar as a safe haven although I predict that to soon change.

Foreign governments and particularly China are not interested in owning anymore US debt though. The question is when will the private support for the US Dollar stop, because then there’s no one to support US debt anymore except the Fed itself. When will it happen? Timing wise I’m not sure. When I started Liberty Silver in 2008, I thought it would happen much sooner that it has. Sooner or later, it’s going to happen though. We will first get a strong deflationary pressure, we are basically in that phase already. Credit will default but this will not be accepted by the governments, who will buy up debt at all costs, eventually leading to a crisis of confidence and then we’re in big trouble because then people will start to spend their savings quickly leading to hyperinflation. And when that happens, debt and credit is not a good store of value.

And who best understands this situation today? China still has a big surplus though so what do they buy instead?

Chinese Gold Rush

They are buying tangible assets. Gold is one such asset but China is also a major foreign direct investor in all sorts of projects from mining in Africa to infrastructure in central Asia.

The Chinese understand that the days of the US Dollar are numbered.

Chinese rush

Whereas Westerners have mostly been shunning gold for the latter part of this decade, the Chinese have been vacuuming the world’s vaults for physical gold. This chart shows that the Chinese, including both the government and private sector, are holding at least 16,000 tonnes of gold.

Chinese AU 16000

The Chinese government even runs adverts on national TV encouraging everyone to buy gold. Just imagine the US government running adverts on national TV encouraging people to buy gold.

Why do the Chinese do this? The simple answer is that they understand that gold is a stable savings asset, but they also understand that the days of the US Dollar as the reserve currency of the world are numbered, and they understand that gold is a much better safeguard against inflation and currency destruction than anything else.

This trend of gold flowing from the West to the East is the same as a flow of power from the West to the East. It has huge geopolitical implications because whoever has the gold in the end has the power. In my opinion, the Chinese are buying as much gold as they possibly can without breaking the neck of the market.

Western vs. Eastern Gold Mentality

I’m in a fortunate position because I’m running 3 bullion dealers across the world, both in the west and in the east. I have two businesses in Europe and one in Singapore in Asia so I’m fortunate to be able to compare eastern and western gold mentality.

What I see is that when the price of gold is going up, westerners buy. In the west, most people are looking to get a return on their investment. That’s how we’ve been conditioned because if we don’t get a return, inflation will eat up the value of the money.

But when the price of gold is dropping, there are a lot of Asians buying. We get queues outside our shop. Easterners are not looking for a return on their investment. What I see is that easterners don’t view gold as an investment vehicle. They view gold as real wealth, they view it as a safeguard against inflation and currency destruction. They view it as savings which provides independence.

In the west, we see the opposite. When the gold price is dropping, Westerners give up. It’s not good for my investments so I need to chase some other investment. So in the West, people instead buy when the price goes up, due to being trend seekers, as we’ve also witnessed this year.

But in my opinion, we can learn a lot from the Eastern mentality because the Eastern mentality is that gold is savings. There’s no counterparty risk for gold. You don’t have to trust any government, central bank or commercial bank when you buy and hold gold. You don’t need to trust anyone because you hold your wealth yourself so you’re in control.

Simply put, in the East, people are value buyers and buy for generational wealth, whereas in the West people mostly buy gold for the lure of currency profits.

How can Westerners piggyback this successful strategy to save/invest in gold outside the reach of intrusive governments?

Singapore’s Story

Let’s take a look at Singapore. I’ve been living in Singapore for about 3 years. I relocated with my family 3 years ago from Sweden, the worst socialist country in the world. And the country with the most political correctness by far anywhere. You think it’s bad in the US, check out Sweden. Socialism is cancer. I’m not going back there.

I moved to Singapore simply because it’s the best country in the world for precious metals, it’s as easy as that. Whether my kids agree, I don’t know but they like to play with silver coins and actually understand the intrinsic value of precious metals much better than most people in their 40’s and 50’s.

Singapore is the new Switzerland for asset protection. It’s the best and safest country in the world for wealth preservation.

Singapore is unique. Let me tell you my story about when I first went to Singapore. My business partner and I first visited Singapore on an exploratory trip researching whether to establish BullionStar in Singapore after we discovered that the Singaporean government was abolishing the sales tax on precious metals in Singapore in 2012. This is interesting because how many countries today are deregulating anything let alone precious metals? In other countries the rulebook just gets bigger and bigger. I know there’s many absurd examples from the US. From Sweden where I originate, the guidance on the sales tax that all companies must know and follow is 3,000 pages long. That’s insane. The rulebook of absurdity is just growing. Singapore may be the only country that is taking the opposite route of actually removing rules.

In Singapore, the government wants to create a trading, transit and storage hub for precious metals so they actually removed the major hindrance to that, the sales tax (GST / VAT as it’s called in some countries), which is rather unique.

So on my first trip to Singapore together with my business partner, we went to one of the suppliers in Singapore to discuss business opportunities. We had a general business discussion and they said, have you talked to the government yet? So I’m from Sweden where if you send a question to a government authority, in best chance you may get a reply after a few months if you’re lucky and they’ll most likely harass you with an inspection or audit while they’re at it.

We’ve been through a lot of that in Sweden even though we’re following all the rules meticulously.

The Singapore supplier told us that we can indeed contact the governmental trade agency in Singapore so I said why not and I sent the government contact person an e-mail 11 pm. I get a reply in three minutes saying that we’re welcome to meet them the next morning at their office.

Baffled, I replied that we will show up so we rock up to their office at 9 am in the morning. There are two guys meeting us. They are in their 20’s - 30’s and we discuss business opportunities with them. They tell us that we are welcome in Singapore, and that they want us here, and they encourage us to get started, and facilitate the introductions to different stakeholders and suppliers.

I met many bureaucrats in my life but that has never happened before, because bureaucrats  are normally just interested in growing their reach, killing anything productive around them. Whereas in this case, they wanted to help us and even came up with their own private business ideas. And this is the Government! Where else would that happen, would it happen in the US? ‘

We were quite amazed and we went for it and established BullionStar in Singapore four years ago.

Singapore Story

So in general terms, the Singaporean government is keen to incentivize productivity and they understand that the private economy is the backbone of the economy.

Singapore was actually literally kicked out of the Malaysian Federation 51 years ago. With nothing going for them and with no natural resources, the journey since has been a tremendous one. In a mere 50 years, which isn’t a very long time when it comes to building a country, they’ve established the premier financial center of the world. They have done this with a very strong rule of law where there’s a lot of freedom within a set framework. You have a lot of freedom as long as you keep within that framework and you especially have good business freedom.

Now, if you bring in guns or drugs, you’ll be put away for a long time if not forever. I’m a libertarian so I don’t really agree ideologically but I can see how this has been serving Singapore very well as a city-state, as there’s no shootings whatsoever and very little drugs.

Singapore is the most business friendly country in the world. Hands down. The Singaporean government runs Singapore like it was a company.

They focus on productivity and innovation and luckily they are a too important as a country to be listed on any grey or black list because of their low tax regime and financial protection. They are also very good diplomats. A few years ago, OECD put pressure on Singapore to start signing Tax Information Exchange Agreements. The Singaporean government said, yes we will start signing these agreements. To date more than five years later, they have signed one such agreement with…Berumda…Strengthening Singaporean-Bermudian ties to ensure that the OECD doesn’t bother them.

Compare this to Sweden is day and night. Sweden is often perceived as some sort of mellow well-working ideal. Bernie Sanders is touting Scandinavia as some sort of socialistic dream. Let me tell you, he’s got no clue what he’s talking about. Sweden’s been going downhill severely in the last decades. Crime is rampant. Due to the migration crisis, Sweden tops all countries for sexual violence. In 2015 alone, 163,000 asylum seekers predominantly from Syria and Afghanistan, arriving into a country with a population of only 9 million. Everything is totally breaking down. You could never run a storefront precious metals dealership in Sweden like we do in Singapore.

Sweden is also practically cashless. Cash is rare as a payment mechanism, and oftentimes no longer accepted. I was very concerned about my family while we still lived in Sweden even though my Swedish bullion dealer business, Liberty Silver, didn’t have a physical shop but just sent parcel deliveries via insured registered mail.

In Singapore, you can see currency exchangers exchanging tens of thousands of dollars without any security glass or any protection whatsoever and it’s completely normal. A couple of months after I moved to Singapore, I walked past Raffles Place, in the Central Business District, and there was a currency exchanger in the process of counting cash in a counter, standing outside his booth with a currency counting machine. Just when I walked past, there was a gust of wind and a pile of bills were taken by the wind and this was on the busiest street of Singapore with lots of people walking by. The exchanger calmly walked around and picked up the 100 dollar notes like nothing had happened. I had to veer to the side not to step on any of them.

What does that tell you about the security in Singapore? It’s incredibly secure. No one would dream of doing anything. It’s a combination of no social exclusion and harsh penalties. There’s no unemployment whatsoever in Singapore. Every shop you walk into has a sign: “we are hiring”. There’s a shortage of labor. Social standards are thus good. At the same time, the punishments for violent crimes are extremely harsh and includes caning.

Michael Fay, a US citizen, was actually sentenced to six strokes of the cane in 1993 after vandalising cars. The US protested loudly that caning was excessive for a teenager who committed a non-violent crime. The US embassy pointed out that the damage to the cars he vandalised wasn’t permanent but the scars from the caning would leave permanent scars on the US citizen. Bill Clinton pressured Singapore to grand Mr. Fay clemency but Singapore stood its ground and carried out the sentence although reduced to four strokes. It’s a rather harsh punishment. Your buttocks are bared and after three stokes, deep cuts are usually opening with blood squirting out. The enforcer must use the full force of his arm.

So this is an example of the rule of law in Singapore and whether you like it or not, it seems to serve as a deterrent.

Defend your bullion from confiscation risks

Bullion in Singapore

Singapore is the very best country in the world for buying and storing precious metals.

There are no taxes on bullion whatsoever in Singapore. The Singaporean government has actually deregulated the precious metals market. There is no sales tax, no capital gains tax, no import or export taxes, no tariffs or restrictions, no inheritance tax, no gift tax, no dividend tax. Before 2012, there used to be GST (sales tax) on physical bullion, but as I mentioned they abolished that tax in 2012 as they want to encourage bullion dealers to establish in the country.

As we all know, Western countries introduce numerous invasive laws targeting privacy and that place the right to buy and store bullion confidentially under attack.

Importantly, there are no reporting requirements, whether domestically or internationally, when someone buys or stores precious metals in Singapore. Your bullion is your private business and we are under no obligation to report your holdings to anyone. If you buy and store bullion with us, we don’t report it to anyone. You can hold bullion completely confidentially in Singapore and that also applies to FATCA. There’s no FATCA reporting for BullionStar because we are not defined as a financial institution. We are keen on helping you defend your right to buy and store bullion confidentially without your local authorities prying into your bullion ownership.

The Singaporean government has chosen precious metals as a growth industry. Singapore is keen on creating a trade, transit and storage hub for precious metals in Singapore.

As regards safety, you can confidently walk into our storefront bullion retail store in central Singapore and buy bullion with cash, then hand carry your bullion out without being hassled due to the zero crime rate. This has the advantage that the insurance cost for bullion in Singapore is low. By the way, the sentence for robbery in Singapore is up to 20 years in prison and a minimum of six strokes of the cane.

In Singapore, property ownership rights are also very strong. Singapore doesn’t allow frivolous litigation. Remember that it’s less than 100 years since the US outlawed gold ownership. Western governments have a long history of stealing. It seems they can’t help themselves when it comes to stealing. Singapore has no history of any confiscations, seizures or anything like that.

So, storing bullion in Singapore is an insurance policy against government intervention, wealth confiscation and frivolous litigation.

What makes BullionStar unique is that we combine online usability with physical accessibility.

BullionStar.com is our website where you can buy, sell and store physically allocated and segregated bullion.

Buy & Store Bullion in Singapore

It’s very easy to get started with us. Other bullion dealers also say that it’s easy but then they nonetheless slap you with 7 steps and require you to send in documentation. Signing up for an account with us is a one page registration form. It takes less than a minute. Much easier than signing up for a Gmail account or booking a flight online.

There are no documentation requirements. We don’t force you to send us any documentation at all. You input an e-mail address, password, your address and select a PIN number. It takes, if you’re quick on the keyboard, 30 seconds, and placing an order takes another 20 seconds. You select the items to buy, you go to the checkout and submit your order. One page checkout. I think I speak for many of us in how unnecessarily complicated everyone makes their online interfaces. PayPal, booking a flight ticket, government agencies, banks. They try to trick you into different things you don’t want. Add insurance, add car rental etc.

It should be easy to buy and store gold. A lot of customers are genuinely surprised about how easy we make it. We get good feedback on how easy it is to deal and transact with us, and we have over 600 genuine Google reviews with an average of 4.8.

You can handle everything online 24/7. You can buy, sell, store, order physical withdrawal of your metals online and even audit your metals online.

Trust is very important in the bullion industry. If you trust as with your hard-earned savings, you have to be able to trust us. What I tell our customers is, don’t trust us. Do your own due diligence. Don’t take my word for it. Read up on us. Google us and do your own due diligence.

BullionStar Vault Storage

If you choose to buy and store bullion with us, it’s important to know that we have five different auditing methods. We employ the LBMA-approved auditor Bureau Veritas to do third-party audits on all customer holdings bi-annually. We have something called the Live Audit Report where everyone can anonymously check on their own and all other customers’ bullion holdings. Furthermore, we allow and encourage customers to walk-in to our bullion center in Singapore and do their own auditing of their own metal. If you choose to go to Singapore to audit your metals, you don’t even have to notify us beforehand. You can just show up and ask to audit your metals, and we facilitate this on the spot. We will bring out your metals from the vault to the meeting room. You can go through everything and compare your bars and coins against your records and have a look at your own metals. This auditing program it thus very comprehensive.

We also take photos of your bullion and upload these images to your account. As soon as you have settled your payment, we process the metals into vault storage and take pictures of the actual bullion so that you can compare the bar serial numbers with your invoice. If you then come to our bullion center to do a physical audit yourself, you can again check on the serial bar numbers and if you physically withdraw your bars, those are the exact bars you receive.

With us, you own specific products. Your bars are allocated with you holding the direct legal title to the physical metal.

You can of course have your products shipped to you at any time fully insured. Even though Singapore is the safest country in the world, we have full insurance protection with the largest specie underwriter in the world, XL Insurance, for all risks at full replacement value. You can download the insurance document online. What’s good is that as there’s virtually no crime in Singapore, it makes the storage premiums low. We charge 0.39% of the average value per annum for gold and 0.59% for silver which includes full insurance for all risks, and all handling and online access for your segregated and allocated gold, which is very competitive.

Just like you can physically audit your metals, you can also come in to our shop to physically withdraw your metals without any prior notification. You show up, present your ID and tell us that you want the metals now and we simply hand over the metals to you.

Walk-in Bullion Center in Singapore

We can do this as our vault is actually integrated into the same venue as our shop.

Our bullion center consists of a retail bullion shop, showroom and vault in one and the same venue truly making it a one-stop-shop for everything precious metals. Our shop used to be a bank branch and has an old style bank vault built into it. The vault was built several decades ago and I believe the reason why the vault is still there is because of its sheer impenetrability. It’s 30 inches thick, constructed from concrete and full of steel bars in the walls.

This is a unique shop. Nowhere else in the world do you have the flexibility of buying, selling, storing, depositing, valuing, physically auditing and physically withdrawing metals in one and the same storefront place without any prior notification.

You can just walk in, we have 20 showcase displays full of precious metals. So unlike many other dealers, we don’t hide online on the internet and we believe this combination is quite unique.

Singapore is a long way from the US and you don’t need to visit us to buy and store bullion with us. You can handle everything online. But if you ever go to Asia, I highly recommend that you pay us a visit to have a look. Whether you’re a customer or not as it’s a pretty cool concept.

BullionStar cash on account

BullionStar Cash & Bullion Account

Another unique feature that we offer is our BullionStar account. If you’re considering opening an offshore account, we have the ideal solution for that. It’s becoming more and more difficult to open bank accounts abroad. This is true generally but especially true for US customers.

With a BullionStar account, you can hold not only bullion on your account but also cash. You can hold US Dollars, Euros and Singapore Dollars on the account. It works like a bank account but we are not a bank. This is what is called a stored value facility and is under the same regulations as e.g. how PayPal holds client money.

As we don’t operate under the risky fractionally reserved banking system, this is much safer than a bank account.

It makes it very easy to trade physical bullion, and makes it easy to average in or out of positions.

Funds can be held indefinitely on the account and can be used towards purchasing bullion at any time or you can withdraw your funds at any time.

BullionStar Gold & Silver Bars

BullionStar Gold & Silver Bars are the world’s first and only gold & silver bar traded without any spread without the buy and sell price. This means that at any given point in time, the buy price is the same as the sell price.

What’s the hook you might ask. Well, the initial price premium is slightly higher compared to the spot price of the metal than for other bars of comparable price, but instead there is no spread so you don’t have trading cost whatsoever thereafter.

The bars are also very aesthetically attractive and if you haven’t been yet, come by our booth 425 to check them out.

The BullionStar gold bar is produced by the Swiss refiner Argor-Heraeus and there’s an inscription on the back side of the bar stating “Money since 4,000 B.C.” matching our ideological belief that gold is money.

The BullionStar silver bar is produced by the renowned German refiner Heraeus.

These bars have become tremendously popular as they eliminate the often large spreads faced by physical silver investors.

BullionStar Offshore Bullion Solutions in Summary

BullionStar was set up for the purpose of international diversification, and to provide confidential offshore bullion storage while being very accessible and transparent for the customer him/herself.

Even though we have a lot of local Singaporean customers given our local shop, it was, to a large degree, set up to cater to offshore bullion protection specifically.

There are no taxes on bullion in Singapore and there are no reporting requirements whether locally or internationally. We treat your holdings with full confidentiality although we are very transparent to our customers.

BullionStar is unique in that we combine online usability with ease of registration and ease of online trading coupled with the accessibility of a physical bullion shop and vault in central Singapore. It’s a one-minute process to sign up and place your first order with us.

With your BullionStar account, you can hold both bullion and cash funds in US Dollars, Euros and Singapore dollars on the same account, which is very convenient as it takes out the banks as the middle man between you and us.

When you hold metal with us, it’s your metal – fully allocated and segregated. We deal with physical metals only. With us, you specifically choose which items you buy. You place an order on e.g. a 1 oz PAMP gold bar. We upload pictures of the specific gold bar that you own to your account. We input the serial bar numbers on your invoice. We store that specific bar for you specifically and you have the legal title to that gold bar.

You can then follow your holdings online in real-time and when you prefer, you can sell or physically withdraw (or audit) your 1 oz gold bar. When you audit or withdraw your gold bar, you are given the exact same gold bar with the exact same serial number as you were allocated when you bought it.

By introducing the BullionStar Gold & Silver Bars which can be traded without a spread between the buy and sell price, we’ve solved the problem of large premiums that physical bullion investors and savers were facing.

And we have the most competitive storage fees in the industry.

But don’t take my word for it, check us out online and while Singapore is a long way from here, if you’re ever around in Southeast Asia, come and visit us at 45 New Bridge Road in Singapore. Our booth number is 425 where we have some awesome metal on display and also a very cool video game, the QE defender, where the objective is to obstruct the Fed, ECB and Bank of Japan from dropping money into banks.

Thank you!

Wrap-Up of BullionStar’s visit to FreedomFest 2016 in Las Vegas

Saturday July 16 wrapped up BullionStar's attendance at its first FreedomFest conference and convention in Las Vegas, Nevada. During the event from Wednesday July 13 through to the Saturday afternoon, the BullionStar team interacted with a wide-range of interesting event attendees, discussing topics ranging from the role of precious metals in investors portfolios, to the safety and security of having offshore storage of investment gold and silver at BullionStar's vault facility in Singapore.

Prospective US customers were interested in the fact that there are no sales or other taxes on bullion in Singapore, no reporting requirements on bullion, and that Singapore is a safe and stable political jurisdiction which upholds property ownership rights and where the Singaporean government actively supports the gold sector. On the topic of specific vaulting infrastructure, potential customers learned that BullionStar's "My Vault" facility provides secure, insured, allocated and segregated bullion storage with 24/7 on-line access to your holdings, using multiple levels of auditing, and that you can hold both bullion and cash on your BullionStar account, thereby using your BullionStar account as a real alternative to a bank account in Singapore.

BullionStar Grand Prize Draw - Silver Bars

Throughout the 3 day convention, attendees could enter a draw at the BullionStar stand for a chance to win one of three substantial silver bar prizes. Additionally, everyone who entered the draw received a free 1/10 troy oz silver coin of .999 purity produced by Golden State Mint, a coin with a design based on the Walking Liberty silver half-dollar historically issued by the US Mint.

The prize draw for the BullionStar silver bars took place on Saturday afternoon as the conference was wrapping up. First prize in the competition was a BullionStar 1 kg silver bar worth nearly US $800. BullionStar silver bars are 99.99% pure silver bars with a high-lustre finish produced by German refinery Heraeus on behalf of BullionStar. Second price was a 10 troy oz Heraeus minted silver bar, produced by Heraeus at its refinery in Hanau, Germany, while third prize was a 5 troy oz Heraeus minted silver bar.

Luke Chua, BullionStar COO and Torgny Persson, BullionStar CEO sum up their impressions of FreedomFest 2016

One of the major themes resonating at this year's FreedomFest event appeared to be that the founding principles of the US such as property ownership rights, personal liberty, and freedom of speech are being eroded, and that the government is encroaching on personal privacy. These themes were also picked up by Rand Paul's keynote speech noted in a previous BullionStar dispatch. A common talking point for people who came to the BullionStar stand during FreedomFest was the worldwide banking reporting obligations imposed on banks by the US Foreign Account Tax Compliance Act (FATCA) rules and regulations.

Beyond the Frozen Monopoly - Third Party Candidates

Given the current media focus on Republican and Democratic candidates in the upcoming 2016 US presidential election, US and international media often forget that there are other parties’ candidate nominees running in the US presidential race such as Gary Johnson of the Libertarian Party and Jill Stein of the Green Party. And so FreedomFest was eye-opening in that it was a reminder that other political parties do exist in the US apart from these two powerful incumbent parties, and that there is plenty of political thinking in the US outside the mainstream media's narrowly defined consensus.

In a Reason.TV interview conducted at FreedomFest with Johnson, former governor of New Mexico, and his running mate for vice-president, William Weld, former Governor of Massachusetts, Weld opened the interview with the interesting perspective that there is a “frozen monopoly of the two parties that has frozen a lot of people's thinking in place,… And they think, 'I have to be a right-winger,' or, 'I have to be a left-winger.' They're not thinking, 'What do I think?”

Steve Forbes - Gold Keeps its Intrinsic Value

During another interview at the convention, Steve Forbes, editor-in-chief of Forbes Magazine, posed a very timely and interesting question, asking not which way the Fed will move on interest rates but “Why is the Federal Reserve manipulating interest rates in the first place?”. Forbes highlighted that interest rates are the cost of borrowing money and rewarding lenders, and that “by manipulating interest rates, the Fed has deformed credit markets”.

On the subject of gold, Forbes said that “gold is an insurance policy against turmoil and against government’s mis-behaviour towards the currency” and he underscored that it was important to remember that "gold keeps its intrinsic value", and that the price changes in gold are just people’s changing perceptions of the value of currencies. No doubt most BullionStar readers would tend to agree with these sentiments.

That wraps up our coverage of the FreedomFest 2016 event. We hope that these insights have been helpful, and we look forward to providing readers with updates at future events around the world that BullionStar may attend.

How Safe is your Gold?” – BullionStar CEO’s speech at FreedomFest

The first full day of the FreedomFest conference took place 14 July in Las Vegas, USA, an event at which BullionStar is attending and exhibiting. Conference proceedings took the form of general speaker and panel sessions in a large auditorium in the morning, and multiple breakout sessions of speakers and panel discussions in the afternoon. Morning events included the well-attended "The Big Bull vs Bear Debate", a panel session of well-known investment commentators such as Alexander Green and Peter Schiff. Lunchtime speeches included a keynote speech by former supreme court judge and constitutional expert Andrew Napolitano who discussed the topic 'Do We still have a Constitution?".

How Safe is Your Gold?

In an afternoon speakers session, BullionStar CEO Torgny Persson presented on and discussed the topic 'How Safe is Your Gold?".

Defend your bullion from confiscation risks

In his presentation, the BullionStar CEO gave the audience an insightful introduction into how the current global monetary system is based on the fraudulent concept of central banks monetizing debt and debasing currencies, and how commercial banks dilute money supply even more than central banks by creating money out of thin air via their lending practices. Mr Persson highlighted how a fully gold backed US Dollar would require a gold price multiple times higher than the current trading price, and the exorbitant privilege that the US Dollar, for now, retains as global reserve currency. He then illustrated and discussed the purposes and characteristics of money, and the degree to which fiat paper currency and gold fulfill these characteristics.

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BullionStar CEO Torgny Persson speaking on the topic "How Safe is Your Gold?"

The discussion then focused on how Singapore is the world's safest place in which to store bullion, due to a number of factors such as the Singaporean government's support for the bullion industry,  the economic and political stability of the city-state, and the near zero crime rate. Further advantages of storing precious metals in Singapore include the lack of sales and other taxes, the fact that there are no reporting requirements to report bullion transactions or holdings to any authorities either in Singapore or worldwide.

The discussion wrapped up with a Q & A from the audience covering topics such as how to transfer in existing bullion holdings from the US to Singapore, generational wealth transfers of bullion holdings, how Singapore would fare off if the US Dollar collapsed, and storage costs of gold and silver using BullionStar's vault storage services.

Exhibition Stand

BullionStar's stand in the exhibition area of FreedomFest near the entrance to the conference auditoriums proved popular with attendees throughout the day, especially in the breaks between speaker and panel debate sessions. BullionStar staff manned the booth, fielding questions on a wide spectrum of bullion and bullion storage related topics from a diverse selection of attendees. BullionStar's decision that all staff members would wear tailored gold suits (see below) proved a popular talking point among attendees. During some downtime we got to chat with fellow exhibitors and media exhibitors in the hall such as Kitco's Daniela Cambone and GoldMoney's Josh Crumb.

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Luke Chua, BullionStar COO and Torgny Persson, BullionStar CEO prepare for interview camera

The FreedomFest conference continues on 15 July with its 2nd full day or speakers and presentations. Check back at the Inside BullionStar blog for further updates.