UOB Silver Savings Account (SSA)

It has really been some time since I last wrote any post. A lot of things has happened since then, but in short, things haven’t been good the entire time. To have a brief update, I lost my previous job, was jobless for a few months, managed to find another job at another bank, and am now currently trying to make sense and adapt to the current work. The good thing about my new work is that it is finally a permanent role, but there is quite a fair bit of negativity and significantly heavier workload. Even though I have been here for a couple of months, but I am still adjusting to the work here. Every night I return home exhausted, finding myself very tired out and almost unable to do anything else. However, this is not the main aim of this post, I shall be talking about something else I decided to invest in, and as the title of the post suggests, it is the UOB Silver Savings Account (SSA).

After looking at the Gold ETF last year, I have been looking at other ways of investing in precious metals and alternative investments. I found it in the UOB Gold Savings Account (GSA) and UOB Silver Savings Account (SSA). As I have already invested in gold ETF, I am primarily more interested in the UOB Silver Savings Account. For more information you can refer to the link here http://www.uob.com.sg/personal/invest/goldsilver/overview.page. Note that I am not paid for advertising this. This was something which I personally invest in and hence, thought to share about it. Some of the basic characteristics of the account are as follows:

  • Ability to buy and sell silver in SGD without physical delivery
  • Minimum initial purchase of 10 ounces of silver
  • Minimum purchase each transaction of 10 ounces of silver
  • Perform transactions within the time of Monday to Friday, from 8am to 11pm
  • Annual administrative fee of as low as 0.2 ounces per month or 0.375% on the highest balance per month, whichever is higher
  • $30 plus GST levied for a/c closure within 6 months

Since the end of last year, I have been looking at alternative investments to invest in as the the equity markets were at an all time high. Fast forward a year later, and yet again, equity markets are at all time highs and bitcoin has crazy valuation. My gold etf purchase is still in the green and I am still holding onto them. I will only sell once I see a financial crisis unfolding. Not sure when, but it will happen eventually. Yet again, I am looking for alternatives. I have not been buying equities much this year as I got distracted by trading (and burnt in the process). My though process is still to bulk buy during financial crisis. As such, my equity investments will be quite limited. At the moment, I am looking for alternatives, and since gold etf the last year, I have set my sights on silver.

Silver is the Brother of gold. During crisis, as gold price spikes, silver prices follow as well, but doesn’t have the sharp movements as gold price. It actually has more industrial use rather than as a safe haven. However, I still think it’s a good idea to diversify my precious metals holdings. As Singapore does not have silver ETFs, and I do not plan to hold physical silver, I have been looking into alternative solutions for investing in silver. I have looked at silver ETFs listed in the US markets but they are mostly synthetically made and based on futures rather than spot silver prices. Furthermore, those which I have looked at are mainly leveraged funds which are not ideal. Hence, my foray into the silver savings account by UOB. I have been buying in rounds of 10 ounces over the past 2 months and I hope to build a sizeable amount by the end of the year. Typically, following the cyclicality of precious metals, year ends tend to be the price lows hence, I’m buying more now.

The silver savings account is not perfect though, and I see some issues with it, but it will do for now. The issues are :

– To me, it is like an unlevered CFD for silver. You pay for it in cash and you are not able to take physical delivery of it.

– There is a big spread.

– Price movements are not very fluid. They are fixed at multiple times within the trading time by traders.

Despite its issues, this will work for me as a silver investment for now. What are your thoughts on this? Let me know in the comments section regarding this.

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One way of investing in Gold – SPDR Gold Shares [O87]

***Please note that this does not constitute a stock recommendation for buy or sell. This is purely my own analysis and is to be taken as my own personal opinion and not to be taken as correct. Kindly do your own diligence in purchasing stocks.

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Some shiny gold bars

Nearing the end of the year for 2016, I have been reviewing my CPF account and find that it is not growing as quick as I would like it to be. Despite the Dow Jones nearing the psychological barrier of 20,000 and the S&P hitting new highs, the STI is pretty flat which depicts the bleak outlook of the Singapore economy. As my ordinary account (OA) is above the amount of $20,000, I have been looking for opportunities to see if I am able to make my CPF money work harder. For those who are unaware, the Singapore government has decided to give 1% more for the first $60,000 in the CPF account, with only the first $20,000 in the OA applicable for it. In order words, the first $20,000 will earn 3.5%, while any excess amount in the OA will only earn you 2.5%. As the first $20,000 can’t be used for investments anyway, I am looking out for any available opportunities in the market which will allow me to earn >2.5% per annum. Due to various rules restricting the investments allowed to be made, there are not many options left. In addition, due to my current vested position in DBS, I do not have much money left allocated for stocks and bond investment. As such, I turn to the other option left, which is the amount allocated for gold. Furthermore, with such high valuations in the foreign stock markets and uncertainty in the near future, I believe that gold investing warrants a second look. Thus, I began to look at SPDR gold shares (O87). In addition, only 10% of the monies in the OA is allowed to be invested in gold.

SPDR Gold Shares is a gold only ETF, with its mandate clearly stated out on the website – “for the Shares to reflect the performance of the price of gold bullion, less the Trust’s expenses.” It is a trust which holds gold bullion and from time to time issues shares in baskets in exchange for deposits of gold and distributes gold in connection with the redemption of baskets (in other words an open ETF, however for retail investors there is no need to create baskets as the investment outlay is very high).

The general information on it are as follows (taken from SPDR Gold website below):

Sponsor : World Gold Trust Services, LLC

Trustee : BNY Mellon Asset Servicing

Custodian : HSBC Bank Plc

Exchange Listed : SGX, NYSE, BMV, TSE & SEHK

Board Lot size : 10 shares

Trading currency : USD

Ounces of Gold: 26,509,820.12

No. of shares: 277,300,000 (as at 31/12/2016) [assuming in circulation for all the exchanges]

Gold Spot Price: US$1,152.06 (as at 31/12/2016)

Gold Measurement Method: LBMA Gold Price

Net Expense Ratio: 0.40% of the daily NAV for Sponsor Fees, payable by the Trust

Website: http://www.spdrgoldshares.com/

I have briefly skimmed through the prospectus and website and this is a relatively simple and straightforward Gold ETF. It has a trust structure which holds gold. As mentioned above, the NAV will just track the value of the gold. As and when necessarily, they will sell the gold in the vault to pay for the expenses above and whenever available, gold will be added or removed when authorized participants add new baskets to the ETF or when they are redeemed. Base on my understanding, the gold are stored in an allocated account, and only transferred to an unallocated account to facilitate gold transactions. According to bullionvault.com, allocated gold is gold owned outright by an investor and is stored, under a safekeeping or custody arrangement, in a professional bullion vault. On the other hand, unallocated gold is the property of the bank, and it is not protected from a bank’s insolvency. The number of shares provided in their website and above are freely floated in all the exchanges as confirmed in an email inquiry I sent them, but they are also not sure how many are available in SGX. I am unsure of how it actually works but I suppose there is not much impact as the number of shares I buy are quite minimal in the bigger scheme of things.

In the last week of 2016, I have bought 20 shares of SPDR gold shares at $108.39 and it has increased by approximately 1% as of the end of 2016. Previously when I started investing, I was under the influence of Warren Buffet’s believe that gold is just a piece of rock that doesn’t yield anything. However ever since starting trading in June, I have started to appreciate the value of gold and thus leading to my decision to buy the gold ETF. So here are a couple reasons why I bought some before the year end.

Rollercoaster 2016 year and uncertainty ahead

2016 has been an eventful year for the financial markets and the price of gold has risen quite a far bit throughout the year due to its image as a safe haven during uncertain times and fallen as well when risk appetite increased. With many equity indexes ending up for the year and making new record highs, it may seem odd for me to buy gold. “Be fearful when everyone is greedy and greedy when everyone is fearful”. Keeping Warren Buffet’s words in mind, this is a time to be fearful as records are broken and everyone is having a rosy picture ahead when there hasn’t been much global growth. There is quite a bit of uncertainty in terms of what Trump’s economic reform plans are, the storm brewing in Europe, the plans for Brexit. With this number of events filled with uncertainty just on the horizon, it is difficult to say that there is no problem and financial markets are doing well. As such, this is a reason to buy gold now and sell them during the crisis time when the value of it is higher. This is assuming that people still view gold as a safe haven holds true.

Inflation hedge 

There is a great deal of expectation that Trump taking office will generate inflation. There are some people that view gold is a good hedge against inflation, and others who think otherwise. There also some who say that measuring inflation using CPI is a flawed approach and gold is a good hedge against inflation if not measured using CPI. These are mixed views and I have no idea which is correct and which is not. To me, I suppose the most important thing is people’s impression and sentiment of gold. The value that people place in gold. I think that to many people, gold holds an important role as a store of value, and that is good enough for me to buy it. I may not think so, but it does not matter as I am but a small fish swimming in the huge financial ocean. I will swim with the tide. As such, if it is a store of value as people ascribe it to be, I believe that gold will be somewhat a hedge against inflation. Whether it is or not, I do not know, but as long as people’s impression of gold holds, it should be okay to hold some gold.

Appreciation of USD/SGD

The trump rally and the mention of 3 rate hikes by the Fed in 2017 has resulted in a considerable run up of USD against all the other currencies. Also, during the presidential election campaign, Trump has said that the Trans Pacific Partnership Agreement was a bad idea. If the USA is not going to ratify it, it spell big problems for the Singapore economy. Furthermore, will tepid global economic growth, Singapore is not spared from it either as it is an export dependent economy. As such, there is much headwind for the SGD and thus, buying gold which is denominated in USD presents a greater value when I sell it to receive SGD in the future.

As such, I have decided to hold them for at least a year, but I am confident that I will be able to offload them during the year at a profit. I just need to overcome a return rate of 2.5%+2%=4.5% in order to do better than the CPF return rate. The additional 2% is to account for transaction costs. If the NAV hits $150, I will sell them immediately. I believe that gold is more of a strategic move of allocating money in the short term and I still don’t think that it should be held over a long time horizon. What are your thoughts on this? Let me know what you think in the comment box below.