Summary:
On the Breakfast Club, 938 Live interviews Richard Khoo, Executive Vice President of Singapore Precious Metals Exchange on their new bullion accumulation program.
Transcript:
Host:
If you’ve always wanted to invest in gold but didn’t have the liquidity to buy in large amounts, the newly introduced a physical gold and silver accumulation program is definitely worth a look.
Just introduced by the Singapore Precious Metals Exchange yesterday, it allows customers to invest in bullion for as little as $60 for one gram of gold and $10 for 10 grams of silver. It’s the world’s first physical precious metals exchange with peer-to-peer bullion trading capabilities, unlike existing paperback gold and silver savings accounts. The SGPMX bullion accumulation program allows you to buy physical bullion. Joining us today is Richard Khoo, Executive Vice President of the Singapore Precious Metals Exchange.
Good morning Richard.
Richard Khoo:
Good morning.
Host:
Now first of all, gold and silver has been talked about a lot lately. I’ve just found out that the price of silver is actually fallen in the last three years but people still continue to buy. Tell us why.
Richard:
Well basically I think be it silver or gold, you know especially here in Asia, even from the time of birth, children and babies do get gold anklets. At weddings you know tradition. So it is something where for hundreds, thousands of years it is something which holds intrinsic value. By large, the world basically acknowledges that and gold and silver continues to be a an investment product.
Host:
But why an investment product? I mean, why would anyone really want to have that other than something that’s traditional?
Richard:
Let’s say in terms of, for example, let’s take the silver dollar which is an ounce of silver dollar. What it used to be is to be benchmarked against the one dollar note. Makes it easier for people to carry around. Now, if you had kept that one silver dollar coin and a $1.00 note in a drawer and bring it out again 50 years later or rather now, that one dollar note can still buy you a $1.00 item. But that one silver dollar of one ounce today could basically buy you $20 to $25 worth of products. It’s still the same. Basically, it’s not that the price of that silver has gone up, but it’s the value of the dollar that has come down. So that’s just a simple analogy of how the intrinsic value has been retained.
Host:
How are gold investment currently governed in Singapore?
Richard:
Basically because the way how the model works is that we have a retail store. We are able to provide the purchase for the sale of physical gold. So we do not fall into the area of derivative products, paperback and directives options, futures. So we are governed strictly in full compliance of the Singapore Companies Act.
Host:
What are the risks and investing in gold and silver? Lots has been said in recent years including the fact that actually each of them has very different investment characteristics.
Richard:
Well basically in terms of risk, let’s take for example the price of gold has a few years back hit a high of 1900, and it is now hovering around in the region of about $1,300. I would say in terms of the risk, it would be more towards the angle of the price fluctuation of the market price of gold. But here in terms of the accumulation program, which we have introduced. You see in Singapore or in anywhere in the world, there are many opportunities of the man on the street being able to or anyone from all walks of life being able to start a savings program or plan through many methods, many companies, many channels. What we are now introducing is the ability for the mass market to purchase gold or silver, let’s say gold, in quantities of 1 gram, 2 grams, 3 grams, in multiples of that. Whereas previously you would need to, let’s say, purchase a 10 gram bar or a 50 gram bar. So for example, a 50 gram bar would cost, say $3,000, but the ability for us to use this Valcambi Combi Bar, which is kind of a perforated bar you can just peel it off with their lines, and you can peel it off into one gram quantum. So it is then made affordable then.
Let me take you back to what I mentioned earlier where you are able to because what we stand for is every investment dollar that you put in for one gram, it is backed up by physical gold of 1 gram. So if you want to then purchase 3 grams for one child, and you have three children, there will be 9 grams. Now if you had bought a 10 gram bar, how do you peel that one gram balance? But whereas through this method, yes, the normal man on the street is able to determine. And then with the program that we have now through eNets and also through Giro, they can put in a standing instruction. So every month 3 grams is deducted for one child, 9 grams equivalent for three children if you want to. And it can continue month after month. Every time your salary comes in, it is just automatically deducted until such time you decide, “I would like to change. I want to move it down to two grams each, or I want to bring it up to even four grams.
Host:
So this is designed really for the retail investor?
Richard:
This is designed for the mass market and it gives them the flexibility to adjust as in how much they can put aside. They can, in a disciplined way, set aside for investment in gold.
Host:
But now having these physical pieces of gold, what can you do with them, really, if you want to? Can you take them out of the exchange?
Richard:
Take out 1 gram and buy a loaf of bread?
Host:
Well, that’s legal tender but it’s not right? It’s not legal tender?
Richard:
Basically, the idea is here that, based on the four pillars of our business model where we are looking at providing a procurement, logistics, the storage and the trading platform in terms of SGPMX–I will come to that. What we are offering the clients is that when you purchase your 3 grams, 4 grams of gold, it is to also provide you the facility of the service–to provide you storage. The storage facilities that we have is at two locations one is at a Singapore Freeport at Changi and the other is at Certis Cisco at Paya Lebar. So these are safe secure vaults. That your purchase of the few grams of gold is actually stored and is also insured.
So back to your scenario, you make the purchase and you can choose the option for it to be delivered to your home. But once it gets out of the system, it is then considered circulated–under circulation. Whereas as long as it is kept with us, it is uncirculated. So if you’re talking about if gold is then taken out–for it to come back into the system, it has to be assayed, it has to be verified that the one gram is still 1 gram. You know three gram is still three grams and not 2.5 grams. So of course there will be discounts, there will be so-called discounts to it, but that will have to be sent to the mint for it to be assayed. Then that is to be determined by the mint. But coming back to this, the way that we are looking at promoting this accumulation program for the mid term to long-term purposes of an investment product or an alternative investment product.
Host:
So if you want to cash out on this, so let’s say you’ve accumulated quite an amount, how do you cash out?
Richard:
Basically then let’s say the client or the investor can then put up on our trading platform to offer, say for example, his 50 gram for sale at a price determined by him. So it will then be a willing buyer-willing seller.
Host:
So this is what you mean by the peer-to-peer trading?
Richard:
The peer-to-peer trading is the fourth pillar which is our trading platform. You can determine your own price. Provided there is a buyer that says, “I will buy from you at that price”. We have 10 mints supporting us. If I can buy from the mint at say, for example, $3,200 for 50 gram and you are offering it at $3,100, I might consider. You know I might go on the trading platform and buy myself, because I am assured it is an uncirculated bar or bullion which is in a secured storage and it’s as good as new so to speak.
Host:
So Richard, before we went to the break, we were talking about putting your gold on sale. How do we tell people when this thing is ready for them to take a look at? And whether they are ready to bid at my price?
Richard:
On our trading platform where you can actually access it on www.sgpmx.com. Let’s say you would like to put up your gold.
Host:
So I’ll have to open an account?
Richard:
Yes. It is very easy to open an account. In fact, before that when you intend to make a purchase, it is very simple, just open an account online with your e-mail address as your username. And then just very few questions and you’re there.
So once the account is open and you have made your purchase and you have accumulated your various gold bars and so forth, now when the time comes for you to offer that up and you say it’s time for me to liquidate some of it and I would like to put it up onto the trading platform and offer it for sale, it is very simple. For a minimum of US $1,000 of value of your accumulated gold, you can then put it up for sale at a price you so decide. Of course, you would know if you priced it too low, everyone will grab it. If you priced it too high, you’re not going to get any buyers. So it’s obvious. So the price will be determined by itself through so-called market forces. You know how many sellers, how many buyers would then come in right and then purchase it from you. The good thing here is through our program or through our structure, the next guy or lady that makes the purchase of your gold basically can again select for it to be stored in our storage services, and then there’s no physical movement of the gold, which was previously owned by you, now moves to her the ownership. And the same benefits is then extended to her in terms of secure vault, secure storage, insurance and everything; it’s status quo.
Host:
Let’s talk about bars versus coins–do you have a view on that?
Richard:
Sometimes it’s still personal preference some they they like it on a Maple Leaf.
Host:
It’s about aesthetics rather than money.
Richard:
In fact like I said, there are 10 mints that are supplying here varying from Perth Mints to Valcambi. Some comes with this design or that design; it’s more of preference. Some will go for the American Eagle.
Host:
In terms of what goes for higher prices, there’s no bearing on that?
Richard:
Again, it will then be market forces on what option, what denomination that you are putting up for sale.
Host:
Well, once again if you’re thinking of maybe moving into the gold market and you suddenly want to look at something that you can build slowly and it’s not gonna be too much of a hassle for you, you can always look at the Singapore Precious Metals Exchange. They’ve opened this peer-to-peer program and you can of course just look at that. Richard can we go to a website very quickly?
Richard:
Yes, it is already available. Just log onto www.sgpmx.com and you’re there. You can go into the retail store and see the various variety of bullions that we have–almost 200 of them in various denominations and so forth.
Host:
Alright. Richard Khoo, Executive Vice President from the Singapore Precious Metals Exchange–thanks for joining us.
Source: 938 Live, The Breakfast Club, April 24, 2014