Summary:
Owning gold has transcended time and remain a timeless practice.
Today, it is seen as a hedge against inflation. But how do we own gold today, where do we store it and how do we trade it?
Plus, how do we decipher the authenticity of gold?
Ryan Huang finds out more from Victor Foo, Chief Executive Officer & Founder, Singapore Precious Metals Exchange (SGPMX) – a private platform that allows investors to buy, store and trade metals such as gold from anywhere in the world.
Transcript:
Ryan:
Welcome to breakfast show.
In these uncertain economic times, gold standards are reliable hedge against inflation. And today, we are going to be chatting about how to actually own and trade gold nowadays, how does one buy and store gold in this day and age, and also how has the landscape of trading gold changed in recent times? And perhaps the most important, how can you tell if the gold you have is the real deal or not?
So let’s explore the simple ins and outs of owning and trading gold with Victor Foo, CEO and founder of Singapore Precious Metals Exchange, a platform that allows investors to buy, store and trade metals such as gold from anywhere in the world.
Good morning, Victor. Thanks for joining us.
Victor:
Good morning, Ryan, thanks for having me.
Ryan:
There’s lots to talk about. It’s very interesting how all this got started. You’re telling me this all began in 2009, and there’s a story behind it?
Victor:
Yes. As you know before ’09 September, I remember very clearly 2008, when the Lehman basically fell, that created a big chaos globally. I think most people were affected. Me, especially, coming from financial services into the insurance broking industry; I was heavily diversified into stocks in the US… banks in the US. Guess what? The two big giants in ‘08 named the AIG and Citibank, fell to an all time low of $1.00.
Ryan:
That’s right, I remember those days.
Victor:
So having gone through that experience in ‘09, when I thought of starting, this was merely an idea for me to recover or to restrategize my own portfolio right. Hence, over the last decade is evolved into a global business. But the foundation of how I started this was learning from the ‘08 experience. I knew that there was no way I would go back to build my wealth backed by things that I cannot see, touch or feel. So I believe that every portfolio should have an intrinsic foundation.
Ryan:
Yeah, those were the days when a lot was disrupted in the finance landscape right.
So you’re now running a metals exchange, and people can trade and buy gold on it as well.
What’s the difference between before you started? People could already do it–buying contracts.
Victor:
Yes, good question. Even today, most, if not every exchange globally that trades from 6:00 AM to 5:00 AM globally are still derivative exchanges, which means you are merely buying a futures contract from a willing buyer, willing seller structure.
How we’ve done it is the same. However, we instilled a basic fundamental where money started.
If you go back to 1970 before the end of Bretton Woods. An ounce of silver then was trading at about a dollar. Maybe $0.50 more because of premium to make a silver coin. But at the same time, if I took that silver dollar over the counter to a bank, I could exchange it for a paper note which is a dollar US. Today, that dollar US is still in circulation. So is that silver coin made by American mint. But the intrinsic value of that coin today is $25 before premium. Whereas, that dollar is still a dollar. So had I kept the dollar coin in the box, locked it up for the last 50 years, today I open up that drawer and the coin is still there, that paper dollar is still there. But when I cash it out today, the dollar is still a dollar. But that one ounce of silver I could sell it for $25.00. So did the silver or gold price go up? Or did our money devalue?
Ryan:
That is one big reason why people like to go into things like gold cause not just is it seen as a store of value, sometimes it can appreciate, especially when you go through what we’re now seeing a lot of uncertainty in the economy, and of course what’s happening out there.
How has the ownership of gold evolved in the past few years? Are you seeing more people go to your exchange?
Victor:
So having a physical backed exchange that is backed by 100%, one for one which means nothing sits on balance sheet. What is yours is yours; we are merely a custodian. So then it is not only local but a global following from all over the world where people have come to us for one reason. Because they know if all fails, that physical coin, bar or wafer is still tagged to them, where they actually have the option to take it home or alternatively store with us in our storage facilities.
That has been our USP, where we are able to attract people from all walks of life.
Ryan:
OK, so let’s expand on that. You mentioned store at your facility. What does your facility look like? How do you store it?
Victor:
For those of you who have not experienced, we operate out of the Freeport in Changi. It’s a state-of-the-art high security building that was built 10 years ago for the purpose of storage of expensive items. So we run the bullion part where there are multiple tenants. People also store wines, art, watches, jewellery. I always say we work in the dungeon in the basement because of the weight right.
So that idea evolve not only in Singapore, because then when we started in ’09, there was GST payable for precious metals. So none of our customers were willing to pay an additional percentage to invest.
So by operating in a 0% tax warehouse, which is secured, we are able to give a better pricing to our clients, not only in Singapore, but globally.
Since then we’ve evolved to expand our storage, not only in Singapore, but also in Hong Kong and in Zurich as well.
Ryan:
Yeah, so you mentioned you’re attracting interests, not just from the local retail crop, also institutional investors as well.
What you offer them terms of training schemes and also some unique features your exchange gives?
Victor:
Today when you buy anything the world people who buy in large volumes get the better price. It’s an unfair value proposition.
But we were able to segmentize our business and come to a reality that we could provide the same pricing for a person who buys $1,000,000 versus a person who buys $100. But in the real terms in the outside world, you can’t do that.
So what we did was because we had physical gold that has been owned and traded by clients, we were able to provide two platforms.
So today we have our main exchange, which allows people to trade in full bars or coins–so you have kilo of gold you can sell it at the market price.
But for people who could not buy or afford a kilo gold–today is a kilo gold is trading about US$65,000–most people can’t.
So what we did about six years ago is we created a fractionalize platform where actually this demand came from our high net worth clients who wanted to dollar cost average their selling.
So digitally, we created a platform where you could fractionalize a kilo of gold into small bytes, into fractions, as little as US 1 cent. So today the common customer who could not afford a kilo could actually buy a fraction of that gold from you, let’s say, Ryan, and you could sell it to him at the market price.
This creates a very fair playing field where regardless of your affordability, you can now trade gold at the best price.
Ryan:
Yeah, so you can in that way make it more accessible to retail investors. You’re almost fractionalizing it, making it more digestible in terms of the quantum as well.
So you store a lot of gold at your exchange, Victor. How do you figure out what is authentic?
Do you face any changes on the front trying to make sure everything that goes through your doors is the real thing?
Victor:
Yes, it’s very important.
So what we did from day one to ensure the provenance or the integrity of the gold that’s traded or stored with us, operating from where we are which is a licensed warehouse which is monitored and secured by Singapore Customs and the security there, we ensured that every single piece that was shipped to Singapore, or any of our vaults globally, came only directly from the refiners and suppliers only.
Which means we don’t deal with the secondary market or gold in civil debts; already been circulated. So having that direct supply chain into our ecosystem gives the assurance not only of the authenticity and it also enhances the liquidity. Because today many people want to cash out gold and silver–it’s all time high, You as the own buyer would be worried–am I buying the real thing? So having that whole ecosystem in place from day one has given us that advantage.
Ryan:
Of course, if you look at where gold prices have been going these days, it’s quite tempting to say, hey is it going to higher?
So you’re in the business for so long. What’s your take? Where are gold places going from here.
Victor:
I’ve been watching gold price for as low as below $1,002 up to where was today. The easy analogy is this. As I mentioned earlier but that one ounce of silver and a dollar note right. The seemingly increase of prices are actually influenced by many factors as you know. There’s geopolitical, there is inflation, there’s interest rates, but for the layman on the street to me it is very simple. The higher the prices of commodities, for say, not only gold, is actually the eroding of our money. I always say when we were in school we could go to school with $0.20. Today, my kids struggle with $2.00.
Ryan:
Yeah, times have changed, and of course we can now perhaps talk about how someone who’s interested to start this journey this gold trading journey.
What would you say is the best way to get started? What advice would you give for someone who’s new to gold investment?
Victor:
I think #1 is to understand what is your risk appetite. Everybody is different. I don’t think we should be greedy that gold prices will hit $3,005 or $5,000.
Once we know what is our risk appetite, have a balanced portfolio. Diversify your money. Don’t put everything gold. But start with bite size. Get comfortable. Try with whatever you’re comfortable with and slowly accumulate.
Singapore is a safe country with a stable currency, but there’s no harm to diversify part of your money.
Ryan:
Alright. Diversification is key for any investor and of course gold could be one option for you to look at.
Today in conversation with Victor Foo. He is the CEO and founder of Singapore Precious Metals Exchange. He gave us the overview on how people can get involved with trading gold, investing in gold and where things could go from here.
Source: MoneyFM 89.3, January 15, 2024