Summary:
Glenn van Zutphen speaks to Victor Foo, Founder & CEO of Singapore Precious Metals Exchange Pte. Ltd about Singapore’s only bullion company licensed by the Singapore Customs to operate at the (tax-free) high security bonded storage facilities in Le Freeport Singapore.
Transcript:
Glenn van Zutphen:
We’re talking about gold and precious metals. We all want to know how best to hedge our investment portfolios, whether it’s shares or the various investment vehicles out there. Of course, precious metals have always been right at the top of most people’s lists.
Victor Foo is joining us. He is the founder and CEO of the Singapore Precious Metals Exchange. Aside from being one of the first precious metal exchanges in the world, SGPMX is the only online exchange where individuals can trade in physical precious metals like gold and silver bullion with the same ease and security as trading financial instruments.
Victor, good morning.
Victor Foo:
Good morning, Glenn. Thanks for having me this morning.
Glenn:
My pleasure. Great to have you with us. Thanks for getting up bright and early. And I suppose gold is good no matter if it’s early on a Sunday morning or late on a Thursday, right?
Victor:
Always. Gold always shines.
Glenn:
It sure does.
Victor, first off, tell us what is the hot commodity? Is it is it gold? I heard that silver was moving over the past couple weeks. Which is the most interesting precious metal at the moment?
Victor:
So I’m sure you saw the frenzy last week after the gain stock and there was a run on silver. So obviously we had a lot of traction from our clients all over the world. Silver moved over 10% in one day. I always am risk averse, and we always tell our clients, I do not chase after the market. Obviously after that, a day later, silver retracted back to the $25-26 levels.
So gold and silver being precious metals have been a very important way to hedge one’s wealth. Over the last decade since 2008, and that is where we started our company. And I believe what happened in 2008 will happen again soon in the near future. But it’s always good to have something in your portfolio as a hedge.
Glenn:
Yeah, gold is, what, around $1,800 an ounce or so, give or take, I believe.
Victor:
Correct.
Glenn:
Somewhere around there. It is a commodity that is quite expensive obviously to get into, but are you at this point still seeing that it’s a good long-term investment that people should have in their portfolios if they’re going to try to get into it now, for example?
Victor:
You pointed out that gold is at all-time high. At 2011, it was at almost $1,900 levels. It went all the way down to $1,050–around that level. And today, it’s back at the $1,815. So in the last ten years, gold has gone back down and on gone above where it was before. So as a commodity, most people look at it as a medium, long-term hedge.
Yes, it is expensive. A kilo today is about US$60,000. So what we’ve done over the last ten years to accommodate to our clients’ needs was to be able to provide gold in different sizes; kilo down to a gram. A gram today will probably cost about US$65 to US$70 a piece.
What we did the last four years to go beyond that, mimicking what the digital currencies have done–I’m sure everybody is into digital currencies today–I, for one, believe in asset backed assets. What we did was we fractionalized physical gold. What we have in storage in the Freeport in Changi, which is a high security bonded warehouse where we store all our customers bullion, we were able to digitally fractionalize the gold. We have built a platform, which where today with as little as US$1, you can buy an ounce of gold or silver. So even my son–he can buy it. Any adult can buy this. Even at such prices.
Glenn:
That’s very interesting. Is that catching on? In that being able to get those smaller amounts. Is that something that people you’re finding really want, need and are willing to put out for?
Victor:
Yes, let me give you an example. If you would buy an ounce of silver today–silver is trading about $26. The premium, which is the fabrication costs on an ounce of silver, will cost you about $15 to $20, depending on the type of coin.
So we’re looking at the premiums within 20% to 30% of the base value of silver. If you bought an ounce of silver to break even or even to take money, silver needs to double, which to me is not a value proposition.
Whereas what we’ve done is we’ve backed it all with a kilo of gold, which reduces the premium to minimal levels. So even if last week you bought silver and it went up by 10% on this fractionalized platform, you could have taken profit. Whereas if you bought a coin, you would still be out of the money.
Glenn:
To be sure, they would need to be a small profit though. We’re talking, you know, not a lot of money.
Victor:
Correct. So the idea is in any investment is always look at three things. One is what is the assurance? Is it backed by a paper? Is backed by physical? Who’s offering the investment?
Two, what is your entry cost? What is your break-even cost? Because if the upfront charges are too high or with the ongoing costs are too high, you’ll never make money.
Three, there always must be a tangibility to an investment. Even as we provided this fractionalized platform, our clients are also given the option to redeem the physical bullion. Of course, the smaller size is a gram. But you could then dollar cost your purchase over a period of time. And then choose to take the physical bullion back, or you could even liquidate and take back your money.
Glenn:
A gram is about, what, US$58 or so. I think was one of the recent prices I saw–US$58 a gram-ish.
Victor:
Correct. But this is before premiums. Once the premium comes in, it’s about US$65.
Glenn:
Right, another $10.
When we look at buying a precious metal, is there a specific time horizon that you suggest?
As a minimum most people look at a 10 or 20 or 30 year horizon for holding on because of the fluctuation in value. What do you recommend for precious metal investing?
Victor:
I would look at it as a medium to long term. if I look at the prices over the last ten years. in 2011 it was about $1,009. Today it’s at $1,815. Of course, last August in 2020 it hit a high of $2,058. So in the last ten years, if you bought precious metals, you probably just broke even. Of course, in between when prices were coming down, you would have been out of the money. But you lengthen into the horizon over the last 20 years, gold actually has averaged year on year–30%.
So if you’re looking at a short term, there are always many other investments. I always believe in having a dozen seaside portfolio to put all your eggs in one basket. It’s good to diversify, depending on your personal risk profile. I personally have a bit of bias.
I basically do not own money anymore because there’s no cash is negative interest rates.
What I do is I’d rather buy bullion, pledge it to a bank as a collateral, and borrow against it because during borrowing costs is below inflation rates, I could borrow in USD at about 1%, whereas inflation rate is at 3%. By spending borrowed money, I’m actually getting subsidized funding.
Glenn:
Very interesting.
We’re talking with Victor Foo, the Founder and CEO of Singapore Precious Metals Exchange. Victor, one thing I’m interested in is the makeup of the clients that you’re seeing.
Last weekend, we had a Business Times reporter on who had done a lot of extensive reporting on Gen Z, and the up and coming generation. And you know people in their 20s who are now entering the workforce or have been in for a couple of years. And how they are starting to understand that the time value of money and investing.
Are you seeing the investors in precious metals skewing younger at all with that thought of a 20 or 30 year time horizon in mind. Or is it still not filtered down quite yet?
Victor:
Traditionally in Asia, most people would have thought Asians love gold and silver. But the majority, which is probably 70%, comes from China and India–most of them do not buy bullion terms of bars or coins, but they invest into jewelry. As you know, jewelry is not bullion because it’s too soft. It’s normally 80% to 90% pure.
To answer your question, is traditionally the more mature markets the ones that are diversify into bullion. Three reasons why. They probably are more savvy. Two, they have a bit more money to set aside. Three, there probably in mid year, mid career–a bit more stable, looking at retirement, or savings for their children. Whereas today the new generations are into something they want to see instantly; something they want today. They don’t believe in delayed gratification. So that’s why a lot of people have gone into the crypto currencies, which you can see has been, a huge frenzy prices have gone off the roof.
So what we did was to be able to keep up with times right I always believe is you have to be up to date. That’s why we created this fractionalized platform, so we can actually cater to this generation. Which you should have seen it, it was a surge when we launched this. Especially when silver came January this year because as little as US$1, we can now diversify. So whether you are having $1, $1,000, or $1,000,000, everybody gets the same value proposition.
Glenn:
It sounds like a fantastic opportunity especially for someone who is young and not making a lot of money, out of university or second job perhaps, or just wants to spend their money on other pursuits. But they can get in at a very reasonable level of financial level and yet still be able to have something they can tuck away and just kind of forget about it for a couple of decades.
Victor:
Correct. And because of the markets today, we also created a 23 hour trading opportunity so you don’t have to call us 9 to 5. Even at 2 o’clock in the morning, you are able to trade from your mobile device.
Glenn:
Is SGPMX kind of a standard brokerage outfit? Or can people get on and trade on their own account? How does it work in a practical way?
Victor:
When we set this up 10 years ago, we wanted to make sure that it is a transparent platform where it’s peer-to-peer. So there is no bid and offer prices. It’s bidding buyer, winning seller. Nothing sits on balance sheet.
As a company, we do not take positions. We are merely here to provide a platform where you and I could trade openly. So if I bought gold at $1,200 and today it’s at $1,800. And we are best friends. I could sell it to you at $1,500. So it’s where we match. So clients provide their prices and quantity that you wish to buy or sell. And then it’s our incentive to basically match the buyer and sellers. We basically just 100% fee-based.
Glenn:
When we look at other precious metals, of course, the rare earths have been very popular in recent years, especially due to the increase in electric vehicles. That the batteries at which need those rare earths. What are you seeing in that sector of the market?
Victor:
We don’t really have much of that on our platform. Maybe a bit of platinum because traditionally, platinum and palladium are used, as you say, it’s more for industrial, commercial use. I personally have been checking on copper. Copper is not a precious metals yet, but if you look at the copper prices– how it’s been behaving over the last two years–it is actually mimicking how silver was also behaving before it broke a $10 levels. So copper, in the future, will be also something that you should look at.
Glenn:
Very interesting. Just trying to pull it up and see what we’re looking at. In 2019 it was $2,700, then it went to $2,900. Sorry, 2017 at $2,800, then it was $2,900 in 2018, and $2,700 in 2019.
So where is it now? Is it closing higher than that $2,700?
Victor:
So copper is out a ton at about $7,955 per ton.
Glenn:
Great, very interesting. Victor, how can somebody get in touch with you if they want to know more about what you’re doing and how they might be able to use your services?
Victor:
Again, come to our website www.sgpmx.com. I would say everything is listed on our website. You can always contact us, and we welcome people to visit us at Le Freeport, which is normally not open to the general public, but we’ll be happy to show a bit around.
Glenn:
I was gonna say I’d actually like to come down and have a look at that. I’ve never been there before. And I know it’s considered Asia’s Fort Knox right. And not that you’re probably gonna show me pile of gold.
Victor:
You should come by. We’ll take you for a personal tour.
Glenn:
Awesome. Victor, the Founder and CEO of Singapore Precious Metals Exchange. Thanks so much for your time. I really appreciate it and the insight into investing in precious metals.
Victor:
Thanks, Glenn. Have a good weekend.
Glenn:
Thank you.
Source: MoneyFM 89.3, February 7, 2021