Tan Kin Lian's Blog: Gold investment scheme

Monday, April 12, 2010

Gold investment scheme

Hi Mr. Tan,
Recently there is this gold investment scheme by 2 companies called X Gold and Gold label. They claim that it is a pretty low risk investment with 9% guranteed return after 6 mths which will mean a return of 18% annually. What is your opinion on this? Is it too good to be true?

REPLY
Of course it is too good to be true. Never invest in promises that you do not understand.

Many investors were offered a return of 12.5% after 6 months on a land banking product and on an industrial chemical product. When the investment matured, they did not get back their principal or the interest. The promoter of the product gave all kinds of excuses - citing the financial crisis. It is easy for you to hand over your money, but difficult to get it back.

There is a chapter in my book, Practical Guide on Financial Planning, about unregulated products that should be avoided. You can buy the book ($12) here.

22 comments:

Anonymous said...: You will be left holding the baby becuase the upside has passed you and the downside is coming.
You should have invested in iron. It soared by 178%; April 12, 2010 11:41 PM
jamesneo said...: The gold investment are likely to be paper gold which means you do not own the physical gold themselves but some promises of gold(derivatives). There is real scandal that is brewing in the London Bullion Market Association(LBMA) exchange:
http://www.thedailybell.com/940/GATA-William-Murphy-Explains-CFTC-Hearing-Andrew-Macguire-Whistleblower-Statements.html
and http://www.gata.org/node/8526

Paper gold is extremely dangerous as the leverage at the LBMA is 100 to 1 which means there is 100 paper gold for 1 real gold. If anybody wants to invest in gold it is better to only invest in the physical gold which means you buy the real gold(gold coins) itself and insist on delivery to you. Do not store your gold at their vaults

Investing in gold shares which means in the gold mining companies can be better investment, however the real problem is the extreme difficulty in differentiating between the many gold mining companies. Some might be fraudulent.

A famous quote is "A gold mine is a hole in the ground with a liar on top."

Thus any gold investment must be done with careful research. Like what Mr Tan and jim rogers has said: only invest in what you know fully.; April 12, 2010 11:57 PM
Anonymous said...: inevitably, this smells of ponzi scheme.; April 13, 2010 12:27 AM
Anonymous said...: People need to realise that Singapore is very very pro-business and operates on a You Die Your Business environment.

It is perfectly legal for companies to be setup to promote all kinds of "investments" --- wine, landbanking, oil, gold, art, time-share, MLM, whatever else crap story... All these are unregulated investments, which means if things go wrong, MAS lagi cannot help you (which is already not much in the 1st place). Such "investment" also is based purely on marketing talk and salesmanship and absolutely no QA by any authorities.

What the original questioner described sounds like one of those ponzi "high yield investment program" thingy. Your money is used to payoff the earlier speculators, and those after you will go towards feeding your interest payments. Until cannot find enough new victims, then the few scammers at the top will run off with the principal payments, leaving you high and dry. Just google high yield investment programs for more juicy details.; April 13, 2010 12:42 AM
freemanland said...: Why don't just put your money in UOB gold saving account?.

Invest directly and take your own risk.; April 13, 2010 7:03 AM
Anonymous said...: I hope the writer can fill us in on more details of this product. This is part of our financial education journey so as not to be cheated again.; April 13, 2010 8:51 AM
Anonymous said...: Bank Negara Malaysia raided two of the gold ivestment companies called Genneva and Etika Emas, which you can read more from the link here: http://www.bnm.gov.my/index.php?ch=8&pg=14&ac=1874; April 13, 2010 9:29 AM
Vincent Teo said...: I found this in Wilfred Ling's blog.

http://finance.yahoo.com/focus-retirement/article/109289/top-10-investor-traps;_ylt=AiIT4EvjzFwMvpfJFPilv.m7YWsA;_ylu=X3oDMTE1dTRmMjk5BHBvcwMzBHNlYwNmaWRlbGl0eUZQBHNsawN0b3AxMGludmVzdG8-?mod=fidelity-managingwealth

Although the article refers mainly in the US, you can see some form of similarity in Singapore as well. Read it for your own good.; April 13, 2010 10:03 AM
slo said...: If I can share with you this "gold investment scheme" as practiced in Malaysia.

1) They sell you gold (mini bars - ranging from 10gms to 1 KG), at the Goldsmiths Association price - which carries a 15 to 16 % premium.
2) you are given a 2 % cash rebate
3) You pay up and take away the gold , plus the 2 %
4) the company will buy back the gold, within 1 month of purchase at the same price you paid, regardless of gold price movements
5) you repeat the same procedure, theoretically earning 24 percent per annum.

He told me that they are setting up or have set up in Singapore, and have registered with the ROC.

As this is a physical transaction, and not the collection of deposits, the do not appear on the radar screens of investment schemes.

To me its a scam, and the operators will scoot when they have enough believers.; April 13, 2010 10:27 AM
Anonymous said...: How come they are so many ignorant "investors" around?

It's most likely to be a SCAM...the early ones will/may get some returns to entice MORE suckers...eventually, it will turn to be another PONZI scheme.; April 13, 2010 3:09 PM
Anonymous said...: The gold bar is sealed and not allow to open for examination.
Under the regulation. the transaction will be void once the seal damaged, beaware that the gold bar is fake.; April 13, 2010 4:07 PM
Anonymous said...: Can't imagine there are still so many naive investors here, after the credit notes saga, the landbanking schemes, and the Sunshine ML scheme.
Why can't Singaporaens be more street-savy, like children facing a variety of candies, and asking which candy to choose. All the candies are laced with poison, my dear friends.; April 13, 2010 5:37 PM
Anonymous said...: Hi,
You can read more at http://www.lioninvestor.com/the-gold-label/

It may be a scam but if you get the gold bar at Singapore Jewellery Association price, your downside is limited ; )

In theory, if the gold price hover or continues to go up, the company should be ok. If the gold price goes south, the company may default on buying back at the original price and collapse.

If so, at least you got the gold bar. The price you pay (if I am right) is the same as if you buy the gold bar from singapore jewellery shop.; April 13, 2010 5:42 PM
Pareto said...: Its the old Pareto rule of 80:20

80 people ignoramus: 20 people smart

century after century.. without fail.; April 13, 2010 8:10 PM
Anonymous said...: I have been monitoring this gold investment scheme for many months. As already discussed in the lioninvestor threads, there is no evidence it is a scam since there is real legitimate physical gold the investor is holding on to.

As far as I can see, the only downside is a risk of about 20% premium upon joining and after about 9 months the investment becomes risk free.; April 13, 2010 10:18 PM
jamesneo said...: To Anonymous April 13, 2010 10:18 PM

There is a problem that we cannot be 100% sure that the gold bars are not filled with tungsten. There are reports that the 400oz bars in circulation are full of tungsten filled gold bars. So must be careful of fraud too beside scams; April 14, 2010 1:17 AM
Anonymous said...: It makes me wonder why the company bother to sell this investment to the man in the street when they could easily approach any hedge funds or for that matter even Temasek or GIC and raise ten of millions of dollars at one go!

There will be a beeline of HNW funds ready to plough millions for that kind of returns. Just pitch it to the private bankers!

Why do they bother with your $5000 investment?; May 04, 2010 2:32 PM
Philip C. Eng said...: http://biz.thestar.com.my/news/story.asp?file=/2010/5/8/business/6217575&sec=business

Is this "Gold Label" the same company? Take care~; May 09, 2010 8:40 AM
Jaxon said...: It is not safe to invest on anything without possessing sufficient knowledge. Investing in gold can yield high profit in a shorter time. But even then it is well and good to get the assistance of a financial adviser.; July 13, 2010 2:47 PM
Anonymous said...: There are some postings on various newspapers about such schemes

http://forums.ocworkbench.com/showthread.php?p=485753; September 04, 2011 12:14 PM
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