Friday, July 30, 2010

Investing in gold

Mr. Tan,
My friend approached me to invest in gold. I pay a price for the gold bar and am allowed to keep the gold. I can sell back the goal at a guaranteed price and earn an attractive rate of return. Is this a good investment?

You are probably required to pay for the gold at a much higher price than the market price. When the time comes for you to sell back the gold bar, you will probably not find the seller. At that time, you have to hold the gold bar at an inflated price, i.e. the actual price is lower than the amount that you have invested.

Remember this message: whenever someone comes to market an investment product to you, you have to be careful. It is likely to be a scam, even though the seller may be your friend and your friend may not be aware of the scam.  Read my article on "Marketed Financial Products" which can be found in (click on Information and enter the search word "Marketed".


silverybay said...

It's sounds like an very secure and enticing investment proposal at first instance. But on further scruntiny, they are unable to explain how they can generate that kind of returns with no value add to the gold bar you are holding.

Their Malaysian office has been raided 2 mths ago and currently still under investigation by BNM (Bank Negara Malaysia, central bank). Singapore operations is still much alive and kicking because as usual, our regulators are always adopting a "wait and see" attitude and until enough money has been lost and enough public outcry and complain, than they will "look into it".

Here's the news about the raid:

Here's forum discussion on this investment scheme:

Many of these investors aren't aware that the gold bullion bar can be purchase at 20% lower from UOB, the only bank here in Singapore to sell physical gold bullion.

To date, many has already participated in this gold investment scheme and many has actually reap decent returns over the pass 1 year. But does that mean this is a sound and safe investment?

Jamesneo said...

buying bullion bar or coins from UOB is better. The reason for buying physical gold is not mainly for the capital appreciation. The most important reason is for wealth preservation as gold is still the best store of value. As part of a balanced portfolio physical gold is still very important. 5-10% for conservative people and up to 20-30% when the currency of your country is not stable.

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