Thursday, October 1, 2009

How to buy gold for hedging purposes?

If you have decided to hedge your money by buying gold, you must know what types of gold are available in the markets. There are three ways you can buy gold.

1)Buying gold from jewellery shop.
Well, the first thing in your mind is to buy gold from jewellery shop. This type of gold might not be a good hedging as firstly you will be charge on the workmanship for the design, and secondly you will be charge GST(currently at 7% as of today). When you intend to sell it next time, you may be charge GST again. With all these, your value of gold will go down a lot.

2)Buying gold bullion.
What is gold bullion. It is commonly known as gold bar. Yes the one you always see in movies showing a safe room which a lot of gold bars inside. It also comes in term of coins. Again this types of gold may not be good for hedging too. Firstly, you will be charge GST, secondly you must find a safe place to store it. If you keep in the bank safe, you need to pay an amount every year.

3)Buying paper gold.
The third type is paper gold. Please it is not the one you buy and burn during the hungry ghost festival. Paper gold are something like shares. Like shares, you can buy it if you have a trading account. The only extra cost is commission when you buy or sell your paper gold. This commission is generally less than 1% which is much lower than GST. In SGX, there is a ETF called GLD 10US$ which is a form of paper gold. One thing to note, this ETF is traded in US$. Before you start buying (or selling), you must take the exchange rate between USD and your currency (singapore dollar).
You can also invested in paper gold using the UOB Gold Savings Account. However beware of the monthly charges.

1 comment:

ZhuKoLiang said...

hi, option3 got counterparty risk. :P

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