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Choosing the Right Form of Gold Investment

Gold endures in its investment appeal and places well within portfolio strategies as a store of value and a safe haven asset, a hedge against inflation and economic uncertainty, and for diversification.


In considering the myriad of gold investment options available, it is imperative to have an understanding of how each of these best align with your risk tolerance and investment objectives.


We set out the 6 main existing gold investment options currently available and introduce a new way of investing in gold available only on SDAX.

  • 1. Physical Ownership
    The most direct option for gold investment is physical ownership of gold through bullion bars, coins or jewellery. This provides the tangibility of possession but comes with its associated of costs of storage and insurance, security concerns and liquidity limitations at the time of sale. Physical gold is also sold at premium over spot prices and markups from dealers, which can reduce returns over time.
  • 2. Gold Exchange-Traded Funds (ETFs)
    Gold ETFs are investment funds which hold gold assets, through physical ownership of bullion, or via derivatives such as futures contracts. These investment funds are traded on a stock exchange. The price of gold ETFs are linked to the price of gold and provide investors economic exposure to gold prices, without the hassle of physical ownership. However gold ETFs are subject to counterparty risk of the fund vehicle holding the gold assets or derivatives. Gold ETFs may also not precisely track gold price movements due to fund management fees and trading costs but are a good proxy.
  • 3. Gold Mining Stocks
    A less direct approach is to invest into the shares of gold mining companies. The performance and growth of these gold mining companies are linked to the price of gold, as their profitability is driven largely by the value of gold. Gold mining stocks provide investors access to the growth potential of the gold industry, but investors also bear the risks inherent in these companies, including operational challenges, exploration success, regulatory hurdles, and management risk.
  • 4. Bank Issued Depositary Gold Certificates
    Some banks offer certificates representing the depository ownership of physical gold in their vaults. In Singapore, banks such as UOB and OCBC offer gold certificates. These gold certificates provide the convenience of exposure to gold without the logistical burden of physical storage. However, banks charge fees and a premium for issuing these certificates which erode returns over time. Investors are also exposed to the banks’ counterparty risk as they are reliant on the banks’ custody of the underlying gold in their vaults.
  • 5. Gold Futures and Options
    For sophisticated investors who have experience trading derivatives, futures and options provide an opportunity to take a position on the future price movements of gold for speculation or hedging. These derivatives allow investors to take a leveraged position without owning the underlying asset, potentially amplifying returns, but also magnifying risk. Futures and options come with the risk of potentially unlimited losses, margin requirements, and should only be traded by investors with a deep understanding of derivatives market dynamics.
  • 6. Gold-backed Cryptocurrency Tokens
    With the advent of blockchain and the nascent Web 3.0 digital asset economy, various gold-backed cryptocurrencies have emerged as a novel means to invest in gold. These gold-backed cryptocurrency tokens harness the advantages of digitisation on blockchain, offer fractional ownership and have potentially lower fees than physical storage or ETFs. However, these cryptocurrency tokens are subject to heavy regulatory uncertainty, cybersecurity threats and investors will need to understand how to navigate the various crypto exchanges and platforms to access these tokens.

A New Way of Investing in Gold 

There is now another way to invest in Gold listed on the SDAX Exchange – securitised Gold in token form (the “Gold Tokens”). The Gold Tokens are issued through a securitised, independent trust and backed by physical gold bullion held at Freeport vaults in Singapore. 


Investing in Gold Tokens listed on SDAX Exchange have the following features:


  • 1. Convenience
    Gold tokens provide investment into gold, without the hassle of physical storage. However, investors who want to trade the Gold Tokens for physical settlement, would also be able to do so with qualified market participants.
  • 2. Security
    Gold tokens are backed fully by physical gold bullion held at Freeport vaults in Singapore. The gold is held by an independent trust managed by a regulated trustee.
  • 3. Regulated Status
    As a Regulated Market Operator (RMO), SDAX falls under the regulatory oversight of the Monetary Authority of Singapore (MAS), and it must adhere to rigorous Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) guidelines.
  • 4. Liquidity
    The Gold Tokens can be traded on the secondary market on the SDAX Exchange, which is a Monetary Authority of Singapore (MAS) regulated Recognised Market Operator (RMO).

Visit https://www.sdax.co/gold/ to find out more.