Prospecting for golden opportunities
31 Mar 2022

Prospecting for golden opportunities

Why choose gold products as an investment option?

Gold has traditionally been one of the most preferred forms of investment around the world. It has been considered to represent financial safety and security for centuries – and with good reason. Gold has retained its value even during periods of severe market volatility and economic downturns in the past. It has shielded investors against inflation, with its return on investment being fairly at par with the rate of inflation. Since gold has an inverse relationship with equity markets, it offers you an effective safeguard against market fluctuations – when equity values go down, the value of your gold goes up. Moreover, the value of gold protects you against currency fluctuations too.

Today you have the opportunity to invest not just in physical gold, but also in a variety of gold products. Let us look at the options open to you today.

What are the types of gold products?

Physical gold (coins or bullions) comes with the added responsibility of storage and the risk of theft. That’s where gold related products come in as alternative options. Gold product is essentially of 4 types –Paper Gold, Gold Funds, Gold-Based Exchange Traded Funds (or Gold ETFs), and Gold Linked Structured Investment Products.

Paper Gold. This is when you purchase gold at its current price but you receive the certification document instead of the physical gold. This is a highly liquid investment – you can buy or sell it at any time depending on how the price of gold changes.
Gold Fund. This is an investment fund invested in gold-related assets. This includes investments in stocks of gold mining or gold producing companies. If the price of gold rises in future, the value of these companies may appreciate too, thus resulting in potential profits for the investor.
Gold-Based Exchange Traded Funds (“ETFs”). This is akin to investing in mutual funds. You invest a certain amount and purchase shares of gold. The value of these shares will go up or down, based on the price of gold. Gold ETFs are managed just like any other stocks and are traded on the public stock market too. There are several Gold ETFs listed by the HKEX as well.
Gold Linked Structured Investment Products (“SIPs”). There are different types of structured products where the underlying asset is gold. In these cases, the investors agree upon the strike price(s), which may be above or below the current gold price. In addition, the investor may also profit from a yield or an interest while the investor may also get nothing back at maturity if the product issuer defaults on its obligations. For example, there are structured products with structure of 100% principal redemption at maturity which means you get back 100% of your principal amount at maturity. In addition, you may get a certain amount of interest, based on how the underlying as gold performs. On the other hand, Gold linked SIPs can also cater to investors with either bullish or bearish sentiments – so you could receive the minimum interest and either the bullish performance return or the bearish performance rate. Depending on the type of structured note, the investor gets back either the principal amount or the underlying gold asset.


When to invest in gold?

So how do you know when to invest in gold, and which of these gold products you should opt for in the circumstances? Let us look at two different scenarios to illustrate this.

Ready to embrace the opportunities that gold investments open up for you?

A diversified portfolio is key to smart wealth management, and gold can be a crucial component of that. As seen above, there are several types of gold products available for you to invest in. Depending on your portfolio requirements and expectations of the market in the future, you can choose just the right gold asset that would work for you.

Explore the paper gold options available here, stay in the know about market trends that can have an impact on your gold assets, and reach out directly to your relationship manager to discuss the best options for you.

Risk Disclosure and Important Notice

The information herein is for information only. DBS accepts no liability whatsoever for any direct, indirect or consequential losses or damages arising from or in connection with the use or reliance of this publication or its contents.

Investment involves risks. The information provided is based on sources which DBS Bank Limited and DBS Bank (Hong Kong) Limited believe to be reliable but has not been independently verified. Any projections and opinions expressed herein are expressed solely as general market commentary and do not constitute solicitation, recommendation, investment advice, or guaranteed return. The above information does not constitute any offer or solicitation of offer to subscribe, transact or redeem any investment product. Past performances are not indicative of future performances. You should make investment decisions based on your own investment objective and experience, financial situation and particular needs. You should carefully read the product offering documentation, the account terms and conditions and the product terms and conditions for detailed product information and risk factors prior to making any investment. If you have any doubt on this material or any product offering documentation, you should seek independent professional advice.

The price of gold is volatile and value of the investment may go down as well as up. Your investments in the DBS Paper Gold Scheme (the “Scheme”) are not principal protected. In the worst-case scenario, you may lose your entire principal. The unit prices of the Scheme are calculated with reference to the price of Loco London Gold as specified by the London Bullion Market Association (“Reference Asset”). Investing in the Scheme is not the same as investing directly in the Reference Asset. Price changes in the Reference Asset might not be reflected exactly in the price changes of the units of the Scheme.

Securities trading is an investment. The prices of stocks fluctuate, sometimes dramatically. The price of a stock may move up or down and may become valueless. It is as likely that losses will be incurred rather than profits made as a result of trading stocks. The investment decision is yours but you should not invest in any stock unless you have taken into account that the relevant stock is suitable for you having regard to your financial situation, investment experience and investment objectives.

Customers should be aware that the prices of the Callable Bull / Bear Contracts and Warrants may fall in value as rapidly as they may rise and holders may sustain a total loss of their investment. The Bank does not provide securities advisory service. Any person considering an investment should seek independent advice on the investment suitability when considered necessary.

Funds are investment products. The investment decision is yours but you should not invest in the product unless the intermediary who sells it to you has explained to you that the product is suitable for you having regard to your financial situation, investment experience and investment objectives.

The information provided above have not been reviewed by the Securities and Futures Commission of Hong Kong or any regulatory authority in Hong Kong.

Explore the paper gold options available: