What is 'least bad': SPDR gold shares or fixed deposit account?
In my country of residence (Singapore) I am allowed to invest 10% of my retirement funds in gold. However, the only option allowed is SPDR Gold Shares (GLD), which has certain risks that most of you are probably aware of. Alternatively my funds will be invested according to the default option, which is a kind of fixed deposit account with the government that is denominated in Singapore Dollars and currently earns about 2.5% interest per year. If invested in the default option, the principal would be ‘guaranteed’ by the government.
In this situation, do you think it would be better to have some exposure to the gold price (even though it has to be through SPDR) than none at all? Or is SPDR so risky that leaving my funds in a government ‘guaranteed’ account that is exposed to the risk of currency devaluation is still safer?
I would much appreciate your thoughts on this.
The standard answer would be "What kind of investor are you?" , "What is your investment horizon?", "How much risk would you be able to tolerate vs. desire for potential gains?", "Are you familiar with the PM market?" etc.
If you listen to the podcasts and interviews/chats available on this site, the recommendation was given to hold certain percentage of one's savings in PM. If you look at monthly technical indicators, GLD has begun an uptrend early this year: http://www.investing.com/etfs/spdr-gold-trust-technical
You can ask yourself a question: "Should I have invested in GLD back in January, what my ROI would have been today?".
Having said that, I am afraid there is no "one fit all" answer.
I hope this helps.
Thanks for your reply.
I already have PM which I have used my personal savings to buy. What I have now is not owned through GLD.
However, I can also use some of my retirement funds (which are in an account controlled by the state) to buy gold. If I do that I would be able to purchase a much greater amount than if I only made use of my personal savings. But as I explained above, the problem is that I'm only allowed to invest my retirement funds in gold through GLD. I'm not allowed to use my retirement funds to buy real physical and store it in a place of my own choosing, which I would have preferred to do.
I remember having heard warnings about GLD before. For example, I know that GLD does not allow you to take delivery of your gold (that's ok for me as the regulations of my retirement account would probably prevent that anyway). Do you know of any other concerns with GLD?
Your question is similar to what I wrote recently:
You may want to watch what Chris Martenson spoke about recently:
Bubbles are Everywhere in Franken Markets-Chris Martenson
By Greg Hunter On September 7, 2016
Hello RL, thanks for the link.
Unfortunately I don't think there is any way out in Singapore, unlike what is described in your discussion. Here you are not allowed to cash out of your retirement fund and there is no such thing as a 'self-directed' account 🙁
My current thinking is that a devaluation of the Singapore dollar against gold is much more likely than an increase versus gold and/or problems at GLD. Hope I will be right!
I updated the thread with some calculations:
Tax loads and Break Even Points
The taxes really make a difference! Do take a look.