By Teh Shi Ning
COME October, investment-grade gold will effectively be 7 per cent cheaper as Singapore has decided that it will scrap the goods and services tax (GST) on the import and supply of precious metals to encourage more gold trading here.
What this means is that investors - whether retail traders, gold exchange-traded funds (ETFs), or private banking clients - will soon be able to trade and store their gold in Singapore free of GST.
At the moment, most investments of this sort are done offshore or kept within the free trade zone at the Singapore Freeport.
Before a young investor enthused by this prospect runs out to buy himself bullion gold bars or coins though, here are some issues to consider.
Is gold still a 'safe-haven' asset?
Gold has traditionally been seen as a 'safe-haven' in times of economic uncertainty and as a hedge against inflation. Many still view it as such.
'Given the on-going eurozone debt crisis and concerns regarding a slowdown in global economic growth, gold continues to be a safe haven for investors to park their funds,' says Kelvin Ngo, head of investments at independent financial advisory firm Providend.
In the past two weeks, 'gold prices have come down due to the US showing better economic and jobs data', observes Lynette Tan, investment analyst at Phillip Futures.
'Similarly, with the Greek debt deal temporarily resolved, investor appetite could return and gold could be sidelined for now,' she adds.
With the focus now on economic growth in China, Europe and the US, if investors begin to feel uncertain about sustained growth again, 'safe haven demands' for gold may return.
But there are those who do not see gold as a safe haven asset. 'Gold is not like bonds, where there is a regular cash flow from interest,' says Wong Sui Jau, general manager of Fundsupermart.com, the online unit trust distribution arm for iFAST Financial.
'Historically, gold and gold equities have shown fairly high volatility as well. Thus we don't believe it exhibits the qualities of a safe haven asset,' he says. In his view, gold can be an investment to consider for diversification purposes, but should not be seen as low risk. 'Based on three-year annualised volatility, gold has almost as high a volatility as equities,' he says.