Investing in UOB Gold

I had been buying 1/10 Oz Gold Bullion Coins (bless my soul!) from UOB for several years now, though none the wiser other than the budget I had on hand at that time. The only thought to it was to choose the Australian Kangaroo over the Canadian Maple Leaf as the face value of the earlier is higher for the same weight.

I was not an investor. I was treating it more of a collectible. It was time to spend some effort to delve deeper before the spread cost me further.

Before we move on further, do note that when you sell back to UOB, you are required to show proof of purchase such as the original UOB invoice and to ensure that the seal or packaging of physical gold from UOB has not been broken or tampered with.

UOB will not buy back if the seal is broken or tampered with. UOB will also deduct $100 off the BUY rate should a receipt not be furnished.

* SELL/BUY rates discussed are based on 10 Oct 2019

1. GOLD BULLION COINS

Weight (Oz)	Weight (Gm)	Sell	Buy	Spread	Spread (based on 1 Oz)
1 Oz	31.1035	2146	2065	81	81
1/2 Oz	15.5517	1114	1032	82	164
1/4 Oz	7.7759	570	515	55	220
1/10 Oz	3.1104	252	205	47	470
1/20 Oz	1.5552	152	102	50	1000

UOB sells both the Canadian Maple Leaf Gold Coins and Australian Kangaroo Gold Nuggets in various weights above.

2. PAMP GOLD BARS

Weight (Gm)	Sell	Buy	Spread	Spread (based on 100 Gm)	Spread (based on 1 Oz)
100	6764	6640	124	124	39
50	3421	3319	102	204	63
31.1035 (1 Oz)	2131	2063	68	219	68
20	1402	1326	76	380	118
15.5517 (1/2 OZ)	1086	1030	56	360	112
10	732	662	70	700	218
5	389	329	60	1200	373
2.5	216	163	53	2120	659
1	95	64	31	3100	964

Produits Artistiques Métaux Précieux – artistic precious metals products – better known as PAMP, is the world’s leading bullion brand, and one of the most trusted refiners and fabricators of precious metals.

3. ARGOR CAST BAR

Weight (Gm)	Sell	Buy	Spread
100	6676	6598	78

This sturdy 100 gram cast gold bar is a 99.99% pure gold bar from Argor-Heraeus SA, one of the world’s leading international gold refiner and bar manufacturer, in Mendrisio, about 17 km from Lugano in south eastern Switzerland.

4. CAST BARS

Weight (Kilobar)	Sell	Buy	Spread
1 Kg	66274	65997	277

Cast bars by UOB are 1 Kg each.

Thought process of investing in Gold

As an investor, you buy gold from UOB at the SELL rate and sell back to them at the BUY rate, the difference being the spread.

Generally the heavier the bullion coin or bar purchased, the lower the spread. E.g. the spread for 1 Oz bullion coin is $81, however if you have a 1/10 Oz, effectively the spread is $470 if you sell 10x of these coins for the same weight.

It is therefore more cost-effective to buy a larger unit size rather than multiple smaller units adding to the same weight .

Why the higher spread for the ‘same’ weight? If all else being equal, purchasing the smallest-sized gold possible would be recommended for most flexibility. However, minting costs tend to be ‘fixed’ regardless of the size of gold. The mint still has to create the dies, source the metal, pay for marketing, manage distributors, etc. So smaller gold bullion or bars carry a higher markup as a percentage of overall cost. It’s similar to how NTUC sells you 20 rolls of paper towels for $20, but the neighborhood store sells 4 for $10.

Type	Weight	Sell	Buy	Spread
Gold Bullion Coin	1 Oz	2146	2065	81
PAMP Gold Bar	1 Oz	2131	2063	68
Gold bullion coin	1/2 Oz	1114	1032	82
PAMP Gold Bar	1/2 Oz	1086	1030	56

From the above, you can see that PAMP Gold Bar is cheaper (lower SELL rate) than Gold Bullion Coin with a lower spread for the same weight. Why?

Prices of PAMP Gold Bars are based on the international gold price, while prices for Gold Bullion Coin include a premium over the international gold price because of their collectability, status as legal tender, and rarity. Therefore, a pure gold investor will opt for PAMP Gold Bar.

Type	Weight	Sell	Buy	Spread
PAMP Gold Bar	100 Gm	6764	6640	124
Argor Cast Bar	100 Gm	6676	6598	78

On a strict comparison between PAMP Gold Bar versus Argor Cast Bar for the same weight, we can see that the latter is cheaper (lower SELL rate) with a lower spread.

It is more cost effective to invest in Argor Cast Bar rather than PAMP Gold Bar.

Rationally, the most cost-effective to invest is by the Kilobar. However, for most of the common folks like you and me, having $60,000+ freely available is not a luxury we have. In addition, the con of having a large unit is that it is not liquid in a sense. You cannot divest part of a Kilobar (e.g. 100 Gm) but would have to sell the entire unit. Thus, buying multiple units may make more sense.

However, by buying too small a unit, you will losing out on cost via the spread. Personally, I feel that minimally 50 Gm and above is a good size to begin. And as a investor, I would lean towards 100 Gm Argor Cast Bar.

Non-physical holdings

Description	Weight	Sell	Buy	Spread
Gold certificate	1 Kilocert	66274	65997	277
Gold Savings A/C	1 Gm	66.27	66.00	0.27
Silver Passbook A/C	1 Oz	24.41	23.84	0.57

There is also the option of buying and selling gold, though not in the physical form.

The con of having non-physical holdings is that the cost is not a one-time cost. There are recurrent fees to consider.

I would personally not consider the above.

Description	Fees and Service Charge
Gold Certificate	$5 per certificate. $72 per kilobar per annum, subject to GST.
Gold Savings A/C	0.25% p.a. of highest gold balance each month, subject to monthly minimum charge of 0.12 grams of gold.
Silver Passbook A/C	0.375% p.a. of highest silver balance each month, subject to a monthly minimum charge of 0.2 ounces of silver.

Do you invest in Gold as well, and have you done your due diligence?