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Using Gold ETFs as a Store of Value

By Geoff Howie, Market Strategist, Singapore Exchange Limited

Using Gold ETFs as a Store of Value​

Over the three-year period ending April 2023, the price of the SGX-listed SPDR Gold Shares ETF gained 14% in US dollar (USD) terms. Due to appreciation of the USD to the JPY over the past three years, JPY-based investors who bought the USD-denominated SPDR Gold Shares ETF more than tripled the baseline returns to 46%. This, of course, assumes the investor made a lump-sum investment on the 30 April 2020 close and held the position through to 30 April 2023.

Going all-in or lump-sum back in any market in April or May 2020 was much easier said than done. The SPDR Gold Shares ETF had already gained around 15% from its March lows through to the end of April, while the month of May 2020 saw officially reported global COVID-19 cases double from 3 million to 6 million. Investors who adopted a more conservative dollar-cost averaging approach mitigated some of the potential risk of going all-in at market highs, in return for missing out on going all-in at a potential market low.

For JPY-based investors, putting the same amount of JPY to work every month into the SPDR Gold Shares ETF over 36 months yielded a theoretical 8% compound annual growth rate (CAGR).

The number of monthly units bought under a dollar-cost averaging plan over the three years through to the end of April would have been a function of both the price of the SPDR Gold Shares ETF, and the strength of the JPY against the USD.

Theoretically, as an educative example, consider an institutional investor investing JPY 1 million at the end of every month into the USD-denominated SPDR Gold Shares ETF listed on SGX. This investor would have on average, bought 50 units each month over the three years, as shown in Chart 1. However, due to changes in the USD/JPY rate and the price SPDR Gold Shares ETF there were some months the investor would have acquired as many as 58 units, while in April 2023, the investor would have acquired just 40 units.

Chart 1 – DCA Educative Example

Chart 1 – DCA Educative Example​
Source: SGX Research

This was tied to the purchasing power of the monthly JPY 1 million dollar-cost averaging plan. When the unit price of the SPDR Gold Shares ETF declined compared, to say the preceding month, it meant the investor was potentially poised to buy more units, and less units when the SPDR Gold Shares ETF unit price increased. At the same time, if the USD/JPY exchange rate declined, meaning JPY appreciated against the USD, it meant the investor was also poised to acquire more units, and less units if the JPY depreciated against the USD. Thus, developments in both the unit price and the exchange rate impacted how many units would be acquired under the dollar-cost averaging plan.

Gold

As an example, in August 2020, 51 units would have been purchased in the plan, versus 58 units in November 2020. As seen in Chart 2, over the three months, the JPY strengthened against the USD, with USD/JPY declining from 105.91 to 104.31, while the SPDR Gold Shares ETF declined in price from US$184.16 per unit to US$166.56 per unit. Both markets moved in a direction conducive to buying 7 more units in November 2020 compared to August 2020.

Chart 2 – Monthly Moves

Chart 2 – Monthly Moves​
Source: SGX Research

As illustrated in Chart 1, there were also instances when both the JPY strengthened and SPDR Gold Shares ETF has gained in price, thus providing an offsetting impact on the number of monthly units purchased. For instance, USD/JPY declined from 148.7 at the end of October 2022 to 130.1 at the end of January 2023, increasing the purchasing power of JPY-based investors, however at the same time the SPDR Gold Shares ETF gained from US$152 per unit to US$177 per unit. The offsetting impact of the gains in gold and appreciation of the JPY meant than the investor bought 44 units under the plan 2023.

AS OF THE END OF APRIL 2023, THE SPDR GOLD SHARES ETF HAD A THEORETICAL THREE-YEAR CAGR OF 7.8%, COMPARED TO A 2.8% CAGR FOR USD-BASED INVESTORS.

As of the end of April 2023, the SPDR Gold Shares ETF had a theoretical three-year CAGR of 7.8%, compared to a 2.8% CAGR for USD-based investors. This means that JPY-based investors who invested in the ETF during this period gained exposure to both the appreciation of gold and the strengthening of the USD. However, it’s important to note that even though dollar-cost averaging is generally considered less risky than lump-sum investing, it is still subject to market risk. For instance, if the JPY-equivalent unit price of the SPDR Gold Shares ETF declined to JPY 19,000 at the end of April, the dollar-cost averaging three-year CAGR would have been -1.7%.

It’s worth noting that the SPDR Gold Shares ETF unit price as of the end of April was JPY 25,086, despite ongoing global macroeconomic concerns such as decelerating global growth, persistent inflation, more potential nudges to financial stability and potential escalations in geopolitical tension. Meanwhile, for Japan, much attention is focused on the road ahead for new BOJ governor Kazuo Ueda and BOJ deputy governors Shinichi Uchida and Ryozo Himino.

The SPDR Gold Shares ETF seeks to track the price of gold bullion, less the fund’s expense ratio of 0.4% per annum, offering investors a convenient, cost-efficient and secured way to gain exposure to the gold asset class without incurring the costs related to transportation, storage and insurance costs of owning physical gold. The ETF is cross-listed on the Singapore Exchange and available to trade in two currencies – USD and SGD, and included under the CPF Investment Scheme (CPFIS) – Ordinary Account and Supplementary Retirement Scheme (SRS).

GEOFF HOWIE

GEOFF HOWIE is the Singapore Exchange’s market strategist, with more than 20 years of experience in financial markets and economics. He has a strong background in global macroeconomics and a reputation for expeditiously identifying key market drivers and their impact across major asset classes.

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Lee Jia Yi

OPERATIONS & ADMIN EXECUTIVE
Before joining SBMA, Jia Yi worked as an Admin & Reporting Officer in her previous role. She holds a Diploma in Business & Social Enterprise from Ngee Ann Polytechnic. Jia Yi is responsible for managing and maintaining physical and digital files in SBMA, supporting invoicing processes, reconciling receivables and payables, coordinating meetings and conferences. Additionally, she will provide support to the team and assist the Business Director in managing the Association’s office operations and general administrative activities.

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Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

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Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

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Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

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Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

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Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

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Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

Ms Pawan Nawawattanasub

Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

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Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

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Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

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Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

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Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

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Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

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Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

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Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

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Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

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Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.