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The Significance of SPDR Gold Shares Dual Currency Trading

By Chinese Gold and Silver Exchange

Published on June 10, 2021

Contributor 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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Effective 30 June, dual currency trading will be introduced to the SPDR Gold Shares ETF which will commence trading in a secondary currency of SGD, with the primary trading currency remaining the USD.

As the unit holdings executed via SGD and USD counters are custodised in a consolidated pool at the depository, investors can buy one currency counter and sell in the other currency counter.

The ETF, also included under the CPFIS-OA, has a minimum board lot size of five units (approx. 0.47 ounces of gold), which at a current unit price of US$166, has a value of US$830 (approx. S$1,110). The SPDR Gold Shares ETF was the most traded ETF listed in Singapore in 2019 and 2020, and the second most traded ETF in the 2021 year to date.

The SPDR Gold Shares ETF has averaged daily turnover close to US$4 million since the end of 2019, which compares to average daily turnover of US$1.7 million for the three years pre-COVID.

Recent Volatility, the SGD and the SPDR Gold Shares ETF

The past five years have seen the SPDR Gold Shares ETF generate a 32% return in USD terms, while the regional FTSE ASEAN All-Share Index generated an 8% price return, with reinvested dividends boosting the total return to 18.8% (also in USD terms). While both benchmarks generated gains over the five years, with the SPDR Gold Shares ETF return largely unchanged at 31% in SGD terms, periods of heightened volatility saw a number of performance divergences across the index, ETF and SGD/USD. So much so, that over the past five years, the daily moves of the SPDR Gold Shares ETF have been inversely correlated to the FTSE ASEAN All-Share Index. When changing the denomination of the SPDR Gold Shares ETF to the SGD, the ETF’s inverse correlation to FTSE ASEAN All-Share Index was increased further. One possible reason for this was that the SPDR Gold Shares ETF, and to a lesser extent, the SGD, have both appealed as less riskier assets that served investors seeking safer havens in recent years.

For instance, during the market volatility between 15 January 2020 and 15 April 2020 the FTSE ASEAN All-Share Index, which is denominated in USD, declined 26.5% while the SPDR Gold Shares ETF in USD terms gained 9.8%. The USD continues to remain the most used international currency used for international and intra-regional trade. During the four months, the SPDR Gold Shares ETF gained 16% in SGD terms, outpacing the 9.8% gain for the ETF in USD terms. This meant the simple inverse correlation of the SPDR Gold Shares ETF in SGD terms to the FTSE ASEAN All-Share Index in USD terms, for the short period, was exacerbated further, in this case, from -9% to -56%.

From 14 January 2021 to 1 February 2021, the FTSE ASEAN All-Share Index declined 4.6% in USD terms, while the SPDR Gold Shares ETF in USD terms gained 1.1% and the SPDR Gold Shares ETF in SGD terms gained 1.7%. More recently, the three weeks from 29 April to 20 May saw the FTSE ASEAN All-Share Index decline 3% in USD terms, while the SPDR Gold Shares ETF in USD terms gained 5.1% and the SPDR Gold Shares ETF in SGD terms gained 5.5%.

FTSE ASEAN All-Share Index vs SPDR Gold Shares ETF

Source: Australian Bureau of Statistics

Note these educative examples of inverse correlation were observed during increased market volatility that coincided with risk-off like themes making the headlines, with the key caveat that past cross-asset flows do not necessarily foreshadow future cross-asset flows. As a global asset class, gold has multiple attributes with portfolio diversification a popular application. Including assets with a low correlation to each other does help reduce overall portfolio risk and the World Gold Council suggests that when investors add risky assets, gold should make up between 2% and 10% of the portfolio.

With Singapore’s open Capital Account, the International Monetary Fund noted in 2019 that due to Singapore’s status as a trade and financial centre in Asia, changes in market sentiment can affect Singapore significantly, and that increased risk aversion in the region, for instance, may lead to inflows to Singapore, given its status as a regional safe haven, while global stress may lead to outflow.

Broader Applications

Much of the ASEAN population maintains a penchant for gold. The SBMA maintains that gold has played a very important role in ASEAN and is closely connected with the life and culture of the people in the region, and has been used often in the past as a medium of exchange and a unit of measurement. Back in 2017, the SBMA highlighted a regional propensity to buy gold jewellery, not only for use as accessories or gifts for cultural or religious ceremonies such as weddings, festivals and other special occasions, but also as a storage of wealth.

The SPDR Gold Shares ETF is a modern, cost-efficient and secure way to gain access to the gold market without having to pay the transportation, storage and insurance costs of holding physical gold

The SPDR Gold Shares ETF is also among the most traded ETFs across the region. The key attribute that State Street Global Advisors often associate with the ETF is its provision of a modern, cost-efficient and secure way to gain access to the gold market without having to pay the transportation, storage and insurance costs of holding physical gold.

Aside from gold helping manage risk and volatility as discussed above, gold may help preserve purchasing power. The leading ETF issuer maintains that the gold prices are influenced by multiple factors ranging from central bank policies and interest rates to emerging market demand and mining production and as a result, there is a diverse set of global drivers that impact the price of gold beyond localised events. State Street Global Advisors suggest that this could support gold prices during periods of local currency depreciation and may help it act as a hedge against global inflation.

Since its inception in the United States in November 2004, the ETF has generated an annualised return of 8% in USD terms or 7% in SGD terms through to 28 June. The SPDR Gold Shares ETF was subsequently listed on SGX in October 2006, and has generated an annualised return of 8% in USD terms or 6% in SGD terms through to 28 June. Globally, the SPDR Gold Trust currently maintains total net assets of US$64 billion.

Contributor 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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Singapore Bullion Market Association Secretariat-Lee-Jia-Yi

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.

SECRETARIAT SBMA-Emily-Oh

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.

SECRETARIAT SBMA Clara-Chang

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.

SBMA Committee-Photo-john-levin

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.

SBMA Secretariat-Fabian-Lew

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.

SBMA-margare-secretariat

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.

SBMA-Albert-secretariat

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.

SBMA-Shaokai-Fan

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.

SBMA-Committee-Alan-Liew

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.

SBMA-Committee-Nikos

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.

SBMA-Committee-khun nuttapong

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.

SBMA Committee-Photo-Raman-Walia

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.

SBMA Committee-Photo-Andrew-Clarke

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.

SBMA Committee-Photo-Kazuya-Naoki

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.

SBMA Committee-Photo-Vinh-Nguyen

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.

SBMA Committee-KL-Yap

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.