Thinking about investing in gold? A beginner’s guide for Singapore

Gold occupies a curious position in modern finance. It generates no income, pays no interest, and produces no cash flow. Yet it remains a core holding for central banks, institutions, and private investors across the world.

For beginners, gold is often described as a safe haven or an inflation hedge. These labels are not wrong, but they are incomplete. This article answers the most common questions new investors ask when they are considering whether gold belongs in their investment plans.

1. What does it mean to invest in gold?

Investing in gold means owning an asset whose value depends entirely on its market price. Gold does not generate income. There are no dividends, interest payments, or rental yields. Any return comes only if the price rises after purchase.

Because of this, gold is usually not held to grow wealth quickly. It is more often used to protect wealth and reduce reliance on financial markets.

2. Why do people invest in gold at all?

Gold has been valued for thousands of years because it is scarce, durable, and widely accepted. Unlike paper money, it cannot be created in large quantities by governments or central banks.

In modern investing, the main reason people hold gold is diversification. Gold prices are influenced by broad economic forces rather than company profits, which means gold can behave differently from shares and bonds, especially during periods of stress.

3. How is gold different from shares, bonds, and cash?

Shares represent ownership in companies and rise or fall with business performance. Bonds are loans that pay interest and depend on borrowers repaying their debts. Cash is stable in nominal terms but loses purchasing power over time because of inflation.

Gold is different because it is not tied to a company or government. Its value does not depend on profits, interest payments, or fiscal policy. This independence explains why investors often turn to gold when confidence in financial systems weakens.

4. Has gold really held its value over the long term?

Over long periods, gold has broadly preserved purchasing power, but not always in a smooth or predictable way.

Since the early 1970s, when gold prices were allowed to move freely after the end of the Bretton Woods system, the price of gold in US dollars has risen from about US$35 (S$44.26) per ounce to above US$2,000 (S$2,529.40) per ounce. That works out to a long-term annual increase of roughly eight to nine per cent, compared with average inflation of around four per cent over the same period.

However, this long-term picture hides long stretches of stagnation. After peaking in inflation-adjusted terms around 1980, gold’s real price remained below that level for many years. Gold can protect value over decades, but it often does so unevenly and requires patience.

5. What drives the price of gold?

Gold prices are shaped mainly by broad economic conditions rather than company-specific news. Key influences include:

• real interest rates, which influence the opportunity cost of holding a non-income-producing asset
• the strength of the US dollar, since gold is priced globally in that currency
• expectations about inflation and monetary policy
• periods of financial or geopolitical stress
• buying and selling by central banks and large investors

No single factor explains gold prices at all times. Different forces dominate in different economic environments. However, research published by the International Monetary Fund identifies real interest rates as one of the most important long-term determinants of gold prices.

6. Is gold a safe investment?

Gold is often described as safe, but it is not risk-free. Gold prices can fall sharply and remain low for long periods. Investors who buy gold during price surges or moments of fear can suffer losses.

Gold is better viewed as risk-moderating rather than risk-eliminating. Its usefulness lies in how it behaves relative to other assets, not in guaranteed returns.

7. Is gold less risky than shares?

Over long periods, gold has usually been less volatile than equity markets, though more volatile than high-quality government bonds. In the short term, gold prices can still move sharply in response to changes in interest rates or currency markets.

What matters most is that gold often moves differently from shares. That difference can help soften portfolio losses when equity markets decline.

8. Does gold protect against inflation?

Gold has tended to preserve purchasing power over very long periods, but it does not move in line with inflation from year to year.

In some inflationary episodes, gold prices rise sharply. In others, they lag until inflation becomes persistent or confidence in monetary policy weakens. Gold is therefore better described as a long-term guard against rising prices rather than as a precise short-term inflation hedge.

9. Why does gold sometimes fall during crises?

In the early stages of a crisis, investors often sell liquid assets to raise cash. Gold is easy to sell, so it can fall alongside shares at first.

Gold’s defensive qualities often become clearer later, once markets move beyond the initial scramble for liquidity and concerns shift toward inflation, currency stability, or financial solvency.

10. Why do central banks hold gold?

Central banks hold gold to diversify their reserves and reduce reliance on any single currency. Gold carries no credit risk and does not depend on another country’s ability to repay debt.

In recent years, central banks have been net buyers of gold, adding more than one thousand tonnes annually, according to data compile by the Bank for International Settlements and national central banks. This reflects a renewed focus on resilience and diversification in reserve management.

11. How can individuals invest in gold in Singapore?

People in Singapore can invest in gold through several routes:

• Physical gold bars or coins
• Gold exchange-traded funds
• Gold mutual funds or unit trusts
• Gold exposure through structured fund platforms

Each option involves trade-offs in cost, convenience, liquidity, and how closely it tracks the price of gold.

12. What are the advantages of owning physical gold?

Physical gold provides direct ownership and independence from financial intermediaries. For some investors, this tangibility is a feature rather than a drawback, particularly during periods of uncertainty.

Singapore’s tax framework also exempts qualifying investment-grade gold from Goods and Services Tax, which makes physical ownership comparatively efficient from a consumption-tax perspective.

13. What are the disadvantages of physical gold?

Physical gold must be stored securely and insured. Buying and selling often involves wider price gaps than listed products, and frequent trading is impractical.

For investors who value flexibility or regular investing, these frictions can outweigh the benefits of direct ownership.

14. What qualifies as investment-grade gold in Singapore?

Singapore’s tax rules define investment precious metals by purity and form. Guidance issued by the Inland Revenue Authority of Singapore (IRAS) states that qualifying gold must typically be at least 99.5 per cent pure, whether in bar or coin form.

This follows the international standard, the London Bullion Market Association Good Delivery standard, which specifies a minimum fineness of 995 parts per thousand, underpinning much of the global bullion market.

15. What are gold exchange-traded funds?

Gold exchange-traded funds are listed securities designed to track the price of gold. Many are physically backed and store bullion in professional vaults.

They can be bought and sold easily during market hours, making them a convenient way to gain gold exposure without handling physical metal.

16. How do gold funds differ from gold exchange-traded funds?

Some gold funds hold physical gold directly. Others invest in gold exchange-traded funds instead. These funds typically trade once per day rather than continuously.

They may be easier to access through savings plans, but often charge higher fees, which can affect long-term returns.

17. Why do fees matter so much when investing in gold?

Because gold produces no income, fees reduce returns directly. There is no yield to offset ongoing charges.

Over long periods, even modest annual fees can make a noticeable difference. Understanding total costs is especially important when investing in gold.

18. How easy is it to sell gold?

Gold is widely traded around the world. Exchange-traded products are usually the easiest to sell quickly at transparent prices.

Physical gold can also be sold, but prices depend on dealers and market conditions. Some fund structures may impose specific selling terms.

19. How is gold taxed in Singapore?

Singapore does not tax capital gains for individuals. Qualifying investment-grade gold is also exempt from Goods and Services Tax.

This favourable tax treatment is one reason Singapore is often viewed as an attractive place to hold gold.

20. How much gold should a beginner invest in?

There is no single correct allocation. Many portfolio studies suggest that modest allocations, often around 5% to 10%, can help balance risk without significantly reducing long-term growth potential.

Common mistakes include over-allocating during periods of fear, ignoring fees, and assuming gold will always rise during crises. Gold is most effective when used deliberately and proportionately.

Key facts and figures about gold

Market size and trading

• The total above-ground stock of gold is estimated at around 212,000 tonnes, which is equivalent to roughly 7.5 billion troy ounces. At a price of US$5,000 per ounce, this stock would be worth over US$37 trillion.

Currency and pricing

• Gold is globally priced in US dollars, but it is traded and held in all major currencies.
• Movements in the US dollar index have historically shown a negative correlation with gold prices, although this relationship varies over time.

Historical price levels

• In January 1980, gold reached an inflation-adjusted peak of approximately US$3,800 per ounce in today’s dollars, following a period of high inflation and geopolitical stress.
• In 1999, gold fell to a nominal low of around US$252 per ounce, reflecting strong equity markets and high real interest rates.
• In 2020, gold surpassed US$2,000 per ounce for the first time in nominal terms.
• In 2023 and 2024, gold prices again traded above US$2,000 per ounce, driven by lower real yields and strong official-sector demand.
• In 2025, gold experienced one of its strongest annual rallies in decades, with prices setting multiple record highs and exceeding US$4,000 per ounce on a sustained basis. The annual average price was significantly higher than in prior years, reflecting strong global demand and macroeconomic stress.
• In early 2026, gold continued at elevated levels. Spot prices surpassed US$5,000 per ounce, and on certain days rose above US$5,100–US$5,500 per ounce, driven by persistent demand and a weakening US dollar in early 2026.

Supply

• Annual global gold mine production is approximately 3,500–3,700 tonnes per year, growing slowly due to geological constraints and long lead times for new mining projects.
• Recycling of gold from jewellery and industrial sources adds roughly 1,300–1,400 tonnes annually, depending on prices and supply economics.

Central bank reserves

• Central banks collectively hold more than 35,000 tonnes of gold, accounting for roughly 17 per cent of all above-ground gold.
• According to data compiled by national central banks and the Bank for International Settlements, official-sector purchases exceeded 1,000 tonnes per year in each of the past three years.
• Official gold purchases remained strong in 2025 even amid high prices, with quarterly buying running into the low hundreds of tonnes and overall demand among official buyers continuing into early 2026.
• The largest official holders of gold include the United States, Germany, Italy, France, Russia, and China.

Physical characteristics

• Gold has a melting point of 1,064 degrees Celsius and does not corrode or degrade.
• A standard London Good Delivery gold bar weighs approximately 12.4 kilograms and has a minimum purity of 99.5 per cent.

Recent demand context

• Total annual global gold demand in 2025 exceeded 5,000 tonnes for the first time on record, driven by strong investment flows and central bank buying.
• Gold price performance has seen both sharp rallies and notable corrections in 2025–2026, reflecting the interaction of safe-haven flows, macroeconomic expectations, and periodic profit-taking.

Final thoughts

Gold is neither a miracle solution nor an outdated relic. It is a simple asset with a complex role. Gold’s value to investors lies in diversification, resilience, and long-term capital preservation rather than income or rapid growth.

For investors in Singapore, gold can add balance and resilience when used thoughtfully. Understanding what gold can and cannot do matters far more than trying to predict its next price move.

Written by: Great Eastern Lifepedia team