Is It Legal to Own Gold Bars or Bullions in Singapore?
Christopher Columbus once famously declared that “he who possess gold can do anything he wishes in the world”. It is no secret that the allure of gold is a universal and timeless one and has indeed contributed to many of the fabled tales that we hear of today.
The fact that gold’s allure is so powerful is also probably one of the reasons why many people are desperate to get their hands on the invaluable metal. Invariably, the large demand for gold, coupled with its large intrinsic value, has necessitated governments (including Singapore’s) to put in place laws to regulate the ownership of gold.
This article shares:
Why Might You Want to Own Gold?
While it is common knowledge that people are attracted to gold, there are a multitude of reasons why this is the case:
- Gold is known to be a safe haven: A safe haven asset is one that holds its value during times of crisis. Gold has been always viewed as an asset that has held its value throughout history, even during turbulent economic times. People have flocked to holding gold during times of crisis, simply because they believe in its value.
- Gold hedges against inflation: Economists have observed that consumers often purchase gold as a hedge against inflation. This is because consumers believe that the intrinsic value of gold will not be affected by market performance or interest rates levied by the relevant fiscal authority.
- Portfolio diversification: There are some patterns to suggest that gold has a negative correlation to stocks and other financial instruments. In other words, the value of gold tends to decrease while stocks are doing well but increase when stocks are doing poorly. Investors therefore choose to spread their eggs in different baskets and invest in gold to ensure that during times of high market volatility, their gold can serve as a hedge to protect their investment portfolio against poor market performance.
- Gold is an attractive consumer product: The purchase of gold can be for personal reasons as much as it can be for investment reasons. For example, the purchase of gold jewellery amongst consumers remains popular. It is also often considered as a symbol of your considerable financial prowess if you can wear accessories made of gold.
Is It Legal to Own Gold in Singapore?
If you are buying gold for personal reasons
There are no laws against gold ownership in Singapore. This includes not only the owning of gold jewellery, but also the ownership of precious metals by way of gold bars and/or bullion.
This should come as no surprise, as the average Singaporean is well known for purchasing considerable amounts of gold throughout the course of his or her life. In fact, in the second quarter of 2021, gold consumer demand stood at 2.7 tonnes – a 124% increase compared to the same time period in 2020.
If you are buying or selling gold as part of a business
However, if you wish to engage in the business of buying and selling gold to retail customers in Singapore, you need to be:
- A registered dealer; or
- Exempted from registration,
under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) (PSPM) Act.
Any person who fails to apply as a registered dealer whilst being in the business of buying and selling gold, and is not exempted from registration, may be guilty of an offence under the PSPM Act. If convicted, you will face criminal penalties of up to S$75,000 in fines and/or up to 3 years’ imprisonment.
You can find out how to register as a dealer here.
How Do You Legally Buy Gold in Singapore?
Regardless of whether you intend to buy gold for trading or personal reasons, you can legally buy gold from any business that is a registered dealer in Singapore. The registered dealer can be an individual who is in the business of buying and selling gold to customers, or a business itself.
However, take note that you may be required to provide your personal information and identification documents for verification purposes when you purchase gold from registered dealers. The registered dealer can refuse to transact with you if you fail to provide such information.
Apart from buying gold from registered dealers, you may also buy gold from individuals (such as users on online marketplaces) who are not in the business of buying and selling gold. As these individuals are not registered, however, there is a risk of the gold you buy being inauthentic.
How Can You Tell Whether the Gold You have Purchased is Authentic or Fake?
Unlike some other precious stones such as diamonds, which come with a certificate of authenticity, the purchase of gold does not usually come with such certificates. Instead, there will be a refinery stamp on the gold coin or bar, which serves as the refinery’s guarantee of authenticity.
Some gold traders may also employ their own forms of authentication devices on top of the refinery’s stamp. For example, a company may laminate their gold bars in a secure plastic casing to serve as proof of the gold’s authenticity.
One way to confirm the quality of the gold that you have purchased is to have your gold bar/bullion tested by the Singapore Assay Office (SAO). The SAO is Singapore’s independent accredited assaying and hallmarking office and provides professional gold-testing services. If the gold bar is found to meet industry standards in terms of its purity, then the SAO will mark every piece of gold with a hallmark as an attestation to its quality.
Legal Ownership of Gold
Having purchased gold, it is important that you ensure that you really are the legal owner of the gold that you have purchased. This is because although you may make a purchase from any one of the retailers or banks that are registered to sell you gold, you may not necessarily be considered a legal owner of the gold that you have purchased. This is unless the bank allows you to take physical possession of the gold.
Some institutions sell gold on an “I owe you” basis – in other words, you are not purchasing the gold itself, but rather purchasing a “promise” from the institution that it will transfer you the gold for consideration of the monies that you have paid.
In this situation, you are essentially treated as a creditor to the institution, as opposed to the legal owner of the gold. This means that even though you have made a purchase of gold from the institution, you are not the “owner” of the gold until you have possession of it.
You may wonder what difference this makes. Assume, that the entity holding on to your gold becomes bankrupt and liquidators have to liquidate its assets to pay off its existing debts. If you have bought from the institution a “promise” that the gold will be transferred to you, you will be classified as a creditor that the institution owes you gold for. However, the gold still belongs to the institution instead of yourself.
As a result, the liquidator can sell off the gold to pay off the entity’s existing debts. Only if there is anything left will the liquidators pay you as the creditor.
Conversely, if you are the legal owner of the gold, then any gold stored with the institution on your behalf legally belongs to you. This means that the liquidators will not be able to sell it to pay off the existing debts. In other words, your purchase will be protected by law, and you will be entitled to retrieve the gold you have purchased (and store it elsewhere).
So how can you ascertain whether the gold that you have purchased from any institution legally belongs to you, if you do not have possession of it? Basically, if you are the legal owner of the gold, the institution should be able to produce an invoice that precisely identifies which of the institution’s stored gold belongs to you. The institution can do so by assigning either a unique identification number or a barcode to each unit of gold that it stores in your name. In other words, the gold is stored on a “segregated ownership basis”.
On the other hand, if the institution provides an invoice that merely provides that “5kg of gold” is being stored for you, without stating which of the gold bars in its storage exactly belongs to you, then you are considered to be a creditor of the institution rather than an owner of the gold. This is because you have only a generic claim against the institution for the assets that it holds, such as gold.
Can I Import Gold Bars/Bullion From Overseas?
There are no laws or regulations preventing you from importing gold bars and bullion from overseas. In fact, the Singapore government encourages investors and consumers to store their gold in Singapore. Singapore is also one of the jurisdictions where there is no goods and services tax imposed on the import of precious metals for commercial or personal use.
However, there are strict criteria that must be satisfied before the exemption on goods and service tax will apply:
- The gold is of at least 99.5% purity.
- It is capable of being traded on the international bullion market.
- It bears a mark or characteristic that is internationally accepted as guaranteeing its quality, such as the hallmark of the refiner, or being branded with the name of the bank that sold it (i.e. gold bars that bear bank names such as Credit Suisse and UBS).
- The gold bar is not a decorative bar, or a collector’s item. It must instead be traded for its precious metal content, and not because of its rarity or numismatic characteristics.
Is There a Limit to How Much Gold You Can Own in Singapore?
There are no laws imposing limitations as to how much gold you can own in Singapore. Gold is a form of personal wealth, and like cash there is no restriction to how much of it you can own.
Likewise, and in line with how Singapore is seeking to encourage consumers to deposit their gold in this country, there are also no capital gains tax, export taxes or estate taxes for holding gold bullion in Singapore.
Where Can You Store Your Gold?
Whether you choose to store your gold in Singapore or overseas, the manner of storage is more or less the same. You can store your gold in a bank, or in a private storage vault facility. Each comes with its own pros and cons – for example, it may be cheaper to store your gold in a bank than in a private vault.
Storing gold in banks, however, may cause additional hassle if you wish to retrieve your gold easily at a later point in time. This is because you must be physically present at the bank’s safe deposit box. Private vaults, on the other hand, may have more flexible withdrawal policies.
There is also a so-called “third” option of purchasing property (either in Singapore or overseas) and storing your gold in such places. While there might be no storage fee incurred in storing gold at your own personal property, keep in mind that you are subjecting your gold bars to common risks such as housebreaking and theft.
Ultimately, you will have to make an assessment amongst the different available options when deciding how to store your gold. However, each choice comes with its own consequences.
For example, certain foreign jurisdictions may tax you for importing gold into their country. If the political situation in these countries are volatile, you may also face a situation where there is no guarantee of the safety of your assets, such as in the event of a gold nationsalisation.
Do You Risk Losing Gold in the Event of Gold Nationalisation?
In theory, it is always possible for any jurisdiction to enact laws to compel its residents to sell their gold to the state. In fact, there have been instances in the past where certain countries, such as the United States of America, Australia and the United Kingdom have chosen to nationalise the acquisition of gold from its citizens and residents, during times of emergencies. In these cases, residents have been forced to sell (or give up) their gold to the authorities, sometimes in return for a meagre compensation.
As a result, there is always the risk that the gold you have purchased can be nationalised by the country in which you’ve stored your gold. Therefore, you should consider storing your gold in a country where such gold seizures are unlikely to happen. Singapore is one such jurisdiction. Since it places a heavy importance on investor confidence, Singapore is unlikely to enact measures that will scare investors away, such as nationalising gold.
Under Singapore law, investment-grade gold or bullion stored in Singapore is private property of the investor, and is thus also considered to be out of reach of foreign governmental agencies such as the US Internal Revenue Service.
Beneath all the simplicity and allure of gold, you would have observed by now that gold has a special place in society – not only in respect of people’s fascination with it, but also the laws that are put in place to regulate gold ownership. You may be faced with a multitude of legal questions when you are dealing with issues pertaining to the ownership of gold:
- Whether the seller is a registered dealer?
- What are the applicable foreign laws if you decide to store your gold overseas?
- Can gold stored in banks be seized if the bank were to be liquidated?
- Whether your gold can be nationalised?
It may therefore be helpful to engage the services of a lawyer who would be able to advise you on these issues. You can get in touch with our lawyers here.
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