Discussion Forum

Had Singapore allocated more of its reserves to invest in gold to at least maintain its original 20% gold to foreign reserves ratio, we would have even much higher reserves now. In contrast, GIC and Temasek investment returns over the past 20 years, as managed by the elite of the elites, have been performing poorer and poorer as seen from their diminishing annualised returns. In a world of much higher risk and volatility now, do you still have faith that the elties can generate annualised returns of 10-20% over the next few years for our reserves?

http://app.mof.gov.sg/reserves_sectionone.aspx

So you see, even though gold does not generate interest income, it offers the protection of our wealth by its very nature over the long term.  Have the elites the wisdom to see why countries like China and Russia are stocking up more gold nowadays, they should take heed and follow their footsteps. No need to analyse and debate over what asset class or portfolio mix to invest in. Just buy gold and silver to match 20% of our total reserves. The world will have more faith in the Sing $ then and we will be better positioned to withstand the aftermath of the next economic or currency disaster.

You never see the big picture. Though the elties may not be able to generate annualised returns of 10-20% over the next few years for our reserves, they can generate many good overseas jobs for Singaporeans. You may also  not aware many elite fund managers in western country also cannot generate 10-20% returns in the next few years (this is global problems).  Imagine the money is converted to gold, it only collect dust in the safe and cannot  value add to our economy.

Thank you for your comments. Please help me understand how, by not stocking up more gold reserves now, the government can then create overseas jobs for SINGAPOREANS with the country's foreign reserves.  Do you mean with government investments in foreign countries, SINGAPOREANS will be hired to fill up positions in their businesses?  Even if this is the case, how many SINGAPOREANS will the government be hiring to go overseas and fill up these positions (which is high paying I supposed, otherwise how to benefit SINGAPOREANS)? Few will benefit I think, unless the reserves are invested in labour intensive industries. Even so, demand for labourers will easily be met by the foreign population pool, so how to benefit SINGAPOREANS?

With your rationale, does it imply that Singapore should then sell all her gold away so as to maximise our reserves for foreign investments?

I am not suggesting that the government should be converting all its foreign reserves to gold, but at least the amount that represents the original gold reserve ratio when our late Dr Goh bought the first 100 tons for Singapore, i.e. 20%.  There are still the remaining 80% of foreign reserves to play with if you will.

With our huge amount of foreign reserves, any drastic devaluation of foreign currencies will wipe out much of the value, especially since much of it is invested in American and European banks, which we are seeing greater risks by the day. Have we not learned from the last crisis how billions can be wiped out overnight? What jobs can we talk about if the value of our investments is wiped out? In contrast, gold will always retain its intrinsic value relative to the money supply in an economy throughout history, even though its price can fluctuate in the short term. It is the assurance of preserving our wealth as a country and individuals for the long term. This is the bigger picture.

Billions of dollar is wipe out because we focused to invest heavily in stock market and not in setting up new business to create jobs.   If you invest billion dollar in setting up new business to create jobs for Singaporeans,  there is no way the multi billion dollar investments can be wiped out overnight like our investment in western banks and stock markets. By investing in new business, beside creating good jobs, you also generate decent return like the stock market without incurring the stock market risk.

I think your reply is deviating away from topic and not addressing my earlier response questions at all:

" Please help me understand how, by not stocking up more gold reserves now, the government can then create overseas jobs for SINGAPOREANS with the country's foreign reserves.  Do you mean with government investments in foreign countries, SINGAPOREANS will be hired to fill up positions in their businesses?  Even if this is the case, how many SINGAPOREANS will the government be hiring to go overseas and fill up these positions (which is high paying I supposed, otherwise how to benefit SINGAPOREANS)? Few will benefit I think, unless the reserves are invested in labour intensive industries. Even so, demand for labourers will easily be met by the foreign population pool, so how to benefit SINGAPOREANS?

With your rationale, do you imply that Singapore should then sell all her gold away so as to maximise our reserves for foreign investments? "

If you have good practical ideas, you may like to start a new, separate topic like "How the government can invest our reserves to create good jobs for Singaporeans and generate better returns". I am sure many people will respond to you.

Singapore prints the Sing dollar based on our foreign reserves so as not to devalue its worth. However, if our foreign reserves depreciates in value (due primarily to the weak Euro and US dollar), we will have less room to print money to meet the country's financing need.  Hence, we are left only with one turbo engine called "economic growth".  But this engine will falter as the population ages and now we can only make it up with mass immigration to boost the GDP - which we well know it is not a sustainable strategy for indefinite growth.

Had we maintained our original 20% gold backing to foreign reserves, the financial risks we face now would have been mitigated to a much larger extent. The government should really start stocking up more gold and silver now, when both precious metals (used as money for thousands of years) are still relatively undervalued now, while we still have the chance to protect our reserves. Otherwise, when we are forced to print more Sing dollars in the face of declining growth and falling foreign reserves in the future, then the value of our Sing dollar denominated assets is sure to plunge. We may not be the ones suffering, but our children and grandchildren are likely to be.