This chart triggers two emotions in me
Gold keeps carving our new all-time highs and was recorded at over $4,100 per ounce yesterday.
On the one hand:
- I’m happy because I’ve always been over-invested in gold
- But I am also worried because I don’t want to live in a world where gold moons like some crypto sh*tcoin
Why is gold reaching new highs?
Some potential reasons:
- Trust is broken. In a world where the US and the EU seize assets of sovereign nations (Russian assets, and more recently even Chinese companies in the Netherlands), Central Banks across the world are accumulating gold. It is one of the only highly liquid assets without counter-party risk.
- Fear. Gold could be rising because the market senses a large conflict is around the corner.
- Greed. Gold goes up so the FOMO trade is on.
- Debt and fiat debasement. The rise in gold could be a result of all the money printing past, present, and future.
Should I buy gold now?
I hate to buy things when they seem overbought. But honestly, I don’t know.
Historically having 5-15% of one’s portfolio in precious metals was deemed to be very reasonable. It’s only in the past few decades that Westerners have forgotten that gold even exists.
The reality is that the emerging world is very fond of gold and silver.
Some people choose to allocate funds to buy gold and silver on a monthly or quarterly basis, no matter the price.
I went to visit one of the world’s largest precious metals vaults in Singapore
Silver Bullion Singapore allows one to buy gold and silver remotely. The stocks are audited by some of the largest international audit firms such as Bureau Veritas. You can buy and sell remotely, and even borrow against your bullion.
They were kind enough to extend a discount for followers of The Wandering Investor. If you sign up using our affiliate form, you’ll get discounted storage and lower spreads/tied three pricing on your metals purchases.
Even if you sign up on your own, you can retroactively use this form to request the discounts, so go for it 🙂
I was in Singapore and went to see the facilities; I was truly impressed.
If you are interested in speculating on Gold and Silver mining companies, then I recommend this newsletter.
You’ll notice I said “speculating,” not “investing.”
Expect more chaos and volatility
We have witnessed a lot of volatility in the past few years and seeing the direction the world is heading in, I do not expect a drop in volatility.
You best defense is to be diversified into asset classes that make sense, and across jurisdictions. You’ll take a few hits here and there, but you’ll be left standing in the end.
This is what we do at The Wandering Investor. We help build resilience through internationalization and diversification.
To a World of Opportunities,
The Wandering Investor.
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Transcript of “Silver Bullion in Singapore: In-person review of one of the largest private gold and silver vaults”
LADISLAS MAURICE: Hello, everyone. Ladislas Maurice from The Wandering Investor. Today, I’m in beautiful Singapore, and I am checking out one of the world’s largest private vaults for precious metals, art pieces, etc. And I’m here with Gregor, who is the CEO of this private vault. Gregor, how are you?
GREGOR: Very good. Thank you for visiting.
LADISLAS MAURICE: Yes. We’ll be visiting all of the facilities in detail, looking at the safety deposit boxes, getting an idea of the services that are offered, the pricing, etc.
Why store gold and silver in Singapore?
LADISLAS MAURICE: But before we do all of this, Gregor, can you explain to us why Singapore as a jurisdiction? Why did you choose to build this company here?
GREGOR: Our focus has always been towards systemic wealth protection, meaning we are worried about where the world is heading towards. If you’re worried about that, you have to look, how do I protect my wealth? Gold and silver makes a lot of sense if you own it physically, because it’s apolitical, it doesn’t have counterparty or jurisdictional risk stored properly. But it’s physical, so you need to decide, where am I going to put it? We have many countries to choose, and there are a few countries, Switzerland, Singapore, few others, which, I think, make a lot of sense nowadays. And we found that Singapore, we saw, is the best choice. And we basically decided to concentrate everything in Singapore and provide the storage services.
LADISLAS MAURICE: And I think one aspect of your company that’s quite different from your competition, because there are other storage facilities in Singapore, is that yours is entirely Singaporean, without counterparty risk. Am I correct?
GREGOR: If you’re storing with a company, or if you’re storing your gold somewhere, you have to ask yourself, how many companies are between you and your gold, and what jurisdictional and counterparty risk you have with these companies. We wanted to minimize the amount of counterparties our client has with us and minimize the amount of jurisdictional risk. And the best way of doing that is to only operate in one country.
So said, if there is a geopolitical systemic event, we can essentially just go back to the courts of that country and no other country when something happens. If we were to have a nationalization, for example, in a foreign country, and we will be getting requests about nationalizing gold into a foreign country, we can easily say, “No, we don’t recognize your jurisdiction.” And if need be, bring the matter up with a Singapore court. Many other companies might not have the luxury of doing that, because they might be operating in these countries. I think that was an important distinguishing factor, is that we built the company around.
LADISLAS MAURICE: And I think this is really important, because when you go online, you see a lot of these services, like, in the US, etc., where they tell you, “You buy gold with us, and then we can store it for you in the Cayman Islands, in Singapore, in Switzerland.” But at the end of the day, you’re still dealing with a US company, and you’re taking on US jurisdictional risk. Here, by dealing with a company that’s entirely Singaporean, you’re essentially just dealing with Singapore risk from a–
GREGOR: From a jurisdictional point of view, yes. Because we are completely vertically integrated, and that’s very unusual in our industry. We can provide liquidity through Silver Bullion, we have the vaulting company, which is a safe house, which is fully owned by us, and the facility we’re sitting in is also fully owned by us. And that means, as we say in the US, the buck stops with us. We don’t have any counterparty which has any material sort of risk involved, so we don’t have to rely on other parties, which then means we have full control. And I’ve been very adamant in creating systems which are so transparent, that any mistake we make is going to be apparent, and that’s going to build trust with a client.
It’s very much been for me to build a better mousetrap and protect the clients from ourselves as well. And that’s how we build the trust so customers ended up coming to us. And then it’s really been a matter of growing one customer at a time, essentially.
Tour of Silver Bullion silver vault
LADISLAS MAURICE: Let’s go see some of the storage facility right here behind.
GREGOR: Sure.
LADISLAS MAURICE: It’s really impressive. Look, I’ve been to a lot of gold and silver storage facilities all over the world. This is my first time checking this one out here in Singapore. I mean, it’s just, this is just part of it, and it is just massive. And I see that you have a fair amount of spare capacity. Can you tell us about this specific room? Because there’s a lot of other rooms. This is just silver, right?
GREGOR: This is probably, it could be the highest capacity vault room worldwide. We’re talking with Reuters, and they told us the biggest vault now has about 6,000-ton capacity. This room alone can do about 10,000 tons. It can hold about 30% of annual worldwide production of silver.
LADISLAS MAURICE: How much?
GREGOR: About 30%.
LADISLAS MAURICE: Thirty percent of annual–
GREGOR: So, about 320 million ounces. In terms of recycling and mining is about a billion ounces coming from the supply of silver per year, so we can hold about 32% of annual silver production from all sources. It is truly, from a vaulting perspective, this is very unusual. And we were able to do it because the floor in this building has a 90 kilo Newton floor loading. To put that in perspective, a car park usually is 2 kilo Newtons, so we are 45 times stronger than a car park, which means I can stack silver 12 meters high, and that gives me these really high capacities. It means that my marginal cost of storage is very low.
And that was one of the ideas of creating all of this, because usually gold doesn’t require a lot of space. Silver needs a lot more space, but it’s too valuable to put into an LME warehouse, where you don’t have the security. And so, oftentimes, silver doesn’t have a proper place to go. And as our name says, we are sort of partial for silver, so we wanted to make sure that we have a high capacity, high security storage capacity for silver in particular.
Storage costs for physical gold and silver
LADISLAS MAURICE: What are the storage costs on an annual basis, roughly, for silver and for gold, roughly?
GREGOR: It depends so much you store, but from our standard pricing under the S.T.A.R. Storage Program, starts at 35 basis points and goes down to 25 basis points per year. To put that in perspective, say, gold ETF, like the GLD, it’s around 40 basis points. It’s quite competitive. When you’re going to silver, so it’s a bit more, you’re looking between 70 to 50 basis points on an annual basis what your value.
LADISLAS MAURICE: Which is very, very competitive. Cool. And also, there’s an affiliate link below. If you use it, you can get a discount on your storage here.
Buying precious metals remotely with S.T.A.R Grams program
LADISLAS MAURICE: This is specifically for silver. You can help people buy remotely, sell remotely, do the storage. You can do all of that entirely remotely for people, right? You have multiple programs?
GREGOR: Yes. Essentially, if you want flexibility while still having ownership of your metal, we have the S.T.A.R. Storage Program, where we have two flavors. You can go S.T.A.R. Grams, in which case you’re buying a fungible amount of gold. You have a gold bar, and you basically buy a portion of the gold bar. And you actually get a report where you see a photo of the gold bar with the exact percentage that you have of all these. But it allows you to buy $200 each month, for example. Or, otherwise, we have the S.T.A.R. Parcel system, where you’re buying specific bars which are uniquely yours. And in either case, you can sell them back online whenever you want, essentially.
Right now, we are accepting sellbacks 24/7. We have a little bit of a limitation in volumes during the weekend, because the markets are closed. But I think the limitation is half a million during weekends and then basically unlimited during working days.
Premiums on physical gold and silver purchases
LADISLAS MAURICE: What are your average spreads, roughly, or premiums versus spot? Let’s talk about premiums versus spot. For gold, let’s say, a typical 100-gram bar, and for silver, roughly?
GREGOR: For our S.T.A.R. program, for grams, it’s about 2% for gold. When it comes to the actual bars, it’s different because it depends on what type of product you’re buying. A coin tends to have a higher premium. But you also have to understand that when you buy a physical premium item, that premium itself can be an investment. Because during a crisis, the premium of coins tends to go higher, and for silver, it can be extreme. I mean, they can go up 50% of the value of silver by themselves. When it comes to the coins, we are looking probably more like 2%, 2.5%, 3%. But if you go to the one-kilo bars, the spread is very low. You’re looking at probably less than 1%.
LADISLAS MAURICE: Which is very competitive pricing. I mean, the best place in the world to buy gold, generally speaking, in terms of pricing, is the US. Once you venture out of the US, you go into Europe, Latin America, some parts of Asia, the premiums are generally higher. But here, the pricing is very competitive.
GREGOR: It’s gotten more competitive over time. And you have to understand that we are dealing with, let’s say, retail clients, but we’re also dealing with the big institutional clients. And so, that means our margins have been reducing over time, especially as we’re able to get more volumes in and then slowly creating this market. And we expect things to get more competitive over time, especially as these larger amounts and volumes are coming in.
LADISLAS MAURICE: Okay, so concretely, the way it works, if I want to use that S.T.A.R. Storage facility, where I can buy, sell, do everything remotely, I just literally go on to your website, I sign up.
KYC requirements for gold storage in Singapore
LADISLAS MAURICE: What sort of KYC do I need to do?
GREGOR: That depends a little bit on what account you’re doing. It can be a personal, it can be a joint, it can be a company, it can be a trust. Easiest ones if it’s a personal account, in which case we just need to have a copy of your passport. I think, compared to a bank, is a much simpler process, but we do have to have an understanding of provenance of funds, a minimal one. And we would have to have a bank account from which the money is going to be transferred over.
And one rule that we have is that the money would have to go back to a bank account in your name. It doesn’t have to be the same one, it can be a different one, unless you want to take delivery of the bullion.
Buying precious metals with crypto
Or, you have the option of selling in Bitcoin as well, or in purchasing Bitcoin. That’s another option.
LADISLAS MAURICE: Just Bitcoin, or other cryptocurrencies?
GREGOR: Bitcoin, Ethereum, I believe, is still Bitcoin Lite being accepted, USDT–
LADISLAS MAURICE: Perfect.
GREGOR: And a few others.
LADISLAS MAURICE: Okay. Do I need to send you all these documents notarized physically?
GREGOR: No, no.
LADISLAS MAURICE: Just online?
GREGOR: No, no.
LADISLAS MAURICE: So online, just my passport, source of funds, utility bill, good to go. And then I can buy?
GREGOR: Usually, within a couple of days, it’s all done, you can do it online.
LADISLAS MAURICE: Perfect. And then I can buy with crypto?
GREGOR: Yes.
LADISLAS MAURICE: And then I can sell and can send money back to my account?
GREGOR: You need to give us the address on which we’ll be sending back and forth. It’s something that requires a lot of security. We’ll usually have a video call with you, make sure it’s being set up, and if you ever want to change it, we’ll have the video call with you as a way. As we know, transactions in Bitcoin cannot be reversed, so it’s very important that there’s security on these things. But these are all meant to protect the client and us in many ways. But other than that, it’s, I think, really straightforward.
LADISLAS MAURICE: Cool. So even trusts, companies, foundations, etc., fine?
GREGOR: Yes.
LADISLAS MAURICE: Cool. This is a big advantage, different structures, you can pay in crypto. The KYC doesn’t need tremendous amounts of paperwork, so it makes it easy. These days, doing anything financially internationally is increasingly complicated, but you’re making it easy.
GREGOR: Yes. Sometimes, it takes six months to open account with a bank nowadays.
LADISLAS MAURICE: Don’t get me started. Then it takes a day to get kicked out.
GREGOR: [laughs]
P2P lending using metals and luxury watches as collateral
LADISLAS MAURICE: Cool. Before we go to the safety deposit boxes, I’m seeing people working on watches here.
GREGOR: Yes. This company is called The Xcess, and it authenticates, repairs, and does maintenance for watches. It will also do a valuation of the watch. It allows people to bring the watch in, and, in the near future, you’ll be able to put it as a kind of consignment, whereby, let’s say, you have a $100,000 watch, and you’re wanting to put in, in the storage, which will be held by the safe house, covered by our $1 billion loss insurance. And it can be in a bonded facility, so you don’t have issues with taxes. And if you decide that you would like to offer it for sale, let’s say, $120,000, then we have what we call an Ask system where, essentially, owners can say, “I’m willing to sell this watch. I’d say, $120,000.” And we will then display it to people coming to the facility.
Because watch owners, sometimes, I say, is a bit like Pokémon hunters, they’re looking for the right watch. And so, over time, we expect to be able to build up quite a collection of watches, and have owners be able to sell amongst themselves. We are not selling watches, we just act as an escrow, providing a small fee in-between. And you have the option as well to collateralize your watch. With our peer-to-peer lending system, which S.T.A.R. Grams users can also use, S.T.A.R. Parcels, you can take a loan up to about 60% of the value of your gold, which interest rate has been around 5% per year, and it will be applying this to watches as well. And so, if you’re a watch owner, you essentially are able to get liquidity out of your watch.
And of course, this applies only to certain type of watches. We shall say, let’s say, investment type of watches which are valued at least $20,000 and above. And we’ll have evaluations that’s conservative enough that we can make the whole process very low-risk process, basically.
LADISLAS MAURICE: I have some close friends of mine that have been using this facility for their gold for a number of years, and they have used the system where they use their gold as collateral to get money for other deals, and then they can pay back a year, two years later. And yeah, the interest rates they paid was, like, about 5%, 5.5%, I remember. They’re really happy with the service.
GREGOR: We had 20,700 loans since we started. It’s been around for about eight years. We’ve done about $900 million in loans. We never had a default. And the reason we never had a default is that we are very conservative in giving the 60%, 65%. We also have a so-called sweeper fund, which essentially is a bunch of money sitting there. When one party is late in paying, the sweeper fund will make a short-term loan to the party which is late to make sure the counterparty gets the money on time. The sweeper fund basically acts as a kind of insurance in case somebody is late in payment. Worst case, we always have the collateral anyway, but that basically makes the system very, very smooth, and not having a default in 20,700 loans is a good track record, basically.
LADISLAS MAURICE: Impressive. And do you have any sanction countries that you can’t deal with?
GREGOR: Yeah. Basically, we are falling under the laws of Singapore. I would say the countries which we would not be able to accept is the usual, Afghanistan, North Korea. We cannot take Russia, or it’s quite difficult with Russia. It’s basically the usual set of countries.
LADISLAS MAURICE: And you take US people?
GREGOR: Yes. Yes, yes.
Precious metals storage for US citizens in Singapore
LADISLAS MAURICE: Okay. Can you elaborate a little bit on the situation for US people? And, again, this is not tax advice, speak to your own tax advisor in the US, but generally speaking, the way some people have been interpreting the rules in terms of disclosure and all that?
GREGOR: One thing to understand is, when it comes to taxation or other matters like that, is, are we a financial institution? Are we not a financial institution? And the answer is we are not a financial institution. There is intergovernmental agreement between the United States and Singapore, FATCA, basically, which defines what a financial institution is and what’s not. Usually, the American definition is very broad. It says anybody dealing commodities can be seen as a financial institution. But in the context of this intergovernmental agreement, Singapore said this is too generic. If you have grocery store selling an apple might be seen as a financial institution under that definition.
It was defined as somebody dealing in commodity futures. We only deal with physical, so we are not a financial institution under Singapore law. We are not a financial institution in the context of the agreement with United States. Does that mean when you’re storing gold with us, there’s a financial account? Well, we are not a financial institution. Whether your tax advisor saying that the fact that you can go online and you can sell something online makes it sort of like a financial account, that’s essentially for you and the tax advisor to determine.
But another alternative, which is where we’re heading to now, is that you can choose to buy a gold bar or something else, and you can put in a safe deposit box. And if you put it in a safe deposit box, then the US tax authorities, IRS, is very clear that the safe deposit box is not a financial account. You’re just renting a little area, a safe space, and you put something in. One important thing, I think, to point out is a safe deposit box is defined as us not having access. It’s the fact that you cannot go online and sell something back, and you as the only one having access to it, or your authorized representatives that makes it a safe deposit box.
And so, from a taxation point of view, it’s quite clear that it’s non-reportable item. But of course, as you mentioned, always check with your tax advisor.
LADISLAS MAURICE: Cool. Theoretically, Americans can then come here, just buy gold physically, you offer the service, put it themselves in the safety deposit box, and then they’re good. Or, use a lawyer here, give power of attorney to a lawyer to do this.
GREGOR: Yes. Or, for example, you can have authorized representatives. If you’re coming in and you want your kids and maybe your wife to have access to support something happens to you, you’re able to set that up when you come here. And so, if something happens, your wife or somebody could come and have access to it. It’s some of the values of safe deposit boxes.
Safe deposit boxes in Singapore
LADISLAS MAURICE: This is the low-security area, because you also have the higher security area, which we went to a bit earlier, specifically for gold and silver. This is pretty much for everything. You can put gold, you can put silver, you can put documents, etc. We’re looking at prices. I mean, the small ones, you’re looking at about $200 a year, and the medium ones about a bit over $300 a year. The pricing is very competitive from an international basis. Let’s go back to the pure gold area and to that segregated storage that you offer online. This, I know I always have access to. I can just come here, I have my key, I show my ID, I can have access to this.
GREGOR: Maybe I mention a few special features of these boxes.
LADISLAS MAURICE: Okay.
GREGOR: Compared to other boxes in Singapore, these ones are reinforced boxes, because the building is a very high floor loading, we’re essentially able to put four times more weight in these boxes compared to what is usual, at least in Singapore. Another difference is, to access these boxes, you need to have two keys. One key is a master key, which is being held by us. The other key is provided by the client. Now, one problem with the system, which is how these boxes usually work, is that I can never prove to my client that I didn’t make a copy of his key. And so, our client, in theory, could always say, “Hey, maybe you had an extra key. Maybe you accessed my box. Maybe you took something out.”
LADISLAS MAURICE: Yeah, because if you lose the key, you need to make a new one, right?
GREGOR: And I cannot prove to you that I didn’t do something. What we did with these boxes, in addition to having these two keys, once you access the internal box, you have a tamper evidence seal with a unique number. When you deposit something, you basically sign a document and you verify that we applied a tamper evidence seal with a certain number, and you sign off on it. The next person coming will sign off that they removed this. That way, we also have a certain trackability. If you have three people having access to the box, who last accessed it. We don’t know what you put inside or what you’re taking out, but we know who is going to have access. And this tamper evidence seal provides us with additional form of integrity protection. It also enables us to provide insurance on these boxes if you want to have that.
How does Silver Bullion audit metals deposits?
LADISLAS MAURICE: Cool. I think we’ll discuss insurance later, because this is an interesting topic. Normal safety deposit box, and then there are the ones we couldn’t film. These clients don’t quite have access to them. How does it work from an audit point of view? Let’s say, I’m buying gold remotely with you through that S.T.A.R. Storage system, whatever, a few hundred thousand dollars. It’s there. It’s sold. I want access to it. How does it work? And what audit mechanisms do you have in place to guarantee that what I’m buying online is really here? How can I verify these things?
GREGOR: When it comes to verification, the first thing is you have to understand what you’re really buying, because, oftentimes, when you buy something, you think you have gold, but in reality, you only have price exposure. You might not really have gold behind it. And so, in our case, when you purchase something, you purchase a specific bar of gold or silver with a unique ID set. It’s always uniquely identified. You buy it with an invoice, because that invoice is the strongest document to certify the transfer of ownership, going from our balance sheet to your private property. And so, that’s the first part to consider, is the legal aspect of it.
Once that happened, we basically became an agent who stores your property for you, provides liquidity and insurance. But if anything happens to us, our creditors cannot take that gold. We cannot take that gold and collateralize it. We cannot sell it to somebody else. And that’s a key, key thing to understand. You need to have a unique ID of the bar or an identification of it to really have transparency. Because if all you have is a quantity of bullion, you have no idea what’s happening behind. Everything we do is by unique ID. You also get, when you buy it, you get a photo of the bar, and you have access to what we call a parcel ownership list, which lists all bars in the system with anonymous ID of each client.
And the reason why that is important is, how would you know, otherwise, that we didn’t sell a specific bar to five different clients? That’s another important part. And that parcel ownership list forms the basis for audits. We have four audits per year from two different independent groups. One is Bureau Veritas. One is our financial auditors. And they, essentially, go and check about 30% of the bullion being there.
LADISLAS MAURICE: Thirty percent per year?
GREGOR: Roughly, yes. And when it’s being checked, they put a seal on the box. And unless this box was opened, they don’t recheck it next year. And by doing this, over the years, we just go through all of them. But another option for a client, which is unusual in the industry but which we offer, is that people can come and request a customer audit with one- or two-days’ notice, as we need to schedule it. You would essentially be able to come here and you can say, “I want to see my four bars I have and two boxes of coins.” And you can do it yourself, or you can have an auditor. We have some clients which tasked Ernst & Young, for example, to come and do an audit.
LADISLAS MAURICE: It’s, typically, your family offices, all that, that do this?
GREGOR: Yeah. It depends on the individual. It’s important to have that functionality.
LADISLAS MAURICE: And people need to pay for the service?
GREGOR: Yes. There’s a fee to it, around, I believe, $400 for two hours or so. It basically pays for the personnel and everything else. That’s the reality there. As long as you offer that service, people don’t mind paying it. And many other people, once they know it’s there and it works, they don’t really need to do the audit, because it’s the fact that it’s available, which is a big statement to say integrity of the system.
LADISLAS MAURICE: And then the auditors you use, one is a local auditor, and the other one is Bureau Veritas, which is, I mean, international. They’re everywhere.
GREGOR: Yes, it’s sort of the standard for the industry. And it’s good to have two different ones. That was for the S.T.A.R. Parcel system. For S.T.A.R. Grams, we have a newer generation tracking system, which we developed inhouse. We call it Gram Chain. And essentially, when a bar is added to the system, scanned, it stores the data and sends a hash of the data on a public blockchain, creating a tamper evidence record. And the system is done directly by the vault operator, so it’s a real time blockchain tamper evidence asset tracking system, which then is very good for being a proof of reserve system for gold that is to be used for, like, a S.T.A.R. Grams, for tokens, for collateralization and so on. And we’re slowly moving towards that system.
LADISLAS MAURICE: And when I open an account with you guys, one of the remote options, I send my money, and the money is on your account. At which bank is the money stored?
GREGOR: Our primary bank is DBS. DBS is the largest bank in Singapore. We have another account for CBC, but usually it will be on DBS Singapore Bank.
LADISLAS MAURICE: Cool. Essentially, one of the world’s most solid banks, when you send your cash here, which is, which is interesting.
Precious metals deposit insurance in Singapore
LADISLAS MAURICE: Let’s talk about insurance. Look, when I see a facility like this, and I think of Singapore, I’m not too worried about theft. I mean, you can literally leave your phone in a bar, and– [laughs]
GREGOR: And people run after you, saying, “Hey, you lost your phone.” [laughs]
LADISLAS MAURICE: [laughs] I’m not really worried about theft here. Scams, not particularly worried either. But what does your insurance cover? Not for this. Let’s not talk about just the normal safety deposit boxes, but the bullion storage facilities, the other one.
GREGOR: In vaulting, I think, you have three type of coverages that you need to think about. Theft coverage is a standard one. Somebody coming in, forcefully stealing something and running away. You have, if something happens, you do the police report, you send the police report, what happened to the insurance company, insurance pays. Another one is infidelity. That means you have somebody inside the company steal something. In that case, you call the police, you get a police report, you send to the insurance, insurance pays. And these two coverages are quite typical in the industry.
But then you have a third coverage, which is mysterious disappearance. And mysterious disappearance really is a key coverage, because what happens if I do have an inside job, but I don’t know what happened, so he got away with it. Or, what happens if I have a shipment of 100 bars of gold coming, and my processes are not good enough. I don’t count it correctly. There really are 99 bars, but I don’t realize that. I’m storing it as 100 bars. Six months later, finding out they’re only 99 bars. That’s a case of mysterious disappearance. Should the insurance pay? Well, if you have mysterious disappearance, they will pay.
And so, we have mysterious disappearance coverage, and that was the result of working with the specialist inspectors from Lloyd’s of London reinsurers to really build up the confidence and have the processes which are strong enough to cover for these eventualities as well. And that essentially gives us a very strong insurance coverage, and we can have mysterious disappearance loss for $1 billion and it will be covered.
LADISLAS MAURICE: What about natural disasters, etc., are you covered for that as well?
GREGOR: Singapore is very boring in terms of natural disasters. We don’t have typhoons, we don’t have earthquakes, even the weather doesn’t change much, as there’s some rain or not rain. Essentially, very little happening in that regard. And if you’re storing precious metals, you have to understand that it’s virtually indestructible. When we had the 9/11 attacks, there was gold stored at the bottom of the Twin Towers, and the gold ended up melting. And what you do, you come in, you recover it, maybe lose half a percent of its value in costs for the remelting, but then, essentially, it’s good again.
Even if the building were to collapse or burned down, it’s insured and can be represented. It’s very different matter for art, but precious metals, because they’re virtually indestructible in that sense.
Geopolitical risk in Singapore
LADISLAS MAURICE: What about geopolitical risk? Because I know people like to say, “Singapore, it’s safe, it’s kind of neutral, blah, blah.” I mean, it’s right on the Strait of Malacca. If there were to be an actual hot war between, let’s say, the US and China, everyone would want to take control of this area. It’s strategic, oil comes through, everything. Like, the Japanese came here quickly.
GREGOR: Well, they kind of conquered almost everything, but it is a big port, sure, but the way I will see things playing out is that, maybe the first part is to understand geography. China is well over 2,000 kilometers away. For China to invade here, they would, first, have to–
LADISLAS MAURICE: Japan’s even further.
GREGOR: they would, first, have to go through Vietnam, which normally doesn’t go well for countries. They would have to go through Thailand, and they would have to go through Malaysia, eventually reach down to Singapore. You have to understand that, let’s look at World War II. Switzerland remained a neutral country. Remained a neutral country because there’s a very important role for small, neutral countries to play in all of this thing, especially if they’re well-defended. Switzerland is well-defended. Singapore is well-defended. As a matter of fact, Singapore is one of the most highly militarized countries in the world, at about $21 million per square kilometer in defense budget. Most people are not aware, but it is well defended.
From a local, regional perspective, Singapore military forces, even though it’s just a city state, is actually quite a lot more powerful than, say, the bigger neighbors like Malaysia. We have three times the military budget. We can muster an army of about 420,000 people within a few weeks. Malaysia has about 60,000 professional workers with no draft. Singapore has military bases in Australia, in the United States for training, primarily, in Taiwan, in India, as well as in Thailand. And part of the reason is, when you’re a small city state, you want to have your military assets in various countries so you can essentially attack from different directions. And most of Singapore’s defense was predicated on Malaysia attacking as a regional item.
China, I really don’t foresee why China, why they would want to attack Singapore, because Singapore and China have very good relationships. The Chinese economic miracle was based on Singapore. Deng Xiaoping incident, early 1980s, he came to Singapore to see how Singapore managed to become wealthy, and they copied the Singapore model in some of the first special economic development zones, and eventually that created. A lot of mayors in China are being sent to Singapore to study how Singapore works as training. There are Chinese companies, oftentimes, they have big international projects, they will ask for a Singapore company to be part of it, to provide credibility and a neutral stance. Singapore is very valuable in its role of being neutral.
And the other thing, I think, to remember about China is, especially in the West, in the US, there’s this idea that China is going to be out and invade other countries. Historically, that’s not what China has been doing.
LADISLAS MAURICE: No, that’s what the US does. [laughs]
GREGOR: Well, I mean, take Taiwan, but Taiwan is a special case. I mean, Taiwan is a little bit like the civil war in the United States, having ended up with Hawaii being held by the Confederacy. And now another country saying, “No, Hawaii is not a part of your territory.” That’s a little bit the situation. Taiwan is a focus point, is something the Chinese putting their foot down.
US-China trade and currency confrontation
GREGOR: But you have to understand, when you go to China, Chinese aren’t really that worried about foreign policy as much. They’re much more worried about the local policy, because they’re over, what is it now, 1.3 billion people? And most of the Chinese are Han ethnic, which is one way why the country is so stable, staying together. They have a few minorities. And the bigger you get as a country, the more problems you have in keeping everything stable. The Chinese are not going to go out and try to conquer Vietnam, and other countries, and so on, because it’s getting more and more complicated to stabilize, and they don’t need more people.
I think that what China wants to do is grow economically, and it wants to defend its interest because it feels hemmed in by the United States. And so, a lot of what we’re seeing is a response to such increasing number of tariffs and other things. And I think the real war, it’s not going to be a hot war, but the concern I’m having is that we might end up with a financial/ currency war. I give you a little bit of context behind this. Right now, China, in my opinion, is preparing for a potential retaliation. And the ways they’re preparing is that they’ve been reducing the amount of US dollars they’re holding. We are at about $772 billion dollars being held. That’s down about 23% from two years ago. They’re not buying more debt, and they’re letting the old debt expire.
LADISLAS MAURICE: Yeah, they’re derisking.
GREGOR: At the same time, the price of gold, the spot price in China is higher than outside of China. If you have an import permit into China, because you need a permit to bring gold in, there are 18 international banks which have this, then you can make free money by taking gold from outside of China and bringing it into China. And that’s why a lot of gold is flowing into China right now, which is not necessarily being captured against official statistics.
And the next part is that China does not allow net exports of gold. To give you an example, if you’re a jewelry vendor in Singapore and you want to have jewelry being manufactured in China because it’s cheap and good, you would, first, have to ship in gold to get the same amount of jewelry back. But there’s no net selling of any gold going out. And so, you take these things in context, and you’re seeing that there’s a strive towards accumulating more gold in real assets and decreasing your reliance on the US dollar.
Why? The United States is doing three things now. They are blocking certain industries almost completely, right, when it comes to chip-making industries. And remember, the US isn’t just telling its companies, “You’re not allowed to transfer,” they’re telling Dutch companies and other companies throughout the world, “You’re not allowed to sell chip-manufacturing machines to China.” And of course, that’s upsetting to China. Then they’re trying to destroy Chinese champions companies. You take Huawei. There was a very explicit, very targeted way of trying to prevent Huawei from growing more. Why? Huawei had something like 130,000 researchers. I mean, how can Apple even compete with Huawei? Right? It’s a big threat. And the United States decided to just kind of try and eliminate it. That’s something that’s going to upset China.
And then you have support-based tariffs, 25%, we’re hearing 35%. Trump has recently been saying they want to put 100% tariffs on countries which don’t use the US dollar. The combination of these three things are making it so that China is becoming less and less reliant on the United States, because the more tariffs you put in, the more you lose the power to put more tariffs, and the greater the likelihood that there will be retaliation at some point, because you’re reducing the cost of retaliation. If I don’t trade with you, there’s no cause for me to do something bad to you.
LADISLAS MAURICE: Yeah. I mean, they’ve learned from what happened to Russia. That’s it, they’re preparing.
GREGOR: And so, unfortunately, in the United States, every party is just competing on who can put more tariffs on there, mostly because of local politics, and creating China as this image of this huge monster which is coming up, which isn’t always fully true. There’s a lot of internal politics in the US associated with this, but the net effect is that, at some point, China might retaliate. And what I mean with this retaliation is, if China were to say, “I’m going to dump all my US dollars and I’m going to make it illegal for Chinese companies to accept the US dollar,” then all trading partners to Chinese companies would have to sell the US dollars to buy some other currency or something else to trade with China.
And that can be a huge blow to the US dollar, because the United States dollar has such terrible fiscal deficits for so long, so much debt. It’s only backed by the trust people have in the United States dollar. This could cause a huge problem for the US. And the US would look at it as a financial attack. And one retaliation the US could do is to just embargo or sanction every Chinese company who doesn’t accept US dollars. And if that happens, you have a stop of trade. Because if I cannot accept US dollars, and I cannot accept Yuan, and anyways, the banks might not allow the transfers anyway, I’m not going to ship you the goods. And then world trade is going to hold.
And I think that’s the critical phase where, if trade stops, eventually, you could start actually with a hot war, Taiwan and so on. But China wouldn’t be coming down to independent Singapore. Whatever’s happening will be around the Taiwan area. But hopefully, we wouldn’t come to that stage, and there will be a way of restarting trade. And that’s where the book I mentioned earlier, Currency Wars by Jim Rickards. He was one of the people who played financial war games in the Pentagon. He was playing China, and he simulated scenarios like this, and he was able to restart trade by saying, as China, “I’m going to put my gold in a neutral country that other countries can also trust. And from now on, because we don’t trust the US currencies, we can trade using physical gold stored in a neutral country, and we just net out every day these trades.
And that was a way of restarting trade. And then later, you can figure out something else. But gold is that apolitical fallback thing which everybody can agree to trust, and Singapore is this country, along with a few others, where most entities will also be okay to trust Singapore. And I think that’s going to become a very important role. I call it the silver and gold hub sort of function, which I think, in the next years, there’s a real chance that some of these things might be happening, and I built this facility partially in view of these sorts of developments.
LADISLAS MAURICE: Look, I’m really impressed with what you’ve built here. Like I said, I’ve been to a lot of facilities, and this one really trumps them all.
How to get discounts at Silver Bullion using our affiliate link
LADISLAS MAURICE: Great. If you’re interested in buying gold or silver remotely, using all these services, or opening one of these safety deposit boxes, there is a link below, an affiliate link, you can get some discounts. Gregor was kind enough to extend a discount for people who follow this channel. There’s a link below.
Gregor, thank you very much for your time today.
GREGOR: Thank you.
LADISLAS MAURICE: I really appreciate it.
