With a Commodity Linked Premium Currency Investment linked to gold, you can enjoy the potential benefits associated with gold because:
- Gold is a precious metal that typically maintains its value during times of economic and market uncertainty
- The investment can improve your hedge against certain currencies and inflationary pressures
- The investment helps diversify your investment portfolio
What are the benefits?
- You stand to gain from interest rates considerably higher than that of conventional deposits.
- You can set the target conversion rate at a level that you are comfortable with.
- Besides SGD, you can also choose to invest in other base currency from the major currencies e.g. AUD, USD.
- You can start investing with a minimum deposit of SGD30,000, while larger amounts can be placed for tenors of just one week.
Who is it for:
Gold Premium Currency Investment is suitable for investors who:
- Seek higher rates on funds
- Don't mind receiving payment in the form of gold
- Feel that the USD will weaken, so higher interest earned may buffer against the fall in the currency's value.
All you have to do is:
- Decide on the placement tenor and base currency to invest in
- Agree on a target conversion rate to ne applied between gold and the base currency
At maturity, you will get back both your principal and the interest in either the base currency or gold, depending on whether there is any conversion.
How it works:
Here is an example:
a. You have funds of USD100,000
b. You don't mind holding on to gold (XAU)
c. The spot price of gold is USD905
You will then:
- Agree on a target conversion rate of USD890
- Select a tenor of one month
- Be informed of the guaranteed interest rate that you will enjoy. In this case, let's assume it is 10% p.a.
On fixing day, which is two business days before maturity, it will be determined if you'll be repaid in USD or in gold (XAU).
|Scenario 1||Scenario 2|
|Gold trades at USD910 per troy ounce. As the USD weakens against gold, you'll get back your principal + interest in USD.||Gold trades at USD880 per troy ounce. As the USD strengthens against gold, you'll get back your principal + interest in gold.|
|You therefore receive:
USD100,000 + USD833 (i.e. 10% / 12 of 100,000)
|You therefore receive:
(100,000 + 833) / 890
* Figure has been rounded to the nearest dollar.
** XAU denotes per troy ounce of gold and XAU figure has been rounded off to the nearest two decimal troy ounces of gold.
What are your available options if you are repaid in gold?
- Hold on to it and wait for gold to appreciate in value
- Enter in another Commodity Linked Premium Currency Investment with gold as your Base Instrument to gain potentially higher returns
- Sell it off at the prevailing rate
A Commodity Linked Premium Currency Investment (CPCI) is not a deposit but an investment product. Unlike traditional deposits, a CPCI has an investment element and returns may vary. The returns of a CPCI will be dependant, to at least some extent, on gold prices and on movements in specified currency exchange rates. A wide range of factors may affect the price of gold and currency exchange rates. Investments in gold are subject to price fluctuations which may provide both opportunities and risks. A CPCI involves an option exercisable by the financial institution, which confers on the financial institution the rights to repay the proceeds of the investment at maturity in either the base or alternative instrument, which can then be converted into a currency of your choice. No physical delivery or physical deposit or withdrawal of gold will take place. You should consider carefully whether any gold investment is suitable for you, in view of your investment objectives, financial means and risk profile. Investments in gold are not deposits.
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