There have been a lot of talk on using gold as an investment vehicle. To most, it is the face of the commodity bull run. Given if that one invested in gold rather than stocks in 2008, one would yield helluva decent returns in the former than a loss in the latter.
A recent few months ago, someone introduced to me gold trading as an investment strategy. Particularly in companies like Genneva.
In the face of many gold scams like HYIPs, I have doubts on my own with regards to the sustainability of the business model in the likes of Genneva and Gold Label.
Yet at the same time, it is indeed fascinating to see people really profiting from such schemes that runs for a significant length of time.
Perhaps I will list down the “For”s and “Against”s at first glance of investing in such a scheme, using Genneva as an illustration:
- Physical gold is retained by the investor
- Gold issued by a registered government bank
- A contract is issued by a legal entity
- Legal entity is ISO certified
- Legal entity is confirmed as a Associate Member of the Singapore Retailers Association
- Real life examples exist and currently profiting
- Not sold via MLM or pyramid
- Gold is on the bull run currently, supporting fundamentals of the “business”
- Whilst it is does not seem like a pyramid or MLM, do note that there are agents who take a cut in getting investors in. (This point is moot as FAs also get a cut for selling unit trusts).
- The physical gold that exchanges hands maybe a pure distraction to the “investor” since the “investor” is paying a premium over the actual worth of the gold. The premium alone seems to me like it is used to feed a ponzi. However, the explanation given is that the company uses these extra cash as working capital for the “vertical integration of their businesses”.
- The website does not seem very well maintained and they use very distracting words like “proprietary trading platform”, claiming that their method appeals to “sophisticated” investors etc.
- Nil disclosure on financial statements
There are 2 camps for such an investment scheme as seen in Lioninvestor’s website. His blog post had attracted many many readers and commenters . You may need sometime to read about them though.
I hope to delve more about the fundamentals and see whether the business model (though claimed to be legitimate) is sustainable or not.