Is It Time To Include Physical Gold Into Your Personal Asset Allocation?

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Recently, I watched the documentary by Channel News Asia on Singapore Reserves: The Untold Story Part 1 and Part 2.  As I watched in awe how the Singapore government handle and managed their reserves through 3 different agencies, namely Monetary Authority of Singapore (MAS), Temasek Holdings and Government of Singapore Investment Corporation (GIC), I noticed that very much like managing personal finances, diversification and asset allocation is also an important aspect.  In summary, Temasek deals with shorter term and riskier investments like equities in various industries, GIC deals with longer term, safer investments like overseas blue chips, bonds and real estate, and MAS deals with foreign reserves.  In the foreign reserves, what caught my attention is the vast amount of glittery shiny golden metal that Singapore has in their stockpile.

With Singapore being looked upon as a 'A1 student' in managing its reserves, at least in my opinion, it makes me wonder if I should really start considering to include gold in my retirement portfolio.  This is especially the case when recently in a financial program in Taiwan, the speaker mentioned that Singapore has started accumulating gold since December 2022 with USD 1.79B worth of gold, to USD 6.27B worth of gold in July 2023 (as shown below) in a span of 7 to 8 months, probably due to the lack in long-term confidence of the value of the US Dollar.  According to BullionStar, MAS bought 68.7 tonnes of gold in Q1 2023.

Gold has been the main 'investment' for my grandmother, and now, my mother (in the form of jewelry).  However, I was hesitant to 'invest' and accumulate gold, primarily because of what Warren Buffett said, and I fully agree: 

"Gold, has 2 significant shortcomings, being neither of much use nor procreative... Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end."

True enough, being a self-proclaimed dividend investor, I mainly invest for income through dividends, or even earned interest.  However, gold does not provide any of these returns, unless it's price appreciates based on people's expectations or strength of the US Dollar, and subsequently sold to realize capital gains.  Otherwise, gold does not provide any income stream nor compounding effect that dividends and growth stocks provide.

However, with all the action going on within the Singapore government, probably it is good for me personally to start some form of investment into gold, as a form of value protection, and as a form of diversification (nope, crypto is not for me).

I think I may start to slowly accumulate gold, starting from next year when I am 40.  I plan to purchase a small gold bar (50 gram) per year, for the next 20 years.  This serves as a form of diversification, and a form of value preservation in case currencies devalue in time to come.  Without any hiccups, I will be able to accumulate 1 kilogram of gold bars by 60 year old.  How is this plan going to work out, I have no idea.  However, what I believe is some form of diversification will be beneficial for the total portfolio.  Time will tell its effectiveness.  Even if the value of gold doesn't appreciate by leaps and bounds, its value will not go to zero.  Barista FIRE, here I come...!

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