Albert Cheng with a set of gold jewellery he purchased in Vietnam years ago, intended as a gift to whichever of his two daughters gets married first - Dios Vincoy Jr for The Sunday Times

With the way its price has been shooting up year after year, it really does seem as if all that glitters is gold.

Investor interest in the precious metal is strong. It is seen as a hedge against inflation and currency failures and looks even more attractive now given our rock-bottom interest rates.

Studies have also shown that the gold price tends to move in the opposite direction from stock prices something that has proved useful in these volatile times.

Gold price has gone up by 440 per cent in the last 10 years, from US$315 an ounce in 2002 to US$1,708 an ounce last Friday.

Mr Dominic Schnider, head of commodity research at UBS Wealth Management, tips that gold will reach US$1,950 an ounce by the end of the year.

Mr Nicholas Trevathan, senior commodity analyst at ANZ Bank, said: In the long term, gold price will continue to increase. Gold is getting scarcer and more costly to produce.

He expects gold prices to reach US$1,780 an ounce at the end of this year, and US$1,890 an ounce in December next year.

In the past 10 years, the amount of gold (mined) has exceeded the gold discovered. At current production rates, known gold reserves will last only about 18 more years.

The keen interest of many investors is evident from more than 10,000 investors in Genneva, a gold trading company now being investigated for financial improprieties.

Genneva sold gold at a higher price than the prevailing market rate. It then offered customers a monthly discount of about 2 per cent on the initial investment. Customers can also opt to sell their gold back to the company at the purchase price after one or three months.

Investigations are still pending, and there is no word on whether investors will be able to get their money back as yet.

However, this is no reason to not invest in gold, which can provide diversification to a portfolio.

There are many ways to jump on the bandwagon but investors should look out for options that are transparent and reliable.

Mr Christopher Wang, head of investment advisory at ANZ Private Bank Asia, explained that funds can be invested in gold or into firms that mine it.

He said: All versions of the funds that invest in gold will track the physical gold price with very minor differences.

Physical gold

United Overseas Bank (UOB) is the only local bank that sells gold.

It offers a variety of different sizes, from wafers to cast kilo bars. The buy-sell market quote is set by the bank daily.

The price of a 1kg bar last Friday was $67,641.

Goods and services tax (GST) on the import and export of precious metals was lifted last month so UOB expects local demand for physical gold to increase by about 10 per cent due to pent-up demand.

It also expects increased demand from overseas customers who want to buy and store gold in Singapore.

This is the most risk-free form of investing in gold as investors can actually hold the bars.

However, there are storage costs unless investors plan to keep them under the mattress at home.

Depending on the size of the safe-deposit box, the annual rental rate can range from $120 to $520 at UOB.

Gold certificates

A gold certificate lets you invest in gold without actually holding on to the metal.

UOB issues certificates in multiples of 1kg, up to 30kg. There is no expiry and they can be used in exchange for cash or gold.

Similarly, you will have to ensure that these certificates are properly stored.

An additional risk of gold certificates is the credit risk of the issuer.

Gold savings account

When you deposit cash into a gold savings account, it is converted into grams of gold.

This is an option that is also highly liquid, as investors can withdraw from the account at any time. Holdings in the account are not subject to GST and can be exchanged for cash but administrative charges may apply.

UOB and Citibank offer this service.

This scheme is approved under the CPF Investment Scheme but is not covered under the Deposit Insurance Scheme.

Gold exchange-traded funds (ETFs)

These are listed investment funds that track golds performance.

There are also synthetic funds where the exposure to gold prices is achieved through derivative instruments.

Retail customers can trade in ETFs through their brokerages. An example is the SPDR Gold Shares, which is listed on the Singapore Exchange.

A DBS Vickers spokesman said the gold shares represent interest in the trust which holds physical gold or cash.

It is popular with investors who want exposure to gold without the hassle of taking delivery of it.

Mr Schnider noted that physically backed ETFs are preferred over those that are not.

Those that are not backed by the physical product hold even greater credit risks but pose no clear advantages over their physically backed cousins.

Gold-related equities and equity funds

Mr Michael Tan, head of premier wealth advisory at OCBC Bank, said: Gold-related equities like mining or exploration companies may have low correlation to the gold price.

They are also dependent on other factors like market sentiment, political unrest, closure of mines, which may affect the price of the underlying equity.

Mr Manuel Tenekedshijew, fund manager of the DWS Noor Precious Metals Securities Fund, said that when gold price goes up, the fund tends to outperform, but when prices tank, the fund swings lower.

The DWS Noor Precious Metals Securities Fund was launched here in 2006.

The fund, which complies with syariah law, increased 15.9 per cent in September but is still down 5.92 per cent over the past 12 months.

Mr Tenekedshijew said this was largely due to the increase in costs that mining companies faced over the past year.

The Schroder AS Gold and Precious Metals Fund has delivered 29.4 per cent returns since it started in 2008.

It has exposure to gold price movements through ETFs, futures and swaps. It also invests in gold equities and other precious metals when they are expected to outperform gold.

Originally published in The Sunday Times.