Gold investors find no guarantee in their assets

 Straits Times
06 Feb 2013
Magdalen Ng

 INVESTORS who took physical possession of gold they bought at The Gold Guarantee - now the subject of a police probe - are in a fix.

Many face difficulties in offloading the precious metal as pawnshops such as Maxi-Cash and ValueMax are refusing to buy any gold associated with the embattled gold trading firm.

They fear that the gold bars may be seized by the Commercial Affairs Department (CAD) during investigations.

Maxi-Cash's senior brand manager Magdalene Eng said: "The police are investigating and we wouldn't know what the results are, better not to touch it (the gold) for now. It is quite a big risk to take."

The Gold Guarantee stopped making payments to investors about a month ago, and its founder Lee Song Teck has been uncontactable. Under the scheme it offered, investors bought gold at a premium and got monthly payments. Some took possession of the gold, while others left it with the firm.

The Straits Times understands that United Overseas Bank (UOB) has bought gold back from some of the investors, even though the bank is not obliged to do so since the gold was not purchased directly from UOB.

A UOB spokesman said: "If the customer does not have proof of purchase but the seal from UOB remains intact, the bank may decide to buy back the gold bar at a discounted price. The bank will assess each transaction on a case-by-case basis."

The indicative retail gold price at UOB yesterday was $66.65 per gram or $66,610 per kilobar, significantly lower than what most of The Gold Guarantee customers paid.

A retiree who wanted to be known only as Ms C. Lim - as some family members were unaware she had invested in The Gold Guarantee - said she bought a 1kg bar last year for nearly $90,000.

"I have no idea what I should do. If I sell, I will lose a substantial amount of money, but if I don't, what am I going to do with the gold?" she said in Mandarin.

As of yesterday, ValueMax was not accepting The Gold Guarantee gold bars, but operations director Yeah Lee Ching said there will be a new directive to allow for buybacks.

She said: "It will be on a case-by- case basis, and those who want to sell have to show that they have good title to the gold bar."

The CAD has confirmed on its website that it is investigating the gold trading firm, focusing on its business practices and whether any criminal offences have been committed.

On whether the customers are entitled to sell their gold as yet, a spokesman said in a e-mail response: "It is inappropriate to comment as police investigations are ongoing."

A lawyer who declined to be named said that whether customers can sell their gold depends on their contract. For example, if it explicitly states that they can sell the gold back only to The Gold Guarantee, then it is unlikely that they can sell to a third party.

However, he said that customers may want to seek legal advice before selling, because the sale may affect any claim that they might have against the gold trading company, and that the CAD does have the power to seize any gold that has been sold.

"Whether they do so depends on whether the seizure would further their investigation," he said.

songyuan@sph.com.sg