Gold Investment VS CPF Returns

gold vs cpf

Is gold always a great investment?

Is gold one of the best investment?

Should you invest your money in gold or should you keep it in your CPF?


Price in 1977: $161.10

Price in 2015: $1060.00

Annualised Rate of Return: 4.95%

$100 invested in 1977 will grow to $657.98 in 2015

CPF Special Account (SA)

Annualised Rate of Return: 4.43%*

$100 saved in 1977 will grow to $542.45 in 2015


A mere 0.35% difference in returns between the 2 tools means a $115.53 difference in returns after 38 years.

*CPF SA interest rate was significantly higher before the start of the century (2000). We have been receiving the guaranteed interest rate of 4% since 2000 because global interest rates have been set low since the burst of the dot-com bubble.

Actual interest received will be higher than stated as we did not include the new +1% interest applicable to the first $60,000 in our CPF accounts as it would make the calculated more inaccurate.


Does this mean I should invest in Gold?

There are always risks involved when it comes to investing. You will need to weigh between growing your money (over the long term) and your current/short-term money needs.

Growing your Money over the Long Term
Over the long-term, Gold provides you with a return that is slightly above the rate CPF SA pays you. However, Gold is also subjected to price volatility. Although the returns are higher, in the short-term, it is possible for you to lose money.

As you can see from the chart below, when investing in Gold, it is possible for you to experience a big drop in value, just like in 2013 where Gold prices fell by 27.6%! But Gold prices also can post huge gains, like in 2010 when it rose by 30.6%!

gold vs cpf

Overall the price of Gold tends to trend upwards, although you do have to hold it for a very long-term to be able to gain from the growth. If you withdraw during the time where after Gold posted huge losses, it will affect the long-term returns you get from Gold.

However, you should also note that over a rolling 5-year period, Gold has a 30% chance of making losses. Meaning if you invest in Gold in 2011, after 5 years in 2015, you could still make a loss even though a fair amount of time has passed.

Current/Short-Term Money Needs

If you need money in the short term, whether if it is for your BTO down payment or your emergency fund, you should avoid putting your money into Gold – or any investments that experience price volatility.

Consistency and stability are important when saving money to meet short-term needs. Your CPF SA fits the above 2 criteria. It is consistent (it will pay you the stated interest when it is due) and stable (Singapore is one of the few remaining AAA credit rated countries in the World).

In addition, because CPF is currently giving bonus interests out on our CPF savings, the rate of return on our savings is significantly higher than the 4.43% that we have stated above. Which makes investing in Gold less attractive because the returns from investing in Gold might not be adequate to compensate for the risks we take when investing in Gold.


The Middle Ground

Although CPF is consistent and stable, you cannot withdraw the money our unless you meet the withdrawal criteria. In a way it is inflexible. Gold is also inflexible because of the price volatility it experiences. As such, given the similar characteristics of both being inflexible and long-term orientated, maybe investing in Gold for higher returns above the CPF SA might not be a bad idea.

Read also: Things you MUST know about using CPF for Housing Loan