To say Silver Bullion has come a long way since founder and CEO Gregor Gregersen first started the company in 2009 would be something of an understatement. When completed later this year, Silver Bullion’s new building, The Reserve, will house one of the highest capacity vaults for the storage of gold and silver in the world. It will also serve as a one-stop wealth hub for storing and transacting precious metals, art, luxury timepieces, and other valuable assets.
Looking upon architectural renders of the 180,000 square foot building clad in 3,600 square metres of backlit onyx, it might be difficult to imagine that Gregersen’s first foray into the sale of precious metals began almost a decade and a half ago with gold and silver bars stored under his bed, hidden away for meetings with buyers with wads of cash at Aljunied MRT.
“Back in 2009, investment-grade silver was almost impossible to acquire in Singapore,” recalls Gregersen, who became interested in obtaining silver as a personal investment, in an interview with The Edge Singapore.
Shortly thereafter, the former financial data architect realised that there could be other investors in Singapore who might also be interested in acquiring silver for themselves. “So, I built a website with live pricing and inventory. A buyer could place an order, meet me with cash in hand and leave with a tax invoice and several bars of silver. The entire process was quite sophisticated and highly professional — aside from the method of delivery,” he laughs.
Gregersen’s sale of silver continued in this fashion until he had about $800,000 in revenue by late 2009, at which point the burgeoning market became clear to him and he obtained a proper office in Centennial tower.
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This move was a timely one — in October 2012, gold and silver bullion were re-classified as Investment Precious Metals (IPM) and became exempt from Goods and Services Tax (GST) in Singapore. Gregersen says this “significant move” by the Singapore government was a huge benefit to his company as it encouraged the purchase of bullion and transformed Singapore into Southeast Asia’s newest precious metals hub.
The importance of establishing trust
Gregersen started Silver Bullion as a result of a personal experience that convinced him that the global financial system had become “intrinsically unstable”.
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While working as a senior data architect for Commerzbank in Frankfurt in 2008, Lehman Brothers defaulted on US$35 trillion worth of derivative positions, triggering the global financial crisis. The speed of the ensuing financial contagion shook Gregersen’s confidence in the system.
“Most people don’t realise how close we came to everything imploding. Having worked at structured product desks of banks, I understood how reliant these derivatives were on the continued solvency of counterparty banks. These derivatives have become too large — being measured in quadrillions — and the counterparty risk is too intertwined, greatly weakening the resilience of the financial system as a whole. If one major bank defaults, the entire system could fall apart,” he says.
“In 2008, I witnessed the consequences of such a collapse,” he adds. “It started to dawn on me that if I really wanted to opt out of the system, I would have to find an intrinsically valuable and liquid asset that does not have financial counterparty risks.”
At the time, physical precious metals like gold and silver, one of the few assets that are intrinsically valuable, grew quickly in demand as investors rushed to buy them from every dealer or bank that still had stock. “By the time I decided to buy some physical silver, no physical bars were left. Banks and dealers would only buy back, and in the secondary markets, silver was trading at three times the official price”, says Gregersen.
Recognising how easily confidence in banks and counterparties could be lost, and how quickly the panic buying of physical gold and silver in a crisis exhausted limited physical supplies, his concern over larger systemic crises grew. It became clear to him that physical precious metals stored outside the financial system with minimal jurisdictional and counterparty risk would be a “failsafe” wealth insurance which would be sorely needed in the future.
He says: “In a crisis, people run to physical gold and silver because it is one of the few hard assets that, if stored correctly, have no counterparty risk, are time-tested and are highly liquid. Unfortunately, most people likely won’t understand gold and silver’s role as a critical failsafe until they have lost their assets in a systemic crisis.”
Gregersen’s experience during the Global Financial Crisis 2008 kick-started his drive to create an alternative, truly secure, form of precious metals wealth storage that could be independent of politics and counterparties.
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It was this obsession towards protecting customer wealth and his technical capacity to encode strong checks and balances in the company’s software systems that allowed him to obtain the kind of insurance and guarantees needed to earn the trust of — often similarly-minded — clients who now store over $900 million worth of precious metals with him.
Gregersen says he never tires of reminding his colleagues, many also company shareholders, that building and maintaining trust via superior transparency and specialised services will always be the key to the company’s success, which is a reason why the company does not outsource storage to third parties.
Fully-owned physical precious metals in a systemic crisis
According to Gregersen, precious metals are likely to play a pivotal role in our future. “While US-Chinese relations could eventually blow up into an actual shooting war, the likelihood of a similarly devastating financial warfare between the two global powers is becoming more and more likely,” he says.
He foresees a scenario in which China, pressured by increasing US trade sanctions, retaliates by dumping US debt and refusing to accept US dollars as an acceptable form of payment.
China’s domineering trade position would force countries across the world to use alternative currencies to obtain Chinese goods, causing a US dollar currency crisis as countries diversify into other currencies. In such a scenario, the US would likely retaliate by prohibiting financial institutions around the world from working with Chinese entities, Gregersen theorises.
Banks would thus be forced to choose sides, either remaining in the current US-dominated banking structure or embracing a Chinese or a Brazil, Russia, India and China (BRIC) based alternative. “Such a divide in the banking system and the irreparable damage to the US dollar would create the kind of devastating systemic crises that we are preparing for,” says the Silver Bullion CEO.
In such a scenario, Gregersen believes physical gold would, as happened many times in history, become the ultimate politically independent store of value. “When Chinese banks cannot accept US dollars and US banks cannot accept Chinese yuan, gold stored in a neutral jurisdiction will be a good way to settle trade between parties that don’t trust each other.”
If such a financial war should occur, he expects an “enormous transfer of wealth” from embattled paper currency holders — whether in Chinese yuan or US dollars — to holders of physical gold and silver bullion. “We can also expect that gold will be nationalised and its ownership made illegal again in countries facing currency crises. A repeat of the United States 1933 gold nationalisation is definitely possible,” adds Gregersen.
Should no systemic crisis occur
Should no such financial war occur, he believes that physical gold is still one of the best assets to hold long-term, especially in a stagflationary environment. Over the past 53 years, gold has appreciated at an average of 7.8% per year, with the bulk of its gains at 26% per year, occurring during periods of high inflation and low growth, otherwise known as stagflation, a situation in which the global economy finds itself today.
“Even in the absence of a full financial war, the ongoing trade wars between the US and China will continue to make large amounts of goods more expensive over the next decade, making it impossible for interest rate hikes alone to curb the systemic, politically originated inflation,” Gregersen explains.
He adds: “Properly safeguarded physical gold stored in the right jurisdiction is therefore expected to be both a powerful wealth insurance and an appreciating, liquid storage of wealth. I believe it to be a much better option than holding increasingly depreciating paper currencies.”
In 2022, central banks across the world purchased a record amount of physical gold. Even the Monetary Authority of Singapore (MAS) quietly increased Singapore’s gold holdings by 29% in January this year, adding a massive 44.6 tonnes of gold to its official reserves — the country’s second largest gold purchase ever in a single month.
Silver: smarter purchase than gold for now
Between gold and silver, Gregersen’s personal preference is for the latter; he holds nearly all his metal wealth in silver rather than gold. He sees silver as an undervalued metal with essential industrial applications that have caused the world to be depleted of most of its silver reserves.
However, his primary consideration is silver’s relative value to gold and he does not plan to hold silver indefinitely. Over the past 50 years, gold and silver prices have diverged significantly, with gold being undervalued compared to silver, and vice versa, at different times.
“When it eventually takes 50 ounces or less of silver to buy an ounce of gold, which has happened five or six times in the last 40 years, I will sell my silver for gold. Currently, silver is highly undervalued versus gold — it takes 88 silver ounces to get one ounce of gold. If I buy silver now and wait until the metals rebalance to a 1:50 gold to silver ratio, I would be able to obtain 76% more gold compared to if I were to purchase gold now,” Gregersen explains of his investment thesis.
He points to an analysis charting tool he wrote to test how various buy/sell ratio strategies would have performed over the past 50 years.
The Reserve’s full suite of services
Anticipating growing demand for safe storage of precious metals globally, Silver Bullion purchased a 180,000 square foot building in Changi Business Park in 2020, which will become The Reserve once renovations are completed by late 2023.
“Having The Reserve eliminates the risks of relying on rented vaulting space and it gives us economies of scale that would not be possible with a rental unit”, says Gregersen.
He plans to use a part of the 15,000-ton capacity vault to store high-value rare industrial metals such as indium and germanium, which have become increasingly sought after by industries that need to secure a long-term supply and are too valuable to leave in unsecured warehouses.
“The Reserve will bring exciting new approaches to our — rather static — precious metal vaulting industry. The vertical integration of dealer, vault and facility will mean that our storage clients have a single, well-capitalised and transparent counterparty to deal with”, Gregersen explains.
Aside from the company’s The Safe House vault, The Reserve will host Silver Bullion’s back offices, development teams, authentication labs, exclusive VIP lounges, meeting rooms and offices for members, wealth managers and clients. The facility is permitted to host art auctions and has the catering capacity to hold exclusive events for up to 120 people.
Horologists will be interested to learn that one of The Reserve’s confirmed tenants, The Xcess will host bonded, tax-free, specialty vaults for luxury timepieces and operate a brand-recognised atelier to authenticate, maintain and collateralise high-end timepieces at around 6% per annum.
Says Gregersen: “The Reserve is a project that we have been planning for several years, and we are very excited to bring it to life by late 2023 and showcase all of its offerings to new and existing customers.”
