IS now the right time to buy gold?
Gold investments have been a vogue choice of sorts in recent years as the price of the precious metal made its ascend riding on the fears and worries of one crisis after another.
That rise, however, has more than taken a breather as the price of gold has fallen by around 11% since hitting a high of US$1,784 an ounce in February.
It had more than doubled from the financial crisis three years earlier.
Jayne Ong, a wealth adviser at a local bank, says the questions for many investors will be how long can this price rise continue.
“Should those who already own gold be increasing their holdings while economic uncertainty remains, or be looking to reduce their exposure? And is it too late to join the gold party?” she asks.
Portfolio diversifierOng says the metal is a good portfolio diversifier because its price tends to move in the opposite direction of stock markets and against bond prices, too.
“The reasons for people wanting to invest in gold varies. Some investors buy gold for safety net or whenever the market declines, while others are just simply looking to capitalise on the rise of gold price. It is unusual because gold is both a commodity and a monetary asset. Quite literally, gold is money,” she adds.
Historically, gold is an asset class that is thought to be more of a hedge or investment. Gold is considered a good investment because it tends to go in the opposite direction from the stock market. So, if the stock market dips, the value of gold will rise. However, the hard part is buying gold at a reasonable price. Physical gold is always attractive. Asia has a fascination with gold jewellery but it does not often make for a good investment because people are paying for the design and workmanship while the gold content may not be high.
“If you buy jewellery, you're paying a high premium for the design. You need to be able to buy gold at bullion prices to make a profit on it. If you love the physical product, buy gold bars or bullion,” Kevin Lau, a commodity dealer says.
Before investing, investors will have to decide whether they want to invest in paper or physical gold. For those who want to buy physical gold, there are a few options apart from buying gold jewellery from the jewellers. One is the Kijang Emas, Malaysia's very own gold bullion coins, which are distributed by Malayan Banking Bhd.
The Kijang Emas comes in three sizes: one troy ounce, half troy ounce and a quarter troy ounce. The price of Kijang Emas is quoted daily and pegged to the international gold price.
Gold investment accountSeparately, there are a couple of banks that offer gold investment with a minimum initial purchase as low as one gramme. Investors will be given a gold investment account passbook and every purchase or sale order will be recorded in the passbook. Its function is like your conventional passbook savings account.
Lau says he had opened a gold investment account with a local bank recently. “I've made a small investment, but it's a start. I am looking at gold to diversify my portfolio,” he says.
Lau is, however, sitting on a “paper” loss as the price of gold has fallen from the time he made his purchase.
He says he is looking at the gold investment for the long term and has no plan to sell.
A regular stock market trader, Cathy Fong opines that gold is generally a more stable investment in the current economic times.
“However, I feel that buying gold does not make up for my stock investment because there is only so much that I can afford to buy in gold.”