Is it time to buy gold?

Precious metal said to be consolidating and likely to rise in next few years
PETALING JAYA: Now is the time to invest in gold as its price is consolidating and likely to climb over the next few years, according to one expert of the commodity.
“Gold reached US$1,900 (RM6,042) last year but has fallen to US$1,600 now. This is a purely periodic correction,” said Dar Wong, a trader and veteran financial consultant who was the guest speaker at Tomei Consolidated Bhd's GoldSilver2U.com seminar. He said prices would be “firm” but may trade in a sideways pattern till the end of the year.
Gold, considered a safe haven in times of economic upheaval, has slipped some 15% since peaking at US$1,900.20 last September at the height of the eurozone crisis, but is up 2.7% for the year at yesterday's spot prices.

Wong (left) and Tomei group managing director Ng Yih Pyng showing gold wafers from Tomei.

“In my view, whenever the market comes off a high and starts to go sideways, this period of consolidation is the best time for investors to plan their portfolio.
“When the market starts to run up again maybe next year, you will have to pay more and jostle with everyone else,” said Wong, who started his career trading futures in the 1980s.
Wong honed his trading expertise working for several banking groups before striking out on his own as an individual trader in 1996.
“People are saying it can reach US$3,000 per ounce. Based on my analysis, the price of US$2,300 is achievable in the next few years. But in order to get it that high, you need fundamental strength,” he explained.
He opined that this would come from two sources: inflation, which would force the hand of central banks to ease interest rates, and US monetary policy.

“Gold is traded in US dollars. Should the Federal Reserve decide on more fiscal stimulus, the weaker US dollar will push gold to new heights.
“From my studies, when the United States elects a new president after the third quarter, whoever gets the job will most likely put in a quantitative easing policy to consolidate his position. That will result in higher gold prices.”
Central banks, he added, had little choice in the current global scenario other than to loosen the reigns on fiscal policy.
“The world economy is stuck between inflation and recession. On one hand, food and commodity prices are going up, which means higher costs.
“On the other, manufacturing and growth is slowing while unemployment is rising. Let's assume banks have to choose just one solution they will choose to cut rates.”
Although Bank Negara left its overnight policy rate unchanged at 3% yesterday, the European Central Bank and China's central bank have cut interest rates in a bid to stimulate economic growth, while the Bank of England announced a further £50bil of quantitative easing.
On his personal experience with the precious metal, Wong revealed that he had bought 25 mint-proof gold coins after the Sept 11, 2001 attacks, when gold plunged to US$320 per ounce.
“People said I was stupid. But the principle is how much money you can invest versus how long you can hold.”
Wong said he has so far sold 20 of those coins for a handsome profit.
“I couldn't sell them at the peak last year. I'll be honest, no one can time the market perfectly. I loaded them off at average prices of between US$1,200 and US$1,500,” he said, adding that he was now waiting for buying opportunities.
“It is not about how much you have now. It is about how much you want to build now for the future. I built my investment 10 years ago and have realised a profit.”


Excerpt from :  The Star Online. An article by JOHN LOH