In Malaysia, gold investment has been gaining more popularity in these days. It is generally known to be a safe haven during uncertainties and economic crises as it is considered more stable than other asset classes. For many investor, investing in gold in Malaysia works as an asset diversify that could lower the overall risk in an investment portfolio and also a hedge against inflation and fluctuation in the US dollars.
There are many ways to invest in gold whether in Malaysia or other regions.
Gold Exchange Traded Funds (ETF)
Many have asked how to invest in gold with ETF. What is ETF exactly? An ETF is listed and traded on the major stock exchange. It sold as shares in stock market just like any other stocks. It works like an unit trust where when you buy an ETF, you are basically investing in a conglomerate of companies, rather than a single corporation.
The gold ETF fund will purchase a large amount of gold, maintaining the physical metal in storage. They will then issue shares in portions. The value of the shares will increase with the price of gold bullion. If the price of gold goes up by 15%, then individual shares would increase in value by the same 15%.
The interesting thing of gold ETF for investors is that the trading can be done very easily at any time during stock market hours using your online brokerage account. It is not necessary to buy a large amount of gold to invest, it can be bought in portions of an ounce but most gold ETF funds have a minimum investment.
Some of the popular gold ETF funds are SPDR Gold Trust (GLD), the very first Gold ETF fund and still the most popular. They purchase 400 ounce gold bars from London Good Delivery Bars, and issue the shares at one tenth of the price of an ounce of the gold.
ProShares Ultra Gold (UGL) is very aggressive and not averse to risk. Also known as a double gold ETF, it is designed to double the investment return, in other words, if the price of gold increases by 10% the value of the shares should increase by 20%.Market Vectors Gold Miners fund (GDX) attempts to mirror the NYSE Arca Gold Miners Index as closely as possible, before any fees are removed from the investment. Using index investing, your portfolio will have 32 mining companies behind it. Keep in mind, this type of Gold ETF is made of up gold company stocks, thus it tracks the gold stock index, not the gold price index.
Gold Mining Stocks
Investing in gold mining sector is huge and liquid. In US stocks exchange alone, there are more than 300 gold mining companies listed and traded. Selection of gold stocks should consider the company’s mining cost, gold reserves and the stability of the company and the region.
The value of stocks is significantly driven by the price of gold. Stock price is also impacted by the mines, projects, reserves of unmined gold below ground, or mining royalty income streams. Gold mining stocks do not simply track the price of gold in the same way that physical bullion, gold ETFs or gold futures do.
Numerous factors are involved in the pricing and valuation of gold equities. These can include: the maturity and geographic spread of mining projects, gold reserves, ore grades, costs, margins, profitability, strength of balance sheet, the debt profile and the quality of management. A combination of these forces will cause the share prices of gold stocks to act in a leveraged manner around the value of gold.
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Gold Futures
Investing in gold futures is also popular as gold futures market is one of a number of commodity futures, wherein contracts are binding commitments into agreeing to buy or sell gold at a certain price at a date in the future.The key determining factor in futures prices is the market’s perception of what the carrying costs ought to be at a given time. This can yield significant trading profits, and it can also cause equally significant losses in the event of an adverse movement in the gold price. Gold futures is consider as relatively high risk investment.
This is how gold futures work for example, an investor is pretty convinced that the price of gold is going to go way up in the next three months. If he wanted to profit off of that by just buying and selling gold, and he had $1,000 US Dollars (USD) to invest, he would buy $1,000 USD worth of gold at $500 USD an ounce for a total of two ounces. If, in three months, it has gone up to $800 USD an ounce, he would have cleared a profit of $600 USD.
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Gold Investment Saving Account
Another popular answer to how to invest in gold Malaysia is via the gold investment or saving account with the banks. Account holder will be given a passbook to record all the transaction of buy and sell of gold. The gold price is quoted on 999.9, 24karat gold price per gram.
Most bank will require a minimum amount to start with the gold saving account, it can be 1g or 5g depends on which bank you go. Bank allow the investor to purchase gold by cash, house cheque or even debit from current/savings account. However, withdrawal or selling the gold will have an options of physical gold other than the usual mode of cash or crediting to investor’s saving/current account with the bank.
Profits are generated only if the investor sell the gold at a higher price than their initial buying price. The spread of buying and selling price from banks is usually between 1% to 5%. One of the disadvantages of this investment is account holder is not given any dividend or interest from their investment. On the other hand, this investment has an increasing trend today as a long term saving and gold accumulation plan.
More details about gold investment saving in Malaysia.
Physical Gold Bullion Coins and Bullion Bars
Investing gold in Malaysia is not only on paper gold, Malaysian is a great fan of physical gold as well. Investors can choose from a wide range of gold bullion coins, issued by governments across the world. In their country of issue, these coins are considered legal tender for their face value, rather than their gold content.
Alternatively, the market value of bullion coins is determined by their fine gold content, plus a premium or mark-up that varies between coins and dealers. Of course the premium tends to be higher for smaller denominations.
Bullion coins may range in size from 1/20 ounce to 1000 grams, although the most common weights (in troy ounces of fine gold content) are 1/20, 1/10, 1/4, 1/2 and 1 ounce. It is important not to confuse bullion coins with commemorative or numismatic coins, whose value depends on their rarity, design and finish rather than on their fine gold content. Many dealers sell both.
Gold bars can be bought from some banks, distributors or jewellery shops in a variety of weights and sizes, ranging from as little as one gram to 400 troy ounces (the size of the internationally traded London Good Delivery bar). The definition of a small bar is one that weighs 1000g or less.
Investment in physical gold will need to think about safe storage and insurance for the precious metal. See more on How to sell Gold in Malaysia.
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Trading Gold Online
Over the past decade there has been a dramatic uptrend in interest in gold as a form of investment and savings. A lot of investors are just started to explore the possibility of gold trading in the forex market. Before 1990, the foreign exchange market was mainly a unique investment tool, which was dominated by large banks and financial institutions. But today, the ability to trade in gold against other currencies, mainly the U.S. dollar is now available to private investors. This means you can connect online and trade in gold on a base of 24 hours at home with your trading platform.