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Gold Malaysia: Here's Your Guide to Gold Investment 101!

Updated 25 Sep 2020 – By Faiz Rahim


Is investing in gold the right option? What’s the risk like? 

Well, The Edge Markets reported that many gold investors will feel the pressure to sell as the gold price continues to rise (this is due to the negative market sentiment recently). But not to worry, there’re still opportunities for new investors (you!) to join in the fun, invest and make a profit out of it!

Have you guys heard that the gold price is expected to increase more than RM300 per gram (g) in 2021? Perhaps it’s something for you to look into.

Other than to make a profit, you should consider investing in gold because:

  • It’s strong against inflation as it stores the value and preserves its wealth
  • A safe choice for investors. It’s because whenever there’s a crisis, the value for gold will always go up and sometimes even higher
  • Diversify your investment portfolio
  • Has the potential to be in more high demands in upcoming years


 

First, here are the different types of gold investment for you to consider...

1. Physical gold


 

Physical gold comes in many forms such as gold bars, gold coins and even gold jewellery. It might come as a shock to you that some people prefer physical gold more in this digital age, right? Well, some do prefer it more because of its unique properties such as its size and design.

 

Gold bars 

Usually the first choice for experienced investors. There’re various sizes of gold bars (ranging from 25g to 1kg). As it’s larger than gold coins, it’s easy to store and an effective option for investment if you’re looking to make a sizable one (read: big profits!). One gold bar could cost you thousands to hundreds of thousands ringgit.

The downside is that gold bars aren’t a convenient option to liquidate (read: sell to get money). Let’s say you’ve 1kg of gold bars and you intend to liquidate your gold. The only option you’ve is to liquidate all 1kg. It’s not like you can slice it and only liquidate a quarter of it, right?

Pros of Gold Bars Cons of Gold Bars
High liquidity (get more money if you sell) Higher risk of theft (if you keep it at home)
Easy to store Not a convenient option to liquidate
Cost cheaper than gold coins -
Need to pay storage cost (if you put it in a safe deposit box) -
 

Gold coins 

A more convenient investment option due to its size and it’s easy to sell it whenever you need money (liquidate). It usually weighs between 2.5g and 25g of pure gold. It’s also an ideal investment option for new investors that’re trying to get their feets wet. 

The price for one gold coin could be between hundreds to thousands ringgit. Here’s a fun fact, sometimes the gold coin is valued higher due to its being individually minted. Therefore, it makes it more authentic and expensive.

Pros of Gold Coins Cons of Gold Coins
An ideal choice for new investors Higher risk of theft (if you keep it at home)
Easy to store Could cost higher than gold bars (due to extra minting cost)
Easy to liquidate -
Will value higher if it's rare -
Need to pay storage cost (if you put it in a safe deposit box) -
 

Where to buy and keep the gold bars & gold coins? 

There’re a few places where you can buy gold bars and gold coins such as from Public Gold and HelloGold. In regards to safekeeping, you can keep it in your safe box at home (which we don’t recommend for security purposes) or safe deposit at the bank which could cost you around hundreds ringgit depending on its size - CIMB Bank charges you the lowest at RM250 (you gotta fork out money some more lah).

P/s: If you buy gold from HelloGold, you don’t need to keep it at the bank. It’s because HelloGold will store it in their vault for you. No worries, it’s guaranteed safe (you can even request to see the latest customer gold list). 

Here are some extra tips!

Do you guys know that you can make extra moolah using gold with Ar-Rahnu? Yes, you can pawn it at Ar-Rahnu for a loan, but there's a trick that you can do to get a much higher return. That said, do remember that this needs to be done within the loan period.

Here’s what you can do, you pawn your gold with Ar-Rahnu for 6 months and buy another gold with the loan that you get. Within the loan period, you wait for the perfect opportunity to sell the gold. Then, you can redeem the gold that you’ve pawned. The excess money from doing all of these will be your profits!

BUT, if you’re unsure and still new with gold investment, Ar-Rahnu and all, we don’t recommend this. It’s because if you’re not certain with what you’re doing, you could lose more money than what you’ve invested in. 

 

Gold jewellery

*Source: The Edge Markets

Although some prefer gold for an investment, others choose to wear it. The price of gold jewellery could range from hundreds to millions of ringgit!

In case you guys don’t know, gold jewellery isn’t all pure gold. It’s usually combined with other materials as well such as silver. So, before you buy, make sure you know how much carat it’s (do triple confirm!). You don’t want to think your gold jewellery is 8 carats but actually, it’s just 5. 

Another thing about gold jewellery is that the value doesn’t usually stay the same. It’s because some gold jewellery may lose its value if it’s broken or scratched. If that’s the case, usually the selling price will be lower than the buying cost. Unless it's a rare, antique gold item such as the ‘Patek Philippie Super Complication Gold Pocket Watch’ which was made in 1933 and cost a whopping US$11 million!


*Souce: Finances Online

Where to buy & keep the gold jewellery? 

Easy. You can buy it at any jewellery shops. Most people would keep their gold jewellery at home for safekeeping. It’ll also be a much more convenient option as you’ll want to wear it now and then. You can also opt to keep it at the safe deposit at the bank.

Pros of Gold Jewellery Cons of Gold Jewellery
Can use as an accessory Low liquidity
Easy to buy Higher risk of theft
- High acquisition cost
- Cannot sell at the buy price
 

2. Gold mining stocks

With gold mining stocks, you’re not exactly investing in gold but you’re investing in the company that does the mining. With that said, your return for this kind of gold investment would be depending on the company’s performance - that’s where you’ll get your dividend.

That’s the thing about gold mining stocks. Although it’s indirect exposure to gold performance, it doesn’t always reflect in the results (company’s stocks). It’s because other factors such as other stock markets and the company’s current circumstances would affect it as well. 

Some of the gold mining companies are Borneo Oil Bhd and Poh Kong Holdings Bhd. For your info, these companies’ performance on the stock market has dropped a little since August 2020. At the time of writing, the share prices for Borneo Oil and Poh Kong are RM0.045 and RM0.77 respectively.
 
Pros of Gold Mining Stocks Cons of Gold Mining Stocks
Indirect exposure to the gold performance Volatile and risky compared to others
No physical gold Depending on the company's performance
Low initial investment (depends on the company's share price) -
High liquidity -



3. Gold Exchange Traded Funds (ETF)



 

Just like gold mining stocks, you don’t exactly buy gold, but you’re investing in the ETF that’s backed by gold instead. It’s a commodity ETF that tracks and reflects the gold price. This is a great investment tool for investors who want to gain exposure to gold. 

Let’s say, you've invested in several stocks that’re heavily influenced by dollars and you’re trying to reduce the risk, gold ETF is the right option for that. It’s because the gold ETF can help shield you from the downside.

Pros of Gold ETF Cons of Gold ETF
Gain exposure to the gold performance Needs to pay a broker fee
Easily invest in gold ETF online Not eligible for everyone (need to have a share trading account)
Zero risks of theft Easily affected by other markets (non-gold related)
No storage cost Volatile and risky compared to each other
High liquidity -


4. Gold Investment Account

This kind of gold investment would require you to open up an investment account with the bank. Some investors prefer this because they can invest gold with 99.9% purity without keeping the physical gold. You can find this offering from Maybank, Public Bank, CIMB Bank, UOB, HSBC Bank and Kuwait Finance House

Other good things would be that some banks only require a minimum initial deposit as low as 1g which could cost you around RM250. Plus, you guys can even withdraw your investment in cash, physical gold or by crediting into your designated current/savings account. Isn’t that awesome?

Do note that this kind of gold investment has no interest, dividend and isn’t even insured by the Perbadanan Insurans Deposit Malaysia (PIDM). Some banks also will charge you conversion fee and service fee if your gold is under the required minimum balance.
 
Pros of Gold Investment Account Cons of Gold Investment Account
Invest in 99.9% pure gold No interest or dividend
Can easily invest online Not insured by PIDM
Zero risks of theft Need to pay the conversion fee
No storage cost Pay service fee if you're under required minimum balance
High liquidity -


Now, let’s talk about the gold price...

In the past 6 months, the gold price has been between RM220 to RM280. Although it's been somewhat volatile, the gold price in September 2020 is much higher than the previous year (2019) which is RM206. You may refer to the price trend in the image below.


*Source: Gold Price

But, what’re the factors that can influence the gold price? And, how? Here, admin breaks it down for you. 

 

Factor #1: Economic uncertainties & market sentiment



Gold is considered as a safe-haven investment. It’s because whenever there's a crisis, the gold price is expected to go up and sometimes even higher. Many investors choose to invest in gold because they want to limit their exposure to losses in the event of any economic uncertainty.  

For example, this year has been extra hard due to Covid-19. So when the MCO started back in March 2020, many investors started to invest in gold. Well, that's not surprising because, at that time, the economy was unstable and weakening. 
 

Factor #2: The US dollar 

One word, dollar-denominated. That’s why gold prices and the US dollar has a total opposite relationship. The gold price will go up when the US dollar value weakens and vice versa. In a way, more will buy gold when the US dollar is weaker (right?!).

For example, do you guys remember when Donald Trump won the election back in 2016? Yup, at the time, the gold price fell back 5% but - the US dollar rebounds!
 

Factor #3: Supply & demand

According to the World Gold Council (WGC), at least 75% of global demands come from gold mining activities. What about the remaining 25%? It usually comes from golds that have been recycled from jewellery & technology devices.  

So, whenever there’s more supply than demand, the gold price would be lower and vice versa. Why? Because the supply wouldn’t be sufficient to meet the demand. 

 

So, what’re the pros and cons of gold investment?



 
Pros of Gold Investment Cons of Gold Investment
Increase in value over time Little industrial/commercial value
Protect against inflation Little utility value
Protect against a time of crisis A commodity
Unique properties Produces neither dividend/income
Low investment risk Low long-term overall performance
Increasing demand over time -
 

What should you ask yourself as a first-time gold investor?



1. The current market conditions:

  • What’re the current gold prices?
  • How is it going to be in the upcoming months and years?
  • If the price is high, shouldn’t you wait first before buying?

2. Your reasons for investing in gold:

  • What’re your reasons for buying gold as an investment?
  • Are you looking to diversify your portfolio?
  • If this is your first time investing, should you start with gold?

3. Your options for investing:

  • What type of gold investments are you looking for?
  • Have you weighed all options for gold investment?
  • What’s the best way for you to invest in gold?
  • Are you financially ready to maintain the gold investment?
  • Are you investing for short-term or long-term return?
  • If you've decided to invest in physical gold, where’ll you keep it? 
  • Are you willing to pay extra for your investment option (storage fee, broker fee, service fee)? 
 

Lastly, is now a good time to invest?

Putting aside economic uncertainty and Covid-19, the gold price is also on the rise. Shouldn't you wait for the price to fall back a lil’ bit before you buy? Especially since the gold price is bound to do so.

A column which was published in The Star explains that the trend in buying gold is likely coming from their fear of economic recession and inflation. But, when the fear goes away, the gold price will fall. 

“It’s only a question of time. Until then, there’s no rush to buy...” - M. Shanmugam, Not the time to buy...as prices will likely come down

However, if you do decide to invest now, make sure that you've done your research regarding the matter. Ask yourself this, 'Am I ready to take on gold investment?', ‘What kind of investor are you?’ and most importantly, ‘Are you a risk taker?’. If all of your answers are yes, go ahead!  

In case you’re looking for other alternatives to invest, you may also read ‘Here are the Best Fixed Deposit Promos in Malaysia 2020’.

Happy investing!

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