11 May 2019

Gold as an Investment. Yes or No?

Since young, our parents or grandparents kept telling us that if we have money, save it in gold. Does this still hold true nowadays given the plenty of investment choices that we are having now❓

In modern days, investors buy gold mainly as a hedging tool against political uncertainties and inflation. On top of that, many investment advisers recommend a portfolio allocation in commodities (usually of only up to 10%), which includes gold, for portfolio diversification purpose to lower down the portfolio risk. 

Price of Gold
Gold Price movement for the past 15 years

Looking back, gold prices shoot up to all-time high after the global financial crisis in year 2007-2008. It stays relatively higher than pre-crisis era until now (USD 1,285/oz at the time of writing).

What are Some of the Factors That Drive Spot Gold Prices?
According to GoldPrice website, Gold is not only bought as an investment, but it is also bought for use in other areas such as industry and jewellery making. The potential influences on the spot price are extensive, but the following list names some of the major ones:

  • Investment demand
  • Jewellery demand
  • Currency markets
  • Inflation or deflation
  • Interest rates and/or monetary policy
  • Risk aversion or appetite
  • Geopolitics
  • Equity markets

The Rich likes Gold?
To clarify further, the rich likes gold mainly for one reason, WEALTH PRESERVATION. It's not for investment purpose, it's not for capital gain and definitely not for recurring income either. This is because the rich can generate/increase their wealth via various ways (business, equities, ventures, properties...) and definitely it's not gold. Don't blindly follow what the rich did, if we're not there yet. 😆😆😆

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In conclusion, gold is a good hedging tool during market uncertainties or financial crisis (hopefully it will still works). In modern days currently, there are various methods to trade/involve in gold investment such as buying the physical gold bullion, mutual funds, futures, mining companies, and jewellery. 

With few exceptions, only gold bullion, futures, and a handful of speciality funds provide us a direct gold investment opportunity. Other investments are just deriving part of their value from other sources such as exchanged traded fund (ETF).

Oh ya... 👏👏👏
Do you know that we Malaysians can invest/buy gold via mobile app❓ And, it's shariah compliant too!

Do check out this article to find out more ↓↓↓

A New Way to Save Money in Gold 

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