Gold accounts gaining popularity
KUALA LUMPUR (March 20, 2011): Gold investment accounts are fast gaining popularity among investors as they are comparatively cheaper to invest in than physical gold. Taking a cue from their popularity, a growing number of financial institutions are offering these products to their customers as an alternative investment option.
Kuwait Finance House (Malaysia) Bhd (KFHMB) CEO Jamelah Jamaluddin said demand for gold has risen significantly as buyers ranging from investors, speculators, hedge funds, central banks and the public, continue to buy gold.
"The reasons for buying vary, but the common underlying theme is the uncertainty in the global economic environment, and the consequent pressure the US dollar has come under. The continued low interest rate regime globally has also built expectations of eventual inflation pressures, and gold has always been viewed as the hedge against inflation," she told SunBiz via email.
"Gold bars, bullions and wafers are alternatives to gold jewellery, especially for investors who wish to invest in gold as part of their financial investment portfolio without having to go through the hassle of holding or verifying the quality of a physical piece of jewellery," she added.
Since KFHMB’s Gold Account-i was launched in February 2010, it has recorded more than 500 new accounts, with a total of more than 200kg worth of gold sold as at Dec 31, 2010. "Gold Account-i customers have contributed to 5% of the bank’s new customers. We anticipate a stronger growth of Gold Account-i this year. "In US dollar terms, the price of gold has appreciated by more than 26% last year. While we expect to see minor adjustments along the way, we see no reason for the price of gold to not continue to remain firm for the rest of 2011. Analysts have expressed expectations that the price of gold will rally between US$1,600 and US$2,000 this year, and we share the same view," said Jamelah.
Generally, investors can open a gold investment account with banks by buying a minimum of 10gm of gold in ringgit. They can then buy and sell at any time with a minimum of 5gm or 10gm and in multiples of 1gm. Customers have the option of withdrawing from these accounts in physical gold bars in the denominations of 1, 5, 10 and 50 grams. There is no minimum holding period before one can sell the gold.
For Malayan Banking Bhd (Maybank), it has introduced two products for those who want to invest in gold. One is a gold savings account where buying and selling transactions are recorded in the passbook of the investor. Dubbed Gold Savings Passbook Account (GSPA), it is pegged to international gold prices and is comparatively cheaper to invest in than physical gold, said Maybank deputy president and head of community financial services, Lim Hong Tat.
"Through GSPA, investors have the ability to build a personal gold investment portfolio by purchasing gold in small amounts from a minimum 5gm regularly over a period of time and can enjoy capital gains if the price of gold (quoted in the international market) appreciates," he said.
Another investment product called Kijang Emas comes in the form of gold coins."An investor may purchase or sell Kijang Emas coins at 31 selected Maybank branches nationwide," said Lim. He noted that many investors still prefer to buy physical gold such as jewellery, bars and wafers, not only for investment, but as wedding gifts and fashion accessories as gold reflects one’s status in society.
At Maybank, its GSPA product is more popular than physical gold. "Demand for Maybank GSPA has been growing positively averaging 35% (a month) in the past eight months. For the last FY09/10, Maybank GSPA’s investment value recorded an average monthly growth of about 11%. We are optimistic that demand will continue to be on an uptrend and we hope to register a total of 50% growth in this portfolio in the coming year owing to the infancy of the local market," said Lim. As at February 2011, the total number of Maybank GSPA accounts stood at 29,000.
"GSPA is viewed as an alternative savings cum investment option. We anticipate more investors will go into GSPA as they can be easily purchased or redeemed at any of our branches; more secure as the investor does not need to handle physical gold and be worried about safety issues; and are a cheaper alternative than physical gold as investors do not have to incur additional charges for storage and insurance," said Lim.
CIMB Bank head of retail financial services, Peter England, said the bank has received encouraging response for its first gold investment account since its launch in January this year. "Our product was only launched recently so we cannot provide actual returns over one year. However, the underlying price of gold has appreciated 31% in the last 12 months which is a good proxy for the returns on our gold account. It is also reassuring to know that the price of gold has more than tripled since 2000, and there hasn’t been a year-on-year depreciation for the past 10 years," said England.
"The CIMB Bank Gold Deposit Account (GDA) allows customers to purchase the purest available gold commodity at daily prices. With GDA, customers can buy and sell gold via a passbook account whenever they want, and potentially earn higher returns in the long term from an appreciation in gold price."Investing in gold provides security as the value of gold is usually maintained in times of uncertainty and economic crisis. It also provides a good hedge against inflation as the price of gold is usually not affected by the impact of rising prices of goods and services. "As gold demand continues to rise, outpacing supply and influencing the price of gold, we are positive on the sale of our product," he added. -- theSun