Equities Covered in Gold Dust

Coronavirus, War, Inflation – these 3 words have been key drivers of global financial markets in recent months. With the lack of clarity on any of these topics, investors have been shying away from riskier assets in a bid to protect their wealth from further erosion as prices of risk assets continue to tumble. 

The Coronavirus, which has been terrorising global economies since 2019, has remained a threat to this day. While many have been rejoicing in the fact that international boarders are opening up (me included), strict lockdowns are still taking place. Case in point: Shanghai, China.  At the moment, 23 cities within China have been placed in lockdown, affecting more than 193 million people, and a threat to the 22% GDP it contributes to the country’s economy.

With the conflict in Ukraine, and rising inflation, investors have been challenged with a slew of uncertainties that has left risk asset prices in a limbo. Which in turn has made Gold more precious than ever. Price of Gold has risen by more than 7% this year in MYR terms (up till end-March 2022), which is a stark contrast to most major equity indices which have been left in the dust as Gold raced ahead.

Gold and Rising Inflationary Concerns

Gold as an inflation hedge. How does this work?

When inflation rises, goods will typically cost more to purchase. Meaning for the same amount of money, the goods that you would be able to purchase would be less than before.  However, price of Gold typically rises when there is expectations of higher inflation. So the value derived from Gold will move inline with inflation rates.  Following this theory, the increased value of Gold will help a consumer maintain his purchasing power when inflation rises, hence the title of “inflation hedge”.

Only in theory?

Base on a study by the World Gold Council that spans more than 50 years (1 Jan 1970 to 31 December 2021), Gold has provided a return of 15% on average when inflation was higher than 3%.  And what if the inflation rate was lower than 3%? Then returns averaged over 6% per annum. Nevertheless, returns were in positive territory.

Because we’re Asians, let’s also take a look at this from an Asian currencies perspective.  The chart shows that over a timeframe of 20-years, Gold has actually provided steady annual returns in both a low inflation environment, as well as in a high inflation environment. Quoted in multiple different regional currencies, Gold price per ounce have proven to be able to provide refuge to investors who are looking for an avenue to store their wealth, and provide steady returns over the longer-term investment timeframe.


Getting the Gold exposure

While there are numerous options for investors to gain exposure to Gold price, Gold-backed ETFs have been the preferred option given that it is physically backed by the asset that it tracks, and its ability to closely mirror the performance of Gold price. The convenience that it provides to investors looking to move in and out of the asset during any trading day without suffering from a wide difference between the buy and sell price also seen as an added bonus.

The Exchange-traded Fund: TradePlus Shariah Gold Tracker

The TradePlus Shariah Gold Tracker, Malaysia’s 1st and only physically-backed Gold ETF that is listed on Bursa, is able to provide investors with this option on the local front.  The ETF buys into physical Gold bars that are thereafter safeguarded in a vault in Singapore.  The ETF closely tracks the performane of the Gold price index by maintaining approximately 99% of its value in physical Gold.

Since the start of the year, the Gold ETF’s NAV has appreciated by 8.2% in MYR terms (up till 7 April 2022), with 209kg of Gold (or 209 gold bars) maintained in its vault as at 31 March 2022.

The Unit Trust Fund: Affin Hwang Shariah Gold Tracker

To provide convenience to our investors, AHAM Capital has also launched a Unit Trust Fund that feeds into the ETF. This way, investors can conveniently gain access to Gold through their relationship manager, as opposed to performing the trade themselves via a broker.

The Unit Trust Fund is a feeder fund, and is able to track the price performance of Gold through its sole investment in the TradePlus Shariah Gold Tracker.


Malaysia VS the World

It is a common misconception that foreign listed ETFs are able to provide better liquidity and performance, leading to investors willing to incur additional foreign brokerage costs, as well as large spreads for forex (given that the foreign listed ETFs are traded in a foreign currency other than MYR) to trade these foreign gems instead of the local alternative.

But let’s compare performances. The below performance chart compares the performance of the SPDR Gold Trust ETF against the TradePlus Shariah Gold Tracker. Evidently, the performance has been on par over the period of 3 years (as at 31 March 2022), making you wonder, why incur additional cost when the same can be found in Malaysia?



   Source: Bloomberg as at 31 March 2022. All returns are quoted in local currency terms.


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Disclaimer: This article has been prepared by AHAM Asset Management Berhad (“AHAM Capital”) specific for its use, a specific target audience, and for discussion purposes only. All information contained within this presentation belongs to AHAM Capital and may not be copied, distributed or otherwise disseminated in whole or in part without written consent of AHAM Capital. The information contained in this presentation may include, but is not limited to opinions, analysis, forecasts, projections and expectations (collectively referred to as “Opinions”). Such information has been obtained from various sources including those in the public domain, are merely expressions of belief. Although this presentation has been prepared on the basis of information and/or Opinions that are believed to be correct at the time the presentation was prepared, AHAM Capital makes no expressed or implied warranty as to the accuracy and completeness of any such information and/or Opinions. As with any forms of financial products, the financial product mentioned herein (if any) carries with it various risks. Although attempts have been made to disclose all possible risks involved, the financial product may still be subject to inherent risk that may arise beyond our reasonable contemplation. The financial product may be wholly unsuited for you, if you are adverse to the risk arising out of and/or in connection with the financial product. AHAM Capital is not acting as an advisor or agent to any person to whom this presentation is directed. Such persons must make their own independent assessments of the contents of this presentation, should not treat such content as advice relating to legal, accounting, taxation or investment matters and should consult their own advisers. AHAM Capital and its affiliates may act as a principal and agent in any transaction contemplated by this presentation, or any other transaction connected with any such transaction, and may as a result earn brokerage, commission or other income. Nothing in this presentation is intended to be, or should be construed as an offer to buy or sell, or invitation to subscribe for, any securities. Neither AHAM Capital nor any of its directors, employees or representatives are to have any liability (including liability to any person by reason of negligence or negligent misstatement) from any statement, opinion, information or matter (expressed or implied) arising out of, contained in or derived from or any omission from this presentation, except liability under statute that cannot be excluded.


Warning Statement: A copy of the Prospectus / Supplemental Prospectus for the TradePlus Shariah Gold Tracker can be obtained at Affin Hwang Asset Management's (“AHAM Capital”) website at www.tradeplus.com.my. Investors are advised to read and understand the contents of the Prospectus dated 28 November 2017 and Supplemental Prospectus dated 2 July 2019 for TradePlus Shariah Gold Tracker before investing. There are fees and charges involved when investing in the fund stated herein. Investors are advised to consider and compare the fees and charges as well of the risks carefully before investing. Investors should make their own assessment of the risks involved in investing and should seek professional advice, where necessary. The price of units and distribution payable, if any, may go down as well as up and past performance of the fund should not be taken as indicative of its future performance. The Securities Commission Malaysia has not reviewed this material and takes no responsibility for the contents of this material and expressly disclaims all liability, however arising from this material.