Gold price quietly creeps higher
While investors shift in and out of the equity market in an attempt to participate in the rising momentum, one asset class that has quietly outpaced most major equity indices in Gold. Remaining precious amidst the ongoing uncertainties that loom over global economies, Gold price has steadily crept higher this year.
Gold held a small party in August to celebrate its price breaching the USD2,000 per ounce mark. But aside from that, the asset class has largely remained in the background, drowned out by noises from the stellar performance of the tech-sector, the troubled tourism segment, and volatile energy prices. And all this whilst global economies battle against the rapidly spreading Coronavirus pandemic.
Post-pandemic recovery to be a long and winding road
As global medical experts scramble to produce a vaccine, the timeframe for economic recovery may be a long and challenging one. The longer it takes for us to find a vaccine, the larger the economic shift would be. We have already seen business models change their structure with many moving their focus from offline to online – reducing the need of more staff, and indirectly leading to widespread of job layoffs. Businesses have been suffering from the impact of restrictive movement controls that have been put in place by economies in a bid to control the spread of the virus, which will no doubt impact bottom line and in most cases prompting salary cuts. The trickling effect of these will be the shift in consumers’ spending patterns.
Central banks have also stepped up stimulus measures in hopes of cushioning the pandemic impact. The continued liquidity flooding into the market is expected to debase currencies, leaving them to gradually shed their value over time. This has been one of the key drivers that have helped push Gold price higher, and allowing Gold-backed ETFs to see new record highs in value as investors scramble to safeguard the value of their assets.
Seeking refuge in Gold-backed ETFs
Key drivers for Gold remain strongly present as little has changed from where we were 6 months ago. While some countries have managed to keep the spread under control, there are also some that are experiencing a 2nd wave, whilst others are still not out of their 1st wave.
While there are numerous options for investors to gain exposure to Gold, 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 of providing investors the flexibility to move in and out of the asset during any trading day without suffering from a wide difference between the buy and sell price is also seen as an added bonus.
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 performance 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 more than 27% in MYR terms (up till 18 September 2020). The strong response by investors have pushed the ETF to double its physical gold bar holdings over the year, and now holds 422kg of Gold in its vault.
Ways to gain exposure
Traded on the main market of the Malaysian exchange under the stock code 0828EA, investors are able to conveniently invest into the ETF via the broker of their choice. Do note that it will be a wise choice to pick a broker that is able to offer competitive brokerage fees, as there are fees that are charged for each transaction, and these fees may vary depending on the broker that you select. As the ETF is a Shariah-compliant structure, the ETF requires investors to trade using a cash-upfront account, therefore the T+2 payment timeframe of normal counters will not be applicable here. As an operational process, some brokers may block the counter from being traded, and may require you to contact them to lift the blocks. So if you’re facing any problems trading, do contact your broker for advice.
For more information
Still not completely convinced about the Gold ETF? Need more information about the product? Hop over to www.tradeplus.com.my/gold-tracker for more details regarding the ETF. Alternatively, feel free to reach out to us via the contact points below:
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Warning Statement: A copy of the Prospectus / Supplemental Prospectus for the TradePlus Shariah Gold Tracker can be obtained at Affin Hwang Asset Management's (“Affin Hwang AM”) 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.