The Gold Rush!

Malaysians have been taking advantage of the recent slide in Gold price to accumulate their holdings in the precious metal.  The rush for Gold even stole local news headlines when large groups were seen queueing up at complexes in a bid to build their treasure trove when jewellers offered store discounts. After a stellar 22.5% rise in Gold price in 2020 (in MYR terms as gauged by the LBMA Gold Price AM fixing), price is now down by 7.9% since the start of the year as at 12 March 2021.

And the rush is not just a local phenomenon, but one that is being seen in Singapore, and India as well.  A spike in demand has been seen for physical assets as jewellers enjoy brisk business after the price dip. 

 

What’s Driving Demand?

The recent spike in the US 10-year Treasury yields on the back of growth optimism following the vaccine rollout had led to a dive in US Dollar, and Gold price. The rapid rollout in vaccine across the globe had reignited investors’ optimism on the global growth outlook.  The OECD has already upgraded its global growth forecast for the year to 5.6%  (from the 4.2% growth forecast it made in December 2020).

Promise of a stronger growth outlook in hand has nudged investors into shedding their holdings in Gold to pursue higher yielding investments. The move has resulted in a complete turnaround from last year, when investors flocked towards Gold in a bid to preserve the value of their assets as uncertainties loomed over us during the pandemic.  Analysts believe that price pressures on Gold may be cast aside if inflation is kept persistently high. Anticipation is high for the US Federal Reserve to be more accommodative with their monetary policies if inflation numbers remain where they are, so inflation may be lurking around the corner.

After the slump in price that has left Gold price at a near 8-month low, hoarders have been rushing to stock up on the precious metal with reports of a spike in demand from consumers in Singapore, Malaysia, and especially India – who typically makes up close to 50% of the world’s demand for Gold jewellery.

 

How Gold price have moved over the year

After hitting a high of USD 2,061.50 per ounce in August 2020, Gold price has since taken a dive.  As at last Friday, Gold price as quoted by the LBMA Index stood a USD 1,703.85 per ounce, which is approximately a 17.4% drop from the August high.

The TradePlus Shariah Gold Tracker, which tracks the performance of the LBMA Index through its investments in physical Gold, has closely mimicked the performance of its Benchmark.

The Gold ETF, which started the year at RM 2.4357 per unit, moved to a high of RM 2.7810 per Unit in August, before slipping to end last week at RM 2.2725 as at 12 March 2021. With each Unit providing investors approximately 0.01 gram of Gold, this means that investors are able to buy approximately 100 grams of Gold for RM 227.25 by buying 100 units of the Gold ETF.

 

Physical Jewellery, or Physical backed Gold ETF?

Over the years, the global financial market has evolved to offer products that bring forth convenience to investors. 

Take for example, the TradePlus Shariah Gold Tracker – Malaysia’s 1 and only Shariah-compliant physically backed Gold ETF. The Gold ETF enables investors to have exposure to Gold, without the hassle of buying the physical assets. NAV price of the Gold ETF moves in line with the price of Gold as it reflects the ETF’s assets (physical Gold).

Additionally, investors can conveniently buy and sell their Units on Bursa, where prices are quoted based on prevailing market prices.  This enables investors to avoid having to visit their regular jewellery store to resell their jewellery – which typically comes with a cost to smelt the products.

But how does this compare against other digital offerings? The 3 things we advise investors to look at when investing is:

  • Costs incurred on your investments – are the platforms you are invested in charge competitive fees?
  • Spread -  know the difference between the buy and sell price, because the bigger the difference, the more you would need your investments to move before being able to break-even, and
  • Convenience – how easy is it going to be for you to buy, and sell your Gold.

 

The Gold ETF

The Gold ETF, which was listed on Bursa’s main market in December 2017, provides investors:

  • Convenience – gain exposure to physical Gold price without the hassle of Gold ownership (storage, insurance, logistics)
  • Narrower Spread – smaller difference between buy and sell price 
  • Shariah-Compliant – a Shariah-compliant solution for investors, with a designated Shariah advisor

The Gold ETF:

  • Is the 1st, and only Malaysian listed Shariah compliant physically-backed Gold ETF
  • Trades under the Bursa stock code: 0828EA
  • The ETF closed at a NAV per unit of RM 2.2725 (as at 12 March 2021)
  • How to trade?
    • ETFs trade just like stocks
    • So all you will need is a brokerage account
    • But as a Shariah-compliant ETF, the counter is typically blocked by the brokerage house
    • Just call your broker to request them to unblock the counter, get onto their online platform, and start trading!

 

NOW IN A UT STRUCTURE!!

  • Investors can now gain exposure to the Gold ETF via a Unit Trust Fund structure: the Affin Hwang Shariah Gold Tracker Fund
  • The Fund was launched in October 2020, and feeds into the Gold ETF to track the price performance of Gold.

 

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:

www.tradeplus.com.my
www.facebook.com/TradePlusbyAffinHwangAM
#tradeplusaham
+(60) 12 250 8002
TradePlus ETF

 


Disclaimer: This article has been prepared by Affin Hwang Asset Management Berhad (hereinafter referred to as “Affin Hwang AM”) specific for its use, a specific target audience, and for discussion purposes only. All information contained within this presentation belongs to Affin Hwang AM and may not be copied, distributed or otherwise disseminated in whole or in part without written consent of Affin Hwang AM. 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, Affin Hwang AM 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. Affin Hwang AM 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. Affin Hwang AM 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 Affin Hwang AM 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 (“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.