The history of gold is long associated with money as a medium of exchange. It’s prominence in every part of human culture is indisputable. The precious metal evokes the human’s emotions at a profound level due to its beauty and permanence. Other than serving as a medium to store value, it signifies wealth and status. Over the years, there’s an increasing trend of investors buying gold as an investment. But whether it’s a good investment has been long debated given that it’s a non-income generating asset. Before delving into the main topic on how to invest gold in Malaysia, let’s have a brief understanding on the key reasons to invest in gold.
Key Reasons to Invest in Gold
- It’s an effective hedge against inflation. Paper money tends to lose value over time due to inflation. Historically, it has appreciated in value in an inflationary economic environment.
- It’s a safe haven. Investors generally increase their holdings in gold in times of high market volatility due to rising geopolitical tensions. Investors often shift their investment portfolios to the precious metal in anticipation of economic crisis to limit their exposure.
- It’s a great portfolio diversifier. It has negative correlation with other asset classes. Investors invest in the precious metal to diversify their investment portfolios.
- The supply constraints are likely to drive its prices higher in years to come as there’s an increasing demand in the precious metal worldwide especially from China and India.
Refer here for detailed understanding on the key reasons to invest in gold.
How to Invest Gold in Malaysia
Investing in gold doesn’t require specialized financial knowledge. It’s relatively easy and convenient to buy and sell gold in Malaysia. There are various methods to invest in the precious metal that are easily accessible to anyone in Malaysia.
Gold Investment Account
Currently, there are six banks in Malaysia that allow you to invest in gold using a Gold Investment Account. It’s also the most popular way of investing in the precious metal among the Malaysians at the moment.
- Maybank – Gold Investment Account
- Public Bank – Gold Investment Account
- CIMB Bank – Gold Investment Account
- UOB – Premier Gold Account or Gold Savings Account
- HSBC Bank – Gold Account
- Kuwait Finance House (KFH) – Gold Account-i
With Gold Investment Account, you can invest in gold with 99.9% purity without keeping the physical gold. Some banks require minimum initial deposit as low as only 1 gram. You can buy the precious metal either by cash, house cheque or debiting your existing accounts maintained with the banks.
Besides that, you can also withdraw your investment in cash, physical gold or by crediting into your designated current/savings account. It varies depending on each bank’s available withdrawal options.
The banks determine the buying and selling prices at their own discretion based on various factors including the prevailing world and local market price conditions. The prices also take into account the exchange rate between United States Dollar and Ringgit Malaysia.
Which is the Best Gold Investment Account in Malaysia?
The table below shows a comparison of all Gold Investment Accounts in Malaysia.
*1 GLD unit represents 0.1 unit of XAU. 1 XAU represents 1 troy ounce of gold, which is equal to 10 units of GLD. 10 GLD is ~ 31 grams.
Pros and Cons of Gold Investment Account
- You can invest in 99.9% fineness gold without keeping the physical metal.
- You can easily invest online with great convenience.
- There’s no risk of theft or storage cost.
- High liquidity. You can withdraw your investment any time.
- There’s no interest or dividend.
- Perbadanan Insurans Deposit Malaysia (PIDM) insures us from losing our bank deposits in the event of failure in banks. However, investment in Gold Investment Account is not insured by PIDM.
- Service fee applies if you fail to maintain the required minimum balance in the account.
- You need to pay a conversion fee to withdraw your investment in exchange for physical metal.
How to Choose the Best Gold Investment Account?
For those who are interested in buying gold via a Gold Investment Account, you may wonder which is the best Gold Investment Account in Malaysia. There are various factors that you would need to consider before choosing a Gold Investment Account.
The factors that are generally relevant for your consideration are as follows:
a) If you have a low appetite for such investment, you may want to choose a Gold Investment Account with a lower minimum initial purchase requirement.
b) You may also want to consider the minimum value for subsequent buy and sell transactions if you plan to accumulate your investment progressively over time.
c) Many investors prefer a low buy-sell spread if they expect to transact frequently. Selling rate is the price that you need to pay when you buy gold from the bank. Buying rate is the price that the bank accepts when you sell the gold back to the bank. Buy-sell spread refers to the price difference between the buying and selling rates of a same quantity of gold at a point in time.
Selling rate: RM160/gram
Buying rate: RM150/gram
Buy-sell spread = RM160 – RM150 = RM10
Imagine that you now buy one gram at a rate of RM160/gram and decide to sell it immediately. You will instantly lose RM10. Higher buy-sell spread will result in lower profit or higher losses when you sell your investment. This is not a big issue if you intend to hold your investment for long term.
d) Lastly, you may also want to consider the amount of gold that you want to hold. Some Gold Investment Accounts attract a service fee if the account doesn’t maintain the minimum balance requirement.
Is Convenience Your Main Priority?
All banks require the user to have an existing current/savings account before applying for a Gold Investment Account. More often than not, a) to d) above may not relevant to those who already have an existing current/savings account with a particular bank above. They can conveniently register for a Gold Investment Account rather than going through the cumbersome procedures to open a new current/savings account with other banks.
HelloGold – An Innovative Way of Investing in Gold
The exponential growth of digital technology has led to emergence of many innovative financial technology (FinTech) start-ups in recent times. And HelloGold is one of the most disruptive FinTech companies that makes investing in the precious metal easier for everyone.
It’s a real game changer in revolutionizing the traditional landscape of buying and selling gold in Malaysia.
What is HelloGold?
HelloGold was founded in 2015. It built a mobile application that enables the users to buy and sell gold anywhere, anytime with just a click of a few buttons. HelloGold is also the world’s first Shariah compliant digital application that is underpinned by blockchain technology. (Refer here for a quick understanding on blockchain technology).
HelloGold provides the easiest way to invest in gold in Malaysia. The users can buy it with 99.99% fineness for as low as only RM1! The investment grade metal is sourced from PAMP SA. It’s a precious metals refining and fabricating company in Switzerland leading the world market for gold bars of 50 grams or less.
The mobile application allows users to buy and sell gold instantly, transfer to anyone and withdraw cash as well. The users can also redeem physical gold through the app. It will be delivered within 5 working days.
How to Invest in Gold using HelloGold?
Here are the 3 simple steps to start investing in gold using HelloGold.
1) Download HelloGold mobile application from Google Play Store or App Store.
2) Register your account for free. Firstly, verify your email address. Next, take a photo of your MyKad and make a selfie using the app. It generally takes 1 working day to confirm your account. You can add my referral code – MART2EF2 to get a RM10 discount if you buy RM50 worth of gold.
3) Once your account is verified, you can click “Add Cash” to top-up your account using online banking. The processing fee is RM1.20 per transaction. You can now buy and sell gold whenever you want!
Pros and Cons of HelloGold
- You can invest in 99.9% fineness gold without keeping the physical metal.
- You can easily invest in gold on the go with great convenience.
- The minimum amount is as low as only RM1.
- HelloGold offers the best buying and selling prices in the market.
- Low risk of theft.
- Gold is insured.
- High liquidity. You can withdraw your investment anytime.
- You can transfer to anyone without restrictions.
- It charges 2% transaction fee.
- It charges 2% annual management fee.
Gold Exchange Traded Funds (ETF)
Exchange Traded Funds, also known as ETF. It’s nothing new in Malaysia. The first Malaysian ETF was listed on Bursa Malaysia in 2005. However, the expansion of ETF market in Malaysia is relatively slow. Until today, many people are still unfamiliar with ETF.
What is ETF? ETF is a type of fund that owns different types of financial instruments or commodities as underlying assets. ETF is tradeable as shares on a stock exchange like Bursa Malaysia. The fund tracks the performance of an index.
TradePlus Shariah Gold Tracker is the first shariah-compliant Gold ETF launched in Malaysia on 6 December 2017. The fund tracks the performance of gold price. Gold ETF is another alternative to invest in gold without keeping the physical metal. But firstly, you need to open a share trading account.
For those who are interested, you can refer here for comparison of all share trading accounts in Malaysia.
- You can gain exposure to gold without keeping the physical metal.
- You can easily invest in gold ETF online with a share trading account.
- No risk of theft and storage cost.
- High liquidity.
- You need to pay a broker fee for buying and selling Gold ETF shares.
- Not everyone is eligible to open a share trading account.
- The performance of the ETF is affected by other market risks other than the gold prices and USD exchange rate.
There’s a saying among the big fans of precious metal that goes: “If you don’t hold it, you don’t own it.”
Unsurprisingly, there are many investors favour physical gold over paper gold as investment in Malaysia due to various reasons. They can adore and appreciate the golden nuggets in their own hands. It’s more than just an investment for them.
You can choose either to buy gold coins or gold bullion bars if you wish to invest in physical gold. Gold bars are generally cheaper because gold coins have more intricate designs that charge a higher premium. Moreover, it’s also easier to store gold bars than coins. Nonetheless, gold bars are less liquid as compared to gold coins.
- You can own it for inheritance or giving out as gifts.
- No counterparty risk as you have full control over the tangible asset.
- Better privacy as you can own it anonymously.
- Low liquidity as compared to other options.
- Risk of theft and storage cost.
- Less convenient to buy and sell.
No doubt gold is an excellent hedge against inflation and serves as a great portfolio diversifier in improving the overall performance of an investment portfolio. Many investors invest in gold as a safe haven to minimize their exposure against any losses in the event of possible catastrophe.
The desire for gold is the most universal and deeply rooted commercial instinct of the human race – Gerald M. Loeb
However, it’s not a risk-free investment. Its price is determined solely based on supply and demand in the world market. The precious metal also has negative correlation with other asset classes based on historical performance. In other words, when the equity and bond markets are on uptrend, its price goes down. Therefore, gold price can be very volatile in short term.
There’s a consensus from the financial moguls that investing in gold should not exceed 5-10% of the total investment portfolio. It’s only wise to consider your risk tolerance, investment timeframe and objective before getting your toe wet in such investment. Good Luck!