Gold as an asset class
Historically, gold as an asset has always been in a class of its own. Its bright yellow colour made it attractive to look at; its high ductility and malleability enabled it to be worked upon in myriad ways; it is stable and has high resistance to corrosion (it can resist attacks by many acids) and most other chemical reactions; all these factors made it the metal of choice for fashioning jewellery across cultures across ages. With the coming of the Industrial Revolution, gold’s property as an excellent conductor of electricity made it an even more valuable.
In economic terms, gold has, from early times, been used as a store of value. It thus fulfilled the value of money especially given the highly volatile nature of non-gold currencies. This is also why it has been used as a hedge against inflation.
There are other reasons for gold’s attractiveness as an investment: gold prices are available for more than a hundred and fifty years enabling far deeper study by investors. Gold’s lack of correlation to other asset classes like stocks and bonds means that gold can be used effectively to diversify portfolios. In general, many financial consultants recommend keeping 4-12 percent of a portfolio in the form of gold. And, in recent times gold has become far more accessible thus enhancing its investibility.
Gold investment avenues in Malaysia
Malaysians can invest in either physical gold or “paper” gold.
Physical Gold investments can be made by buying gold jewellery, gold coins, gold wafers and gold bars from jewellers. Gold jewellery incurs workmanship charges while the purity of coins or bars vary from jeweller to jeweller.
Investments in gold can also be by means of the Kijang Emas or the Kelantan Gold Dinar. Kijang Emas are the Malaysian Gold Bullion coins issued by the Bank Negara Malaysia. Kelantan Gold Dinars are being issued by the Kelantan State Government since 2006. One Dinar refers to a gold coin of 4.54 grams and has a composition of 22 carat gold (916 purity). The Dinars are available in 1, 1/2 and 1/4 Dinars. The advantage of investing in these gold bullion coins is that you are assured of the purity and composition of the gold that you are holding.
Investing in physical gold carries with it storage costs and the risk of loss due to theft, robbery etc.
Paper Gold – Gold Investment Accounts
Malaysians can also invest in gold through Gold Investment Accounts. Some banks in Malaysia allow anyone to open such an account; the account balance is measured in grams of gold rather than in terms of a currency. This allows an investor to make deposits when prices are favourable and withdraw funds at a profit, when prices rise. The investor can even opt to receive physical gold instead of cash when they withdraw funds.
Islamic Gold Investment Accounts are also available. These accounts are Shariah-compliant and are based on the principles of Bai’ As-Sarf & Qardh.