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(GAP) Gold Accumulation Plans & (GSA) Gold Savings Account - What is the difference?


Welcome back to our "Common Question on Gold Investment" article. Today, our article discusses other gold investment products such as a "GSA" Gold Savings Account and "GAP" Gold Accumulation Plan. Our research has indicated that many investors are misinformed on GSAs and GAPs. When we wish to know something, many of us head to Google to find the answer. Unfortunately, many of the online articles are biased and do not provide all the information.

We have decided to exclude products such as (ETFs) Exchange Traded Funds, and Gold Futures as it is a topic for another conversation. Let us dive into the basics of a Gold Savings Account and a Gold Accumulation Plan.

(GSA) Gold Savings Account

What is it?

A Gold Savings Account is not dissimilar from a standard savings account. We like to think that GSA is an extension of a savings account. The difference between the two is that savings account primarily stores cash deposits from an individual, whereas cash is used to purchase gold in a GSA. The available balance of a GSA is denominated in gold. Industry players categorise GSA as "Paper Gold".

What is "Paper Gold"?

Industry players define paper gold as the rights or title on gold kept and owed by an institution to an investor that has used cash to buy gold.

Gold Buying Process

How does the buying process work? Investors will first be required to become bank account holders of the bank that they wish to buy gold. Upon completion of the account opening, customers will have to have money deposited in their bank accounts to make purchases of gold. Once the transaction has been completed, the bank provides a gold savings passbook indicating the amount of gold held by the customer, the price at which it was bought and the transaction date. Investors can view daily prices posted by institutions on their official websites and make trades via the institution's mobile application or over the counter.

Why is GSA an attractive option?

GSA offers investors the ability to invest in gold at near international gold market prices without paying for the charges of taking physical delivery. Physical gold and GSAs can differ by upwards of RM 10 to RM 50 per gram of gold.

(GAP) Gold Accumulation Plan

What is it?

The GAP program is designed to make gold investment accessible to everyone. What do we mean by the term "accessible to everyone"? Traditionally when people think about investing in gold, there are only three forms, physical gold bars, coins and jewellery. So, what makes GAP different from the latter?

Why Gap?

The GAP programs are interesting because they offer: 

  1. Small Minimum Investment Sizes: GAP programs offer investors the ability to invest with RM 1.00, making it extremely attractive and affordable for all investors. We like to think of the AIRASIA slogan, "Now everyone can fly at affordable prices". Investors can invest in 24 Karat or 999.9 (99.9%) pure gold at a low cost and small budget requirement. 
  2. Monthly Commitments: Commitments monthly may seem like a terrible idea, especially when you have no clue what you are doing. Our studies are conducted on young adults between 18 and 30 who are becoming increasingly interested in small size hassle-free investments. Many young adults are extremely occupied with their day jobs, and social lives and very few have allocated time to invest. The beauty of the GAP program is that it enables investors to set money aside on direct debit to invest in gold every month. An investor would not need to worry about deciding on when to invest as there is a team of experts making that decision for you.  
  3. Physical Gold Redemption: The accumulation in the acronym GAP is about building up your gold portfolio. Institutions or companies that offer GAP extend their offerings by value-adding services such as physical gold redemption in the shape of bars, coins, or jewellery. Is that an attractive idea? If you plan to accumulate gold to be converted into physical for marriage, retirement, gifting or any other reason, the redemption service is an absolute no brainer. 

Upsides & Downsides of GAP

Physical Asset-Backed

We have chosen to exclude the factor of physical assets from the analysis above as we believe it deserves a more extensive explanation. The term "physically backed" comes up often in many articles on the internet. What does it mean? We categorise a GSA or GAP program physically-backed in the gold industry when paper gold bought by an investor is "allocated" to a physical gold bar kept in a secured vault. The idea of physically backing these programs stems from offering confidence to regulators and investors that they are not just investing in a piece of paper but actual physical gold.

Several articles online regarding GAP and GSA have a large misconception on who offers and who does not offer physically-backed gold. Many articles claim that GSAs do not offer physically-backed gold. Many articles offer their opinions that GSAs do not offer physically-backed gold. The truth is something that requires further explanation. Some banks and institutions do offer physically-backed gold on GSA. The differences lie in something we call "allocated" versus "unallocated" gold. The term allocated is defined as allocating a particular gold bar (1kg) with a serial number to an investor who has bought a specified amount of gold. When it comes to unallocated, no physical gold bar or serial number allocated when an investor has bought gold.

Big Question: What am I going to choose? 

There are a few aspects to consider when deciding what program to choose. Our previous articles talked about investment time horizon, budgeting, requirements, and many others. Those are the primary considerations that an investor needs to consider before deciding on physical or digital investment. Once you have a clear idea of the above information, it comes down to personal preference on whether you believe physical investment is better than digital investment or vice versa.

We have attached the links below for your referral.

Common Questions on Gold Part 1
Common Questions on Gold Part 2

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