Did you know that gold is extremely ductile? A single ounce of gold (31.10 grams) can be stretched into a gold thread 8 kilometers long? Welcome to our Quarterly Report on Gold. The report provides a deep insight into the performance of gold over the 3rd quarter of 2022.
Global Jewellery Demand Performance
Key Highlights
- Global jewellery consumption grew by 10% (year-on-year) to 523 tonnes in Q3, a 14% jump from Q2.
- Jewellery demand manages to surpass its 5-year average of 501 tonnes.
- Year-to-date demand reached 1,454 tonnes, a 2% improvement compared to 2021.
- Note: The report highlights the performances of China and India because they are the two biggest jewellery consumers.
How did China & India perform in Quarter 3 of 2022?
China
China experienced massive disruptions in Q2 due to the implementation of the "Zero-Covid" policy. The policy prevented investors and retailers alike from conducting business. However, in Q3, gold jewellery demand experienced a 58% (quarter-on-quarter) growth due to changes in investor sentiment and a decrease in local gold prices.
How has Chinese sentiment changed?
Persistent lockdowns, sluggish economic growth and a weak local currency, have encouraged jewellery consumption. 24Karat (99.9% pure gold) products are highly demanded compared to their lower purity counterpart (18K, 75% pure gold). Higher-purity gold products promote value preservation through lower yields and transparent labour charges.
Retailers actively promote heavier gold products to boost profits and recover from a weak Q2. Chinese investors hunted for heritage gold products such as antique gold bangles with higher gold purity. Evidently, the heritage product market has surpassed 18K jewellery in China.
What is the outlook for China in Quarter 4?
(WGC) World Gold Council analysts believe that Q4 performance for gold jewellery in China has more upside than downside potential. Seasonality and the government's efforts to boost jewellery consumption will aid economic activity in the sector. However, China's Covid policies may remain a barrier to generating growth.
India
India's performance in Q3 was impressive as it overturned the negative global expectations for jewellery demand. Urban investors drove jewellery demand as India's economic activity began normalising. Credit expansion has also added a positive outlook to jewellery demand. In several recently published articles, India's bank credit growth grew by 17%, touching a 9-year high by the end of Q3.
What is the outlook for India in Quarter 4?
WGC analysts have projected that India's outlook for the year is positive due to upcoming festivals and marriages. Despite its respectable performance, demand figures are not to be on a record-breaking path compared to Q4 2021 as higher inflation cripples rural areas.
Bar, Coin & Exchange Traded Funds (ETFs) Investment
Key Highlights
- Bar & Coin investment in Q3 grew by 36% to 351 tonnes but still remains unable to combat the 227-tonne outflow of ETFs.
- Interest rate hikes and a stronger $US dollar to combat rising inflation is a barrier to gold investment performance.
What is the outlook for Bar, Coin & ETFs?
In Q3, drivers for gold investment are high inflation and the resultant impact on interest rates. Bar and coin investors focused on hedging against inflation. In contrast, ETF investors reduced their holdings as opportunity costs rose from interest rate hikes and the surging US dollar.
How did ETFs perform in Quarter 3?
Global ETFs positions experienced negative outflows of 227 tonnes (US $12 billion) for Q3 reducing the total holdings to 3,548 tonnes. Five straight months in Q3 have almost successfully reversed inflows of 316 tonnes generated between January - April 2022.
How did European ETF perform?
Europe ETFs saw inflows of 41 tonnes earlier in the year due to uncertainty surrounding the Russia-Ukraine war. However, Q3 performance saw a net outflow of 78 tonnes because of interest rate hikes imposed by central banks such as the ECB, SNB and BOE.
How did North America ETF perform?
In North America, ETFs generated the most substantial outflow of 149 tonnes to global gold ETFs. The Federal Reserve's hawkish approach to monetary policy altered investor sentiment. Investors sought to adjust their investment portfolios for higher interest rates.
How did Asia ETFs perform?
ETF performance in Asia saw a marginal inflow of 1 tonne during Q3. China influenced ETF performance in Asia as Chinese investors increased their gold holdings due to lower local prices. In India, ETFs were a net outflow of less than 1 tonne as higher returns on local equities and bonds attracted investors.
How did Bars and Coins perform in China?
In Q3, the performance of gold bars and coins grew by 8% year-on-year to 70 tonnes as a result of the following:
- The easing of lockdowns prompted the release of pent-up demand for gold products.
- In July, local gold prices experienced a pullback, initiating investors to bargain hunt for higher purity gold products.
- Chinese banks have advocated the benefits of physical gold products, attracting many investors.
WGC analysts suggest that gold as a "safe haven" and Chinese commercial banks' promotion of physical gold products should support overall demand.
How did India perform in Quarter 3 for Gold Bars and Coins?
India's performance saw an improvement of 6% year-on-year as retail investors reacted to the lower local gold prices and weaker equity markets. Q3 demand was 14% higher than the five-year quarterly average, the highest since Q1 to Q3 2015. However, a recent increase in customs duty on gold saw imports interrupted. The result saw increased smuggling activities on upwards of 29 - 30 tonnes of gold. Traders were exploiting a loophole that allowed them to import gold as a platinum alloy, paying a lower customs duty.
The festive period of Navratri, Diwali and wedding seasons saw improvements in coin demand. Discussions with Indian traders indicate that the remaining months of 2022 should match the performance of 2021 Q4, the highest quarterly investment for nine years.
How did other countries perform?
Middle East & Turkey
Gold bars and coins' performance in the Middle East grew by 64% year-on-year (26 tonnes), the highest quarterly retail investment for four years. Influencers such as rising inflation and opportunities to purchase gold price dips drove investors. Retail investment in Turkey is also substantial, with recorded increases of fivefold. The 47-tonne record is the second-highest quarterly report seen from Turkey. Exceptional inflation levels and stable prices of the Lira saw a surge in demand.
Western Market Performance
In the West, inflation, weakened economic growth and persistent geopolitical tensions continue to fuel demand for gold bars and coins. US demand remains positive at 3% year-on-year as consumers express pessimism towards the US economy and rising inflation.
A recent study conducted by the WGC indicates that 82% of consumers believe that gold offers protection against inflation and currency fluctuations. 85% of respondents agree that gold is a safe haven against political and economic uncertainty. The remainder of prospects suggests that demand will remain healthy as more than 50% are "very likely" to buy gold coins or bars within the next 12 months.
Europe has also experienced a surge in gold investment by 28% year-on-year. Weak growth across the region, war, and central banks struggling to balance inflation continues to fuel gold investment.
ASEAN Market Performance
Investment demand remains robust across South East Asian (SEA) markets. The concern about inflation, currency depreciation and sustainability of medium-term economic growth remains troubling to investors.
Central Bank Performance
Key Highlights
- Q3 demand includes a significant estimate for unreported gold purchases.
- Turkey, Uzbekistan and Qatar were the largest buyers of gold in Q3.
- Year-to-date net purchases are at 673 tonnes, surpassing all annual totals dating back to 1967.
Global central banks accumulated 400 tonnes of gold in Q3 (115% quarter-on-quarter) increase. Generally, official institutions refrain from publicly reporting their gold holdings or may do so with some time lag. Metal Focus analysts suggest that purchases in Q3 may have started well earlier in the year.
Outlook for Central Banks on Gold
- Turkey remained the largest reported buyer of gold at 31 tonnes in Q3, increasing its reserves by 29% (489 tonnes).
- Uzbekistan added 26 tonnes in Q3, with a year-to-date purchase of 28 tonnes.
- Qatar bought 15 tonnes of gold in Q3; its total estimated reserves stand at 72 tonnes.
The demand trend for gold corroborates the WGC's findings from its 2022 Annual Central Bank Survey. A quarter of respondents in the survey indicated their intention to increase their gold reserves over the next 12 months.
What is the future outlook for Gold?
- The 2022 Financial Year remains weak for gold investment, but with certain upside potentials. These potentials are derived from global stagflation risks, fewer interest rate surprises and stretched negative sentiment. A stronger retail response and US dollar in a challenging environment may not be able to combat the lower over-the-counter (OTC) demand and flat ETF demand.
- Jewellery demand remained more robust than previously predicted. India and other SEA countries managed to support jewellery and fabrication needs, finishing 2022 with a better-than-expected position.
- Central bank demand will continue to be net purchasers of gold and outpace analysts' expectations, leading to further upside potentials.
Sources
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Disclaimer
The information provided on this website are adapted from the original authors and other contributors. These views and opinions do not necessarily represent those of ASTONM ENTERPRISE staff, and/or or any/all contributors to this site.
Introduction
Welcome back to our weekly market report. Our topic today analyses the US Stock Performance and contributors of inflation.
US Stock Performance
- US stocks on Monday saw their biggest decline in two months, especially in technology shares. The weakened economic outlook and the rising concerns that the Federal Reserve will adopt a hawkish stance at this week's symposium have contributed to a significant decline.
- S&P 500 index saw a 2.1% decline, the most significant daily decline since mid-June. Technology stocks that vowed continued growth were vulnerable due to rising interest rates that would impede future earnings.
- In recent interviews with the Fed, the central bank has stressed that they have a long way to go to combat inflation, and the rate hikes will not end with three increments.
Wages? The strongest inflation indicator?
- The latest (CPI) Consumer Price Index and (PPI) Producer Price Index reports infer that the inflation rate is easing. The report fell short of market expectations and created a sense of relief. Analysts at CNBC suggest that the positive job data enables the Fed to avoid a recession, with the worst being a wage-price spiral.
- Several top members of the Fed have maintained their commitment to maintaining wage growth at the current level to enable the American people to outpace inflation. Further evidence of a wage-price spiral has yet to present itself and thus, does not pose a threat.
- Analysts from Action Economics and Lightcast suggest otherwise that a wage-price spiral is a likely threat and should be taken seriously. The latter believe that the Fed has downplayed its concerns.
What are the current signs of a softening job market?
- Labour Market data indicates that people are accepting employment at a rapid rate. Despite a lack of indication from the Fed to reduce its interest rate hikes, the latest Fed FOMC minutes suggest that wage growth numbers do not solely reflect the labour market.
- FOMC minutes note that "nominal wage growth continued to be rapid and broad-based", but there were several signs of a softening outlook for the labour market.
- The Fed cites that the following signs indicated a softer labour market outlook; increased weekly initial unemployment insurance claims, reduced quit rates and vacancies, slower growth in payroll than the year before, and a report on hiring cutbacks.
- Companies'Companies' point of view is the concern of declining productivity despite wage hikes. Many individuals are debating the fundamentals that might have changed the economy for the worse and lowered productivity forever. The impact of lower productivity would have a significant effect on inflation and maintain pressure on producer prices and ultimately flow to customers.
Gold Outlook
- Monday's performance of gold saw a corrective pullback from a monthly low. A stronger US Dollar saw gold price weakening despite the market's rush for risk safety.
- (DXY) US Dollar Index saw a six-week high and an upward trend amid fears of recession and the likelihood of a hawkish approach by the Fed.
- Chief Technical Strategist Sunil Kumar at SK Charting states that gold appears to be oversold and primed for a rebound. Mr Kumar has said that "if confirmed, the rebound is likely to challenge today's high of $1,749/ounce".
- Kumar has indicated that "gold will eventually settle on the trading range, but the floor seems to lower as the risks of energy and food inflation could keep the Fed aggressive with rate hikes into the new year".
Sources
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Introduction
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:
- 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.
- 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.
- 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
Introduction
Welcome viewers to our channel, where we bring you news highlights on recent events. Our article today views the market sentiment on gold, the United States position on protecting Taiwan and lastly, the (IPEF) Indo-Pacific Economic framework for Prosperity.
If you are interested in learning how to invest into gold, browse our gold investment articles. Click here to start today!
Gold Outlook
- Early in the Asian session, spot Gold opens at $1,865/ounce. The market is losing confidence in the Federal Reserve's ability to react with the necessary aggression to combat inflation and prevent a recession.
- Over the past few days, global stocks traded with a "soft tone" as many investors flock toward safe-haven assets such as gold.
- Economists and investors believe that a less aggressive stance will occur after the upcoming potential 50 basis points hike. Atlanta Fed President Raphael Bostic states that the Fed can prevent a recession in the US economy despite the rate hikes.
- According to the (IGCS) IG Client Sentiment indicator (an indicator that shows the market position of traders), 84% of retail traders are net-long on gold.
- The (USD) United States Dollar, the impending Russian oil embargo, and the easing of the Chinese economy due to Covid-19 are possible contributors to the bullish note on gold. Traders believe that gold may break $1,900 over the coming week.
The United States position on China & Taiwan
- The United States are in hot water with China as President Biden showed their support for defending Taiwan should an attack by Beijing take place.
- China's State Council's Taiwan Affairs office release a statement indicating that the US is playing the "Taiwan card" to contain China.
- Xinhua State outlet spokesperson Zhu Fenglian advises the US to refrain from making any remarks or actions that violate the established principles between Washington and Beijing.
- However, Pentagon officials in Washington have indicated that President Biden's comments do not signal a change in US Position. Secretary of Defence Lloyd Austin told reports at the Pentagon that America is committed to maintaining peace and stability across the Taiwan Strait.
- Alongside the SOD, top US General Mark Milley refused to comment on the risks and consequences of defending Taiwan in the event of a Chinese invasion.
(IPEF) Indo-Pacific Economic Framework for Prosperity
- President Biden unveiled IPEF in Japan on Monday during his second Asian trip to increase the US's presence in the region.
- The IPEF seeks to improve ties through common standards in different economic sectors. Countries such as Australia, Brunei, Indonesia, India, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Thailand and Vietnam are the initial target of the US.
- Sectors covered under the framework include trade, supply chains, clean energy and infrastructure, tax and anti-corruption. The framework attempts to repair the damage created by his predecessor, President Donald Trump, that saw his withdrawal from the (TTP) Trans-Pacific Partnership agreement in 2017.
- Analysts and officials in the region state that the framework's scope is limited and lacks binding commitments. Nick Bisley, the dean of humanities and social sciences and professor of international relations, indicate that the issue with the framework is that "it sets out a high level of intentions, which makes sense, but until specific agreements are agreed and signed, the actual impact is impossible to gauge".
Source
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Introduction
Welcome back to our news highlights. Today's article views the perspectives of Federal Reserve board members on the economy and interest rate hikes. If you are interested in learning how to invest into gold, click here to browse our articles.
Household Economics & Decisionmaking Survey
- Annual Survey of Household Economics and Decisionmaking 2021 indicates that concerns about the state of the American economy have been looming well before the invasion and price surges.
- The survey shows that 24% of respondents believed the economic conditions were good or excellent, while others remained wary. Comparison with previous years of 2020 and 2019 indicate a 2% and 26% drop.
- However, many households report strong financial circumstances despite the economy's slowing, with at least 78% living OK or comfortably. The readings are the highest when comparing the previous eight years. Low-income families saw growth in this sector with a 13% increment from 2020 to 53%.
Federal Reserve Comments
- Atlanta Fed President Raphael Bostic states that once the Fed delivers the additional 50 basis points or half-a-percentage point hike, "a pause in September might be plausible". Bostic believes that policy decisions will depend highly on inflation dynamics and the impact of higher interest rates on the economy. Mr Bostic ends his statement with optimism that inflation will be much lower by then.
- Kansas Fed President Ester George broadens the scope of consideration for the economy by including additional events such as the Russia & Ukraine war and China's Covid-19 lockdown that may contribute to inflationary pressures or alleviate them.
- In addition to her statement, she indicates that the pandemic has altered the course of the US economy resulting in labour supply shortages and a service economy that has trouble adding back capacity due to reduction early in the crisis.
- George is also concerned that a "wildcard" may play as trillions of dollars in excess household savings can pose additional challenges for the Fed to control the heated economy.
- Investors are expecting the Fed to continue raising interest rates throughout the year. The rates are expected to be between 2.75% and 3% by year-end.
Money Market - Federal Reserve of New York
- Monday (23 May 2022) saw a record $2.04 trillion stored in money market funds and banks as investors flock to safe-haven investments as interest rates rise and financial markets struggle to gain traction.
- The figures marked the first time the Federal Reserve of New York has seen substantial funds tucked away in an overnight reverse repurchase facility.
- According to the Investment Company Institute, money market funds last week sat at $4.5 trillion, a figure just shy of the early months of the pandemic by $0.3 trillion. Figures, however, remain much higher compared to preceding years.
- The decline in the issuance of treasury bills has fueled investors' interest in the Fed's overnight facility. Investors are competing for fewer assets as there is less supply of treasury bills and, as a result, pushing prices higher and forcing fund managers to search for alternatives.
Gold Outlook
- Gold remains bullish with a four-day streak. Spot gold opened at $1,852/ounce in Tuesday's Asian session.
- The rally in gold is said to be attributed to the weaker (DXY) US Dollar Index. The index eased around 2.8% after hitting 105.00 despite the rising odds of an additional 50 basis point hike in June.
- Gold may witness a pullback towards $1,840 as the Federal Reserve is set to provide insights on monetary policy action in June.
Source
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Introduction
Welcome back to our Gold investment series. Last week, we spoke about investors' common questions before investing in gold. Some of the items covered include understanding your risk profile, time horizon, and the impact of inflation on gold. If you have yet to read part 1 of our article click here.
In part two of our series this week, we will dive deeper into gold products, types of products, sizes, design, and liquidity. Let us begin by looking at the distinct types of products available. We will only be covering minted & cast bars and gold coins. Our next episode will cover non-physical products such as (GAP) Gold Accumulation plans and (ETFs) Exchange Traded Funds.
Cast Bars
What is a cast bar? A cast bar is the classic form of gold bar, the ones that you see in a James Bond movie. On a shorter note, it is a bar that contains a refiner's hallmark, weight, purity, and serial number. For your reference, we have included some samples below.
Minted Bars
The counterpart of cast bars is the minted bars. Minted bars are another form of gold that differs from cast bars in size, pricing, packaging and design. Like the ones you see below, each minted bar is unique in its way. It is similar to the cast bar except for the design, sizes and packaging.
Bullion Coins
Apart from the cast and minted bars, investors have the option of gold coins. Gold coins are traditionally denominated in one troy ounce size (31.10 grams). Highly prevalent in the United States and Europe, gold coins have also extended their presence in (SEA) Southeast Asia.
What are some of the benefits and drawbacks of each type of product?
Sizing
- Cast bars: 50 grams to 1 kilogram
- Minted bars: 1 gram to 100 grams
- Bullion coins: Usually 1 Troy Ounce (31.10 grams)
Note: Understanding the different sizes available will help determine what sizes will suit your investment needs. Some investors may prefer to invest in high volume, small sizes for easy liquidity, while others prefer larger sizes but smaller volumes.
Price & Design
When we determine the cost of the products, we like to refer to the “premium”.
Premium - "The excess charged by a precious metals dealer over the intrinsic value of gold for physical delivery".
The premium for "Cast Bars" are much lower when compared to minted bars and bullion coins. The manufacturing costs of cast bars are inexpensive due to their uncomplicated design and unprecedented demand by various industry sectors (Retailers, Investors, and jewellery manufacturers).
However, the accuracy and additional design requirements make it tedious and expensive to produce when it comes to minted bars. The cost of production of a 10-gram bar versus a 100-gram bar is almost similar. If we were to consider a scale perspective, a refiner or trader would stand to benefit from the sale of a larger size bar versus a smaller size bar.
Bullion coins, however, differ in premium from refiner to refiner. The Austrian and Canadian Mint may command a higher premium than Royal UK Mint and American Mint. However, compared to minted and cast bars, the coins, on average, do command a higher premium, especially in the US.
Liquidity
Are each product different from the other on the note of liquidity, and does one command more liquidity? Generally, it depends on several factors:
- Size: The larger sizes tend to be slightly more difficult to liquidate as most goldsmith stores tend
- Proof of Purchase: Investors that have long invested or have lost their receipt may be required to produce some verification. Otherwise, an investor might risk commanding a lower price for their gold.
- Brand: Global brands versus local brands. The reason why some brands command higher premiums is due to their recognition, whether locally or globally. Global brands tend to be easier to liquidate as they have better recognition and trustworthiness.
- Method of payment: The choice of cash, cheque or bank transfer. Each payment method may command a different price point as some retailers may command higher charges for bank transfers and cheques.
- Product Type: Most of the time, when one sells used gold, the product gets scrapped (melted).
Storage
When investing in physical gold, the most common question is, “Where will I store it” or “do you offer storage facilities”. The size factor comes into play as smaller sizes, such as the 100 grams bars, are easy to store and fit perfectly in books or small compartments. However, when it comes to ½ kilogram or 1kilogram (similar size to an iPhone 6), it becomes a bit more complicated to store. Generally, most investors would prefer to hold it in a safety deposit box.
Stay tuned for next week's article on non-physical gold investments and our verdict on gold investment
Weekly Gold Investment Series Guide
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Introduction
Welcome back readers and a warm welcome to our new subscribers. Our news highlights provide some insight on statements made by the Federal Reserve and Canada's ban of Huawei's 5G networks.
Federal Reserve
- On Tuesday, during a live stream interview with Federal Reserve, Federal Reserve Chair Jerome Powell reassured the people that the central bank would not hesitate to increase interest rates until prices equalise towards a healthy level.
- Mr Powell continues to reaffirm to the market that should "they need to move past the historical understanding of neutral levels, the central bank would be fluid to react".
- Powell indicates that a 50 basis point move is likely to ensue in the upcoming central bank meetings, provided economic conditions remain similar. He has repeatedly committed that the Fed aims for a 2% inflation target without severely compromising the unemployment rate.
China
- Canada has banned China's Huawei from implementing high speed 5G network equipment in the country.
- Public Safety Minister Marco Mendicino states that "many hostile actors are ready to exploit vulnerabilities in our defences". Mr Mendicino indicates the government has conducted extensive analysis and is adamant about protecting its citizens from exploitation.
Gold
- Gold consolidates at $1,840 - $1,844/ounce in the early Asian session.
- High inflation in the Eurozone has peaked significantly, weighing heavily on higher prices and growth figures.
- Thursday saw many impulse investors preferring gold over other assets.
- (DXY) The US dollar index has fallen significantly despite the negative market sentiment. Last week saw the index at a high of 105 but surrendered all gains to the yellow metal.
- The market has corrected the oversubscribed DXY. The fundamentals of the index remain strong despite expectations of contractionary policy by the Federal Reserve.
- The United States has been lobbying its allies like Canada to exclude Huawei from its 5G mobile networks. US Intelligence believes that China's communist rulers could push the company to cyberespionage.
- Huawei spokesman Alykhan Velshi said that "we are surprised the government took so long to make a decision". "We see the decision as political, primarily from the United States.
Are you interested in learning more about gold investment? Check out our article.
Source
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Introduction
Welcome back readers and a warm welcome to our new subscribers. Our article today provides some insight on what economists think of the position that the United States Federal Reserve.
Federal Reserve
- A plan is in motion to prevent a recession as interest rates increase. Federal Reserve Chairman Jerome Powell's announcement of a series of interest rate hikes is straight out of the central bank's 1994 playbook. A strategy saw the Fed tempering the US economy and executing a successful soft-landing.
Soft-Landing: A terminology economists use to describe the manipulation of interest rates proactively sufficient to stop the economy from overheating and experiencing high inflation.
- The former titan Alan Greenspan, 1994 Federal Reserve Chairman, had much success controlling a chaotic economy. The year 1994 saw the economy booming with rapid inflation on the loose. Mr Greenspan, in seven interest rate hikes, pushed the rates to 6%, two half-point increases and one three-quarter hike.
- Economists agree that an interest rate hike is warranted to reduce economic demand and combat price fluctuations. However, on a bigger scale, the consequences for the economy are unfavourable. Historical evidence of rate hikes supports an economic downturn, but instances where a soft landing is somewhat rare.
- Former Bank President of New York Bill Dudley believes that attempting to control prices without spiralling into a recession would be extremely difficult.
- 1994 and today's economy are different. Timing is seen to be the most critical factor. Mr Greenspan saw that economic growth and inflation were inevitable and thus, raised interest rates proactively to be ahead of the curve. However, Mr Powell is seen to be more reactive and may not be quick enough to combat the issues.
- Another factor contributing to the difference is the employment rates. Baby boomers were seen to be at the pinnacle of their careers with new technology in the workplace. The workforce and productivity in 1994 were unaffected despite the interest rate hikes. 2022 will see boomers exiting the market and reduced productivity.
- The year 1994 also saw the erection of the (NAFTA) North American Free Trade Agreement and the fall of the Berlin Wall. The impact of both events saw additional imports and lower costs of goods. Today's global events saw a pandemic and a war that has led to energy price shocks and supply chain disruptions.
Gold Price
- Spot Gold opens above $1,820/ounce as US Dollar Index (DXY) weakens.
- The impact on DXY could be attributed to the large interest rate hikes that the Federal Reserve has announced.
- Estimated US Retail Sales monthly figures have improved by 0.7% compared to 0.5%. Stronger numbers indicate that consumers are confident in the economy, and as a result, the DXY will strengthen and weaken gold prices.
France
- France has pledged to protect Sweden and Finland against Russian threats as the latter has announced its decision to join NATO.
- The two countries seeking NATO membership will end decades of military nonalignment in a move driven by Russia's invasion.
- President Putin of Russia has stated that NATO membership is not concerned unless military infrastructure is expanded.
Source
Weekly Gold Investment Series Guide
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Introduction
Welcome to a new series on Gold investments. We will release educational information to help you with your gold investments each week.
Disclaimer: The viewers, thoughts, and opinions expressed in the text belong solely to the author and not necessarily to the employer, organisation, committee, or individual.
The most common question: "How much should I invest in Gold?"
Let's address a couple of questions before determining how much to invest.
How long do you plan to invest in Gold?
Finding out an exact or estimated timeline of your investment will help you plan the lifespan of your portfolio. Each individual depending on their needs and requirements, will differ.
What amount of funds are you comfortable with investing?
Question 2 is equally as important as number 1. One should look carefully at his/her finances and determine what an appropriate amount to set aside for investment after taking daily expenses, emergency funds, and monthly commitments into account. The amount that you set aside for investment should not affect you significantly. It is essential to understand that no investment is 100% secure and should expect to make losses.
Generally, for investors that approach us with no set investment budget in mind, it is recommended to:
a) Stable Income (Salaried Employee) - Individuals with a stable monthly income can invest 8% of their net worth into Gold. Why 8%, might you ask? We believe that 8% is more than enough exposure to Gold, which leaves you additional investment funds for other assets.
b) Freelancers, Business owners, & others (Inconsistent Income)- Individuals that fall into this group should be slightly more reserved compared to the (A) group. A 4% exposure to Gold is sufficient to ensure that it does not dent the bank account. Group B individuals will be prone to different risks that may require liquidity.
What is your risk tolerance?
How often have we heard this question when approaching a bank to invest in unit trusts, shares, and bonds. This question requires an immense level of self-reflection from the individual.
It is good to discover your personality traits as an investor and harness that strength. To help you decide on your risk tolerance.
"Isn't it too expensive to buy now? Gold price today looks very high!"
We address this particular set of concerns with factual data on the historical prices of Gold.
Analyses of the chart indicate that the price of gold has increased over both a 10-year & 5-year period. The 5-year period suggests an estimated 27% increase in the gold price, while the 10-year period shows a 31% increase. If we were to take the data into account, we could conclude that the price we pay today is lower than in the future.
Generally, investors that fall under short-term investment (under one year) should be more price-sensitive when buying Gold. The period for appreciation of the gold price is shortened by the investment period. However, investors who view Gold as a long-term investment will be less price-sensitive today because there is additional time for price fluctuations compared to the former.
"Is there a right time to invest in Gold?
The short answer is that there isn't a perfect or right time to invest. Why is that? Let's view different sides of the coin that supports gold investment during specific economic crises versus opposition.
Traditionally, investors have used and are still using Gold today as an asset to hedge against inflation (rising prices). What do you mean & how does it work?
It is essential to understand a few concepts.
- Gold has an inverse relationship with the United States ($) dollar. If the US dollar appreciates, the price of gold will fall and vice versa.
- Inflation: - The general rise in the prices of goods and services. How does inflation affect Gold?
Let us take the example of US inflation that has spiralled out of control over the last few months due to supply shortages, conflicts and vaccination against the Coronavirus.
Rapid inflation affects the American people by eroding their purchasing power. For example, if today the price of a loaf of bread is $1.99, and inflation tomorrow is 5%, that same loaf is valued at $2.09. The monies spent yesterday are worth 5% less, and thus if you had the same amount yesterday, you would not be able to purchase the same loaf today.
Americans would invest in gold to protect their wealth when inflation spirals out of control because the US dollar's value is or has eroded. On the other side of the coin, "when is it the wrong time to invest in gold?" We use the real-world example of the recent decision that saw the Federal Reserve of America (Central Bank) raise interest rates. Why did they increase the rates, and what are the implications?
To begin understanding the decision to manipulate interest rates, economists view the growth of the economy, unemployment and inflation figures. During rapid expansion (economy performs well), inflation tends to trail behind. Inflation follows with economic growth because demand outweighs supply, and as a result, suppliers begin to capitalise on excess demand or a lack of stock by increasing their prices. The result saw the prices of goods and services become more expensive.
The Federal Reserve's decision to combat rapid inflation by contractionary monetary policy is to limit the amount of money in circulation. The Fed applies an interest rate hike of 25 or 50 basis points (0.25/0.50%). A rate hike means several things:
a) The cost of borrowing money becomes expensive because the interest on the loan that one service is higher
b) Saving money in the bank is better because one can yield higher interest for the amount stored.
c) Reduction in demand for goods and services as people spend less money. People would prefer to invest in assets that benefit from increased interest rates.
We hope these few questions are sufficient to answer some of your investment queries. Stay tuned next week for part two of the series.
Weekly Gold Investment Series Guide
Checkout our blog weekly or subscribe to our newsletter for the latest Gold Investment Guides
Click here to visit our Blog
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Introduction
Welcome back to our weekly news recap. We hope all our Muslim friends have had an enjoyable Hari Raya celebration. Our article today provides a brief overview of events over the past week.
Federal Reserve
- Last Wednesday, during an official interview with the Federal Reserve, the central bank raised interest rates by 0.5% to combat worsening inflation. US inflation figures are the worst the country has seen in the last 40 years. The aggressiveness in rate hikes is also the highest in the previous 22 years.
- Fed Chairman Jerome Powell has stated that an additional 0.5% rate hike over the next few meetings is on the table but is not expected to apply further hikes past 75 basis points.
- The rising costs from grocery stores to fuel pumps have created significant tension among the American people. Mr Powell has said that the Federal Reserve understands the concerns and hardships faced by the American people. Policy implementation is imminent to reduce the pressure on prices.
- However, much debate on whether rate hikes would be sufficient plagues investors. The market views the Russia-Ukraine conflict as applying additional pressure on the price of food and energy, which are not expected to end soon. As such, the implications on the US economy are highly uncertain. The additional pressure from the conflict has created and will continue to generate additional upward pressure on inflation and affect economic activity.
Inflation
- A Federal Reserve Survey released on Monday (9th May 2022) indicates that consumers are a little more optimistic about inflation figures in April. However, the latter expects spending to be considerably more over the year.
- Inflation expectation (1 year ahead) figures have fallen to 6.3%, a 0.3% decrease from March figures. Over three years, expectations gained 0.2% to 3.9%.
- The American people are very much uncertain about the rising living costs. New York Fed survey indicates that Americans expect household expenditure to increase by 8%. However, when it comes to fuel prices, consumer expectations have fallen to 5.2% from a previous 4.4% (April).
Gold Prices
- Asian Market opens lower with gold prices at near $1,850/ounce. Market sentiment expects that the Federal Reserve will announce a larger rate hike.
- Last Friday's report on US Nonfarm Payrolls (NFP) has increased the odds of a rate hike by the Federal Reserve in June. US Bureau of Labour Statistics has indicated that an additional 428k jobs in the labour force compared to expectations of 391k have been added to the market. Higher job creation indicates economic growth and inflation, which may compel the Fed to hike rates by another 50 basis points.
Sources
Weekly Gold Investment Series Guide
Checkout our blog weekly or subscribe to our newsletter for the latest Gold Investment Guides
