In the past week, gold shot through its $2,200 resistance and made a new all-time high of $2,392/ounce.

The precious metal is up 15.48% since the start of the year, outperforming even the S&P, which gained 8.35% within a similar timeframe.

Why is gold soaring?

Analysts believe that investors are continuing to seek safe-havens due to rising geopolitical tensions in the Middle East and Ukraine.

During times of conflict, nations tend to increase money printing to finance their war efforts, leading to a surge in inflation and a depreciation of the country's currency.

Both retail and institutional investors will look for ways to safeguard their wealth, and gold remains the preferred option due to its scarcity and durability.

Central banks across the world, most notably China, have been heavily stockpiling gold.

At the end of March, China’s gold reserves hit 72.74 million ounces (or $171.1 billion), representing a monthly increase of 160,000 ounces.

This is the 17th consecutive month for the central bank to increase its holding in the asset.

When we extrapolate the PBOC’s movements and combine it with Gold prices, the evidence becomes quite clear: China is driving up gold prices.

The Chinese central bank announced that this drastic move is to diversify its foreign reserves amid increased uncertainty in the global markets, particularly relating to international currencies.

Apart from China, India has also been aggressively buying gold as part of the global effort to gradually reduce reliance on the dollar.

Another key driver for the uptick in gold prices is the Federal Reserve.

Markets are optimistic that the central bank will be reducing interest rates this year, which will continue fueling the precious metal’s rally.

However, inflation in the US has been sticky in the past few months, and the Fed wants to see more evidence that price increases are on a steady downtrend before reducing rates.

ING Research believes that if the Fed continues this cautious approach on reducing interest rates, gold prices could risk a pullback.

Nonetheless, the firm expects gold to continue soaring this year as demand for safe-havens continues to be supported by geopolitical uncertainties and the upcoming US election.

“I want to invest in gold, but it’s too high right now.”

Rather than speculating on future prices, it’s much better to invest according to what your portfolio requires.

Generally, experts don’t recommend allocating more than 5-10% of your portfolio in gold, as it is only used as a hedge against inflation and a means of diversification.

So, if you have:

RM1,000 = RM50-100 in gold

RM5,000 = RM250-500 in gold

RM10,000 = RM500-1,000 in gold

“Where to invest in gold?”

i) ETFs that track gold. 

Each fund has their respective pros and cons, with some having a lower expense ratio (fees) but at the cost of not being Shariah-compliant.

You can search up their tickers and invest in them just like any other stock through Rakuten or any regulated broker. Notable examples:

• TradePlus Shariah GoldTracker (GOLDETF).

• SPDR Gold Shares (GLD).

• iShares Gold Trust (IAU).

ii) Invest with Bursa Gold Dinar (BGD)

Operated by Bursa Malaysia, BGD is a new platform for investors offering the convenience to buy, sell, save and invest in physical gold through a mobile app.

It is Shariah-compliant and has a maximum fee of RM1.00 for investing and 0.15% for cashing out.

The additional management and purchase fees are waived until June 2024, making this option the most economical for now.

More details: https://bgd.bursamalaysia.com/en/help-centre.html?content=tab-fee

iii) Invest with Versa Gold

Versa Gold is a local ETF that tracks spot gold prices, giving investors exposure to the asset without the hassle of physically owning it.

This is my most preferred option since I am a regular user of Versa. I’ll periodically switch funds from Versa Cash over to Versa Gold (vice versa) whenever I want to increase/decrease my exposure in the asset.

FYI, Versa Gold’s underlying fund is the TradePlus Shariah GoldTracker mentioned in option (i).

If you’re interested in creating an account, be sure the key in our referral code “THEFUTURIZTS” to receive RM10 for your first deposit of RM100 and above!

Download Versa: https://versa.com.my/

iv) Buy physical gold (not recommended).

This option is not recommended because you’re very likely to pay a higher price for gold.

If you’re buying jewelry, a significant sum of your purchase will be going towards the jeweler or the designer as craftsmanship costs.

More importantly, if the physical gold is not pure (24 carats or 999), they will not retain value and hence are not suitable as an investment.

Buying physical gold also has another huge disadvantage: where are you going to safekeep them?

Though a robbery is highly unlikely, the last thing you want is for people to break into your house after hearing that you own a few gold bars.

This is why I choose to invest in funds that track gold, as listed in options (i) to (iii).

“I already own gold. When should I sell?”

This will entirely depend on your portfolio allocation. As mentioned earlier, it is generally not recommended to have more than 5-10% in your portfolio.

With prices at a record high, the weightage of the asset may greatly exceed your target allocation. In this case, you should take profits to reduce the percentage down to a target that you’re comfortable with.

My approach is to maintain gold exposure at 5% of my overall portfolio with a 2% deviation. This means that if gold exceeds 7%, I will take a 2% profit to bring it down to 5%.

DISCLAIMER: This is not a sponsored article. Investing in gold is very different from opening a deposit account with a financial institution. You should always speak to a financial planner before making any investing decisions. ⚠️

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