Thursday, 8 May 2014

Equity Heading South? Is It Time for Gold to Shine Again?

In my previous post on "Predicting The Next Market Crash Using Shiller P/E Ratio", I advocated that we should start diversifying into other non equity investments. This is not to say that we should totally exit the Equity Market! Instead we should look for other alternatives to allocate our savings/investments. By that, I'm referring specifically to investing into Gold.

Why Gold?
a) Comparing Percentage (%) Gain of Gold Price vs KLSE Index
Let's us take a look at the performance of gold price in comparison with the the Kuala Lumpur Stock Exchange Index from 1st Jan 2014 to 6th May 2014.

Gold Price Gain
Price on 1st Jan 2014 - 1202.30 USD/oz
Price on 6th May 2014 - 1308.60 USD/oz
% Gain : 8.84%

KLSE Index Gain
Price on 2nd Jan 2014 - 1852.95 points
Price on 6th May 2014 - 1860.43 points
% Gain : 0.40%

Over the past 5 months, Gold has steadily albeit quietly making gains that have outperformed the returns of the rather volatile KLSE. However, some might question the use of KLSE Index to compare with gold.

To make a more relevant comparison, let us compare the performance of Gold against the percentage returns of the top 5 highest returning Unit Trust Fund from 1st Jan 2014 till 6th May 2014.

b) Comparing Percentage (%) Gain of Gold Price vs Top 5 Highest Returning Equity Malaysia Top Performing Unit Trust

Gold Price Gain
Price on 1st Jan 2014 - 1202.30 USD/oz
Price on 6th May 2014 - 1308.60 USD/oz
% Gain : 8.84%

Top 5 Highest Returning Equity Malaysia Top Performing Unit Trust

Kenanga Growth Opportunities Fund is the highest ranked fund according to YTD at +11.47%. The other two funds that outperformed Gold returns are Libra DividendEXTRA Fund at +9.07% and Kenanga Syariah Growth Opportunities Fund at +9.00%.

Despite having three (3) Equity Malaysia funds outperforming Gold, funds ranked from 4th onward have all under performed. The vast majority of equity malaysia funds that have under performed clearly indicate that gold is a wise choice of investment if you're looking for diversification.

How Do I Invest In Gold?
I've written about investing in gold some time ago and you can read the full article HERE.

Apart from investing directly into physical or paper gold as suggested in my article, investors can also consider investing into Gold/Precious Metal Mutual Funds. 

Why invest into Gold/Precious Metal Mutual Funds?
The family of Gold/Precious Metal funds are making a comeback after shedding more then 40% last year (2013). The unit price of these funds are at the all time low, attracting investors to invest into these funds instead of gold as an alternate investment.

While gold price has appreciated by 8.84%, top performing precious metal fund such as RHB-OSK Gold And General Fund has achieved an outstanding 12.19% return over the same period!

What's My Take?
While I may not whether Gold is on the path of recovery or not, we all know that Gold (be it physical, paper or mutual fund) has been the safe haven for investors whenever the equity market turns bearish. The signs might not yet be pointing directly to a major stock crash and it might take a few more years for it to happen.

Never the less, I see no harm in having a portion of our investment being placed into Gold as a form of passive investment. For me, having a 8.84% return over 5 months for Gold certainly beats placing your money in a fixed deposit account or even ASB.

Cheers and Happy Investing!

Related Reads:

If you like reading this post, it would do me a great favor by:
1. Sharing this post on your Facebook!
2. Like my Facebook Page
3. Like to find out more about investing in RHB-OSK Gold And General Fund conveniently as well as saving on sales charge? Drop me an email at

No comments:

Post a Comment