The asset that never loses its sheen

The asset that never loses its sheen

Gold savings schemes push low-income folks to invest

Gold ornaments on sale at a Hua Seng Heng gold shop on Yaowarat Road. Pornprom Satrabhaya
Gold ornaments on sale at a Hua Seng Heng gold shop on Yaowarat Road. Pornprom Satrabhaya

With a reputation as a safe-haven asset, gold has historically been perceived as a core risk diversification asset and an efficient tool to preserve and pass on wealth to the next generation.

However, as soaring gold prices rendered the precious metal unaffordable for people with low income and little savings, many gold trading companies now offer gold savings services that encourage people to invest with a small amount of money.

Global gold prices have increased recently, driven by the tension between Russia and Ukraine that caused oil prices, and consequently inflation, to rise.

As of Feb 18, the selling price of gold bullion stood at US$1,880-1,900 an ounce.

Analysts from YLG Group forecast the price to move in a range of $1,878-1,932 an ounce in the short term and said the precious metal still has upside in the long term as the global economy remains weak in the face of the prolonged pandemic.

BIT BY BIT

Gold savings services allow investors to gradually accumulate gold by depositing a small amount of money over time and exchanging the deposit for real gold when it reaches the desired amount, or leave it in the account to speculate on future gold prices.

Many companies offer such services on various platforms such as applications and websites.

One of the biggest players is YLG Group, a gold and jewellery exporter with more than 20 years of experience.

Customers can purchase gold through the YLG Gold Savings programme by opening an account online. The company provides two types of gold savings services.

The first is a daily gold savings service that allows investors to buy gold with a minimum of 100 baht per day. Customers are not required to deposit the money every day, instead investing whenever they are ready.

The second option is a monthly gold savings service that allows customers to deposit a minimum of 1,000 baht per month in their account.

YLG's gold savings services are available 24 hours a day at real-time prices.

When an investor has saved up the equivalent of 1 gramme of gold at the time of exchange, they can convert the deposit to real gold.

MTS Gold offers MTS Gold Blockchain (MGB), a gold savings system under the supervision of MTS Gold Maethongsuk.

According to the MTS website, MBG is an online gold savings platform using blockchain to reassure investors their gold, personal information and transactions are not compromised.

The system allows customers to purchase gold in fractions starting from a minimum weight of 0.1 grammes, or roughly 150 baht.

Customers can also transfer gold in the system to other members, or exchange it for physical gold at any MTS branch.

As of Feb 18, the selling price of gold bullion stood at US$1,880-1,900 an ounce.

ALL THAT GLITTERS

GCAP Company Ltd, a Thai gold exporter and importer, also has a savings programme that allows customers to purchase gold for only 500 baht per month, which can be deducted via an automatic transfer system on every first business day of each month.

After the deduction, the company processes the purchase the second business day of the month for the amount specified by the customer at the market price at the time of purchase.

When the savings amount reaches one gramme of gold, customers can choose to pick up the gold at any GCAP branch or have it delivered to their address.

Hua Seng Heng, one of Thailand's oldest gold traders, has a gold savings scheme in which participants invest in bullion in the hopes of profiting from their daily or monthly gold savings.

The first plan allows customers to purchase gold by depositing a minimum of 1,000 baht in an account.

When the deposit amounts to a certain weight of gold, investors can choose to exchange it for physical gold when the price drops, or sell it when the price rises to make a profit.

The second plan allows investors to deposit or ask Hua Seng Heng to automatically deduct money from their account on a monthly basis to invest in gold bullion.

When buying gold in any form, the metal is normally weighted according to the standards of the Gold Trade Association.

The most popular gold sold in the country is 96.5% pure gold, while in the international market it is 99.99% pure gold.

One baht of gold weight for gold bars equals 15,244 grammes. In the case of gold ornaments, it equals 15.16 grammes.

FOUR FACTORS

Traders recommend investors closely monitor four factors as gold prices are closely correlated to their movement.

The first factor is interest rates. If the interest rate increases, signalling an economic recovery, the US dollar will appreciate and cause gold prices to fall.

On the other hand, if the rate is cut, suggesting a weaker economy, the US dollar will depreciate and cause the price of gold to rise as people hedge against an economic downturn, said gold traders.

The second factor is oil price as hikes in fuel prices can cause inflation. Oil prices, inflation and gold prices typically move in the same direction because demand for gold as a safe-haven asset rises during such times.

The third factor is the US dollar because it is the most widely used currency.

When the greenback weakens, gold prices typically rise as a safe-haven asset, and when gold prices fall investors usually turn to the dollar.

The final factor is the global demand and supply for the precious metal, which is influenced by three groups: the jewellery sector, investment sector, and manufacturing and medical sectors.

Gold traders said central banks' purchases of gold to increase reserves as a hedge against risk from the US dollar will also push global demand for gold.

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