Investing in gold?

So why has gold seen a dramatic rise to record highs?

1)Demand of the asset with the status of "safe haven" reaching records of ten year highs in 2010 of 3,812.2 tonnes. So where is this demand coming from?

We have Emerging market banks, who have been large buyers of gold, snapping up gold as a means to preserving national wealth and promoting greater financial stability, as these markets have been experiencing rapid growth and with the European debt crisis, Central banks unlikely to be holding any gold sales soon.

Looking forward, we can also expect buying to be dominated by Asia and emerging economies.

4 other key demand factors are:

-a 17% higher demand in 2010 than in 2009 in the jewellery sector

-the revival of the indian market and growing momentum in the gold demand in the Chinese market, which together took up a 51% of market share in investment and jewellery demand last year.

-Central banks are net buyers instead of sellers of gold for the first time in 21 years during 2010, which

Also due to the depreciation of the US dollar. Since the beginning of August, gold prices have increased more than 10 percent while the dollar index has fallen by only 2 percent. This may be signalling the intent of investors, who are bearish on the US dollars. This is not helped with the fact that the Fed's printing of money, with further quantitative easing, investors seem to be left with very few other alternatives than the safe haven of gold.

So has gold hit the roof at 1400? Is this where we can expect some resistance, well actually back in the 1980s, gold hit a record high of $875 and adjusting it for inflation that would actually turn out into a record high of $2315.52 in 2010 dollars! (Inflation Adjustment calculator)

Where the outlook of gold is concerned, current forecasts out of investment banks is that the rise of the precious metal will continue, although with a warning that it may have reached a mature phase in its recent rally.

In a Goldman Sachs report, their forecast on gold is that it would peak in 2012 at about $1,750 or about 30% higher than its current price of $1438. The current view that is that the current price of gold makes it a compelling trade, but not a long term one.

So what are the avenues for investing in gold?

Gold Etfs - ETFs or Exchange Traded Funds indexed to the price of gold are the smartest bet because they forgo the messy externalities that accompany most other assets that are said to offer exposure to gold.

SPDR Gold shares is an Exchange traded fund(ETF) can be bought and sold anytime via any stock broker/ via electronic platforms and investors can buy as little as one board lot or 10 shares. (Click Here)

Each share is backed by a gold bullion, held in an allocated account by the custodian HSBC bank. Its cost effectiveness comes in the form of the transaction costs which are lower than the costs associated with purchase, storage and insurance of physical gold.

Each gold share represents 1/10 of an ounce of gold. Ticker symbol is GLD 10US$.

UOB gold account- For more information on the gold savings account, you can take a look at this link: "Click HERE"

Gold futures Contract - the futures contrace is a very speculative arena where one's exposure to the market is leveraged and highly exposed where movements up and down are highly magnified. So the risks are much higher here with 9/10 investors likely to walk away with nothing.

Mutual fund that is invested into securities of gold mining or extraction companies. For example, investing in a such fund over the last 10years would have yielded returns of 518.9744%. This avenue overs a much safer avenue to building up your wealth as compared to venturing into futures contracts and for those who are not investment savvy, and are not well versed with trading SPDR shares or ETFs then mutuals funds are the best option.


Gold Equities, such as mining company stocks, get caught up in general market forces such as bull and bear cycles, phases that do not affect gold bullion prices.

For example:

-Change in management
-operational cost efficiency
-political or local currency risks


So unless you're buying into buying into various mining companies to diversify your holdings this may not be recommended.

One future option that may open up to investors soon is a Europe-based company Swiss Precious Metals(SPM) looks to be to tap into the high networth clients in asia with plans to setup a gold bullion storage at the singapore freeport facility, aimed at those who wish to diversify their portfolio into physical holdings of the precious metal.

There's also plans of an SPM gold index to track the value of the metal vs a basket of currencies.

Here are some Historical Gold Prices:

Closing priceYear @31 Dec	Gold Price ($/oz)
1910	20,67
1920	20,67
1930	20,67
1940	34,5
1950	40,25
1960	36,5
1970	37,6
1980	641,2
1990	423,8
2000	272,15
2001	278,7
2002	346,7
2003	414,8
2004	438,1
2005	517,2
2006	636,6
2007	869.38
2008	878.13
2009	1098.15
30-Mar-10	1416.25

I hope the following information was useful. Happy Investing all!