Today, we are living in challenging times.
Gone are the days when job security brings financial security. Millions realized that it now takes more than a fixed salary to get ahead financially.
Thus, many begin to seek for investment opportunities to create additional sources of income and to build wealth.
Regrettably, there is an emergence of con artists to deceive sincere investors of their capital. They appear in most, if not all, investment markets such as stocks, properties, private businesses, forex trading and gold. It is unfortunate that these opportunists are still thriving in our beloved country.
In this article, I’ll be sharing five misconceptions that most people have about gold. From which, you can avoid being scammed, save tens, if not hundreds, of thousands in Ringgit and have a peace of mind knowing that your investment is intact. They include:
Misconception #1: Gold Brings Cash
Lately, I had a conversation with an uncle. He shared with me about his recent participation in a gold investing scheme. I was told that he was promised a nice fancy cash returns from investing in this scheme on a monthly basis.
In reply, I asked him whether he is aware of Genneva Gold. Calmly, he answered, ‘Yes, I’m aware of Genneva. But, this scheme is different. I think it’s more solid than Genneva.’
I believe, the reason why schemes like Genneva Gold and JJ PTR can thrive in Malaysia is simply because we still have a huge market of ignorant people who are willing to be conned in exchange for promises to get rich quickly.
Here, let me get it straight to you.
Gold is a precious metal. It is cold, hard, and tangible. It doesn’t bring cash returns to you. So, if you’re being approached with schemes that promises cash returns from investing in gold, please do not entertain them any further if you are sincere in buying gold to store wealth.
Misconception #2: Gold is an Investment
Let me clarify on the term ‘Gold Investing’.
Today, there are still many people who do not understand gold. Hence, savvy investors and gold bullion traders would use ‘Gold Investing’ as a convenient term to explain and educate the general public.
Meanwhile, for savvy investors, most of them do not treat gold as an investment. As mentioned, gold is not an asset that produces cash returns. Rather, it is a store of wealth as quoted by JP Morgan, ‘Gold is Money. Everything Else is Credit.’ Gold is included as an insurance policy against inflation as well as rapid devaluation of a national currency. This includes Ringgit Malaysia.
Misconception #3: Buying Overpriced Gold
In Malaysia, there are two different types of pricing for gold.
The first price is set by the Federation of Goldsmiths and Jewellers Associations of Malaysia (FGJAM). It is price that is displayed if you walk pass retailers such as Poh Kong, Tomei and Habib. As I write (June 20, 2017), the retail price for 999 gold (99.9% purity) is RM 225 per gram.
The second price is the international spot price. It is Live Pricing based on the latest gold price trading denominated in the US Dollar. The spot price in Ringgit is calculated based on the latest conversion rate between USD and MYR. Presently, the spot price of gold is RM 171.54 per gram. It is 24% lower than the retail price set by FGJAM.
Imagine. If you are buying a 50g gold bar,
Price #1: FGJAM
RM 225 x 50g = RM 11,250
Price #2: Spot Price
RM 180 x 50g = RM 9,000
(usually brokers will sell marginally above spot price)
Total Potential Savings
RM 11,250 – RM 9,000 = RM 2,250
Today, there are several brokers that focus on selling gold products close to the international spot price. Of course, nubex.my is one of them. Savvy investors would compare prices from these brokers to get the best price for gold bullion instead of local jewellers as it is so much cheaper.
Misconception #4: Buy Local Brands
Personally, I prefer global brands over local brands for gold bullion.
Wait a minute. Aren’t they the same? Gold is, after all, gold.
Let me elaborate further.
Let’s say, you have two choices. The first is a 50g PAMP Suisse Gold Bar. The second is a 50g Bunga Raya Gold Bar from Poh Kong. Which of the two bars would you choose?
In terms of metal content, both bars have identical value. However, the difference lies in marketability. PAMP Suisse is demanded as it is a global brand, recognized and highly regarded around the world. Poh Kong gold bar is a local Malaysian brand. Most likely, a foreigner would have no idea who Poh Kong is. It is less trustworthy. Thus, it is easier for investors to dispose a PAMP Suisse gold bar over a Poh Kong gold bar.
Misconception #5: Non-Transparent Brokers
There are brokers who choose to publish their selling price of gold only. These brokers would reveal their buying prices through phone conversation. I think it is a hassle and a disadvantage.
Thus, I prefer dual-priced brokers that publish both buy and sell price of gold on their website.
Firstly, it is transparent as I can calculate the buy-sell margin before making a purchase from the broker. Secondly, it is more convenient to estimate the current value of my gold holdings. Thirdly, brokers that display their buy and sell prices may boost confidence to investors in terms of their ability to buy-back their own gold bullion products.
If I’m looking to buy Gold …
I would choose brokers that are:
- Offering Global Brands
- Pure Bullion Traders (no fancy schemes, please)
- Dual-Priced (displaying buy & sell prices)
- Offering closest to the International Spot Prices
Locally, there are several good ones. Nubex.my is just one of the few good ones. Ultimately, it’s important for you to find one that you can trust and is convenient to you.
Co-Founder of Goldsilvermethod.com
The #1 Online Gold & Silver Education Course in Malaysia