Gold will prove a timeless investment

Even though gold has fallen from its historic high of US$1,032 (Bt33,318) per ounce to about $860, it is still a worthwhile investment instrument as an inflation hedge, the president of a leading gold investment institute said earlier this week.

Gold is expected to generate returns of about 10 per cent this year, said Boonlert Siripatvanich, president of Ausiris.

The Bank of Thailand forecast that the inflation rate this year would rise to between 4-5 per cent, while Finance Minister Surapong Suebwonglee predicted it could be as high as 5.5 per cent.

Medium- to long-term investors should accumulate gold in phases when the price has levelled out, while short-term investors normally buy when the price is down, he said.

Those who do not care about price movements can snap up gold at any price, as it is a timeless investment instrument, he added.

The London Bullion Market Association, a trade association that acts as coordinator for activities conducted on behalf of its members and other participants in the London bullion market, predicted that gold prices this year would average about $846 per ounce, Boonlert said.

He believes the metal has not lost its shine, thanks to strong demand and falling supplies.

Gold at the moment is classified as a mainstay - not an alternative investment - for hedge funds and retail investors worldwide. Moreover, several central banks have returned to accumulating gold due to the depreciating US dollar, he said.

Gold-mining operations have fallen due to mounting concerns over global warming, which has reduced new supplies.

Regarding a recent resolution by the International Monetary Fund to unload 403 million tonnes of gold, Boonlert said the news had already been factored into the gold market and the sale would not affect the price as the IMF would only sell to financial institutions.

Last year, the gold price rose at an annual rate of 36 per cent in dollar terms and 21 per cent in baht terms, having offered an annual return of between 7 per cent and 8 per cent between 2000 and 2006.

"I thought I would never see gold at $1,000 per ounce in my lifetime, but now I don't think it will fall back to $200-$300 per ounce as it was several years ago," he said.

According to international investment standards, between 10 per cent and 20 per cent of assets should be allocated to gold as part of a diversified investment portfolio.

"Gold is an investment instrument to hedge against any extraordinary situation and it is regarded as a safe haven for capital," Boonlert said.

Gold investment in Thailand has two trading patterns - physical and paper.

Ausiris is a physical gold trader and one of two online gold traders in the country.

The company has recently launched 99.99-per-cent purity gold bars and sheets. The bars are available in 10 and 20 baht weights, while gold sheets are offered at 10, 50 and 100 grams. The move to offer 99.99-per-cent purity is a first in Thailand, while retail gold shops sell items at 96.5-per-cent purity.

"The price difference between 99.99-per-cent purity and 96.5-per-cent purity is roughly Bt500 higher per 1 baht weight," he said.

Boonlert suggested retail investors should go for 96.5-per-cent purity because it is directly based on the domestic price set by the Gold Traders Association of Thailand.

For those who want to trade gold with 99.99-per-cent purity, they should have investment knowledge because the price is based on the global spot price and foreign exchange, he added.

"Our 99.99-per-cent gold can be sold in other countries as it is Swiss-made gold under PAMP, which is the leading independent precious metals refiner and widely accepted around the world," he said.

Before starting trading gold at Ausiris, investors must apply for membership and they need to put a deposit of about 10 per cent of the spot gold price when they place a buy order. Gold delivery will be made two days after the transaction is executed. Buyers must pay the remaining amount on that date as well.

Investors can deposit gold at Ausiris for two weeks.

The company has between 2,000-3,000 customers who trade gold online and the daily trading volume averages between Bt20 million and Bt50 million, he said.

"We forecast that our online trading volume should grow by about 10-15 per cent this year. It is likely that our overall trading volume will exceed that target," he added.