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While economic uncertainty grows, many investments have become more volatile, and investors are turning to gold as a safe haven to protect against the upcoming recession and declining USD. If you are looking for ways to keep your wealth safe and mitigate the effects of the downturn, you may want to consider investing in gold too.

 

Starting from the most ancient civilisations, gold has been a prized commodity. Unlike iron, copper or many other durable metals, gold does not rust or degrade over time. It can also be easily worked into valuable artifacts, like jewellery or ceremonial items. Today, gold is also valued in the investing world as an instrument to hedge against inflation, diversify portfolios and provide a cover for trying times.

Why should you invest in gold?

Gold is generally showing low correlation with asset classes such as equity, while it could even decouples and become inversely correlated during periods of stress. Therefore, Gold is unique among the asset classes that could help diversify your investment portfolio risk.

 

Post the reopening of major economies after the draconian COVID19 lockdowns, major central banks across the globe (eg, US Federal Reserve, ECB) have continue to commit to keeping interest rate low for longer in order to provide an accommodative environment for stronger recovery from the economic fallout. This could help providing support to the precious metal as the opportunity cost of holding the Gold declines.

 

While daily COVID-19 cases in the US remain elevated, the on-going uncertainties from the US-China tension and the US election in November could means the market volatility to remain high. In addition to that, the weakening USD and the strong gold physical demand from other central banks to diversify away from USD as reserve currency would also benefitting the precious metal.

 

Key headwinds for the Gold in the near term includes the potential positive news on the COVID-19 vaccines development, better than expected global economic growth and hence higher bond yield / interest rate environment and spike up in USD due to safe-haven seeking activities (due to risk-off events).

How can you start? 

The traditional way to invest in gold is to buy physical gold. Gold bars allow you to make large investments at a time, and gold bullion coins make it easy to liquidate smaller portions of your investment for cash, as and when you need to. These are some of the benefits that make physical gold desirable. However, physical gold has some drawbacks. You’ll need to protect it from theft and loss, which can include renting storage, spending on security and making sure your gold is covered by insurance. These precautions can make it expensive and inconvenient to invest in physical gold. 

 

Alternatively, you may consider investing with CIMB e-Gold Investment Account (eGIA). You’ll enjoy the benefits of paper gold – such as its ease of purchase and liquidity – without the worries of storing or protecting it. You can access your eGIA via CIMB Clicks – a convenient way to buy or sell gold online, from anywhere. With a minimum investment as low as 1 gram, it’s easy to start building an inflation hedge for your wealth with gold. 

Disclaimer

The contents in this document are reasonably believed to be correct at the time of issue and are subject to change.

 

CIMB Bank Berhad (“CIMB”) makes no express or implied representation, recommendation or warranty as to the accuracy, desirability, reliability, or completeness of any information and opinion relating to any matter contained in this document.

 

The information in this document is subject to change and correct at the time of issue. Neither does this document purport to contain all the information that a prospective investor may require. Because it is not possible for CIMB to have regard to the specific investment objectives, financial situation and particular needs of each person who reads this document, the information contained in it may not be appropriate for all persons.

 

CIMB is not acting as advisor or agent to any person whom this document is directed. You, the recipient of this document must consult your own professional financial, legal, accounting, taxation and all other advisers and make your own independent assessment of the contents of this document. Under no circumstances should you treat or rely on any of the contents of this document as advice in relation to any of your financial, legal, accounting, taxation, technical, investment or any other matters. 

 

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