Gold investment accounts revisited

Want to invest in gold but deterred by the risks and hassle of keeping physical gold bars? Then gold investment accounts, which allow you to buy and sell gold and keep track of your transactions through a passbook, may be for you.

When Personal Money reviewed gold investment accounts in June last year, they were only available at three banks — Kuwait Finance House, Public Bank and Maybank.

Due to gold’s growing popularity, CIMB and United Overseas Bank (M) (UOB) have jumped onto the bandwagon as well. All banks, except for Kuwait Finance House, use Swiss Pamp as the underlying gold bar for their gold investment accounts.

Kuwait Finance House uses a generic gold bullion and UOB uses different gold bullions. Investors can select their preferred brand when making a withdrawal (see opposite page). You must have a savings or current account at the bank to open a gold investment account.

On Aug 23, gold prices hit a record US$1,911 (RM5,688) an ounce in Asia. On the back of rising prices, the buy and sell prices of gold investment accounts have also increased by about 30% over a period of 15 months.

A year ago, the precious metal’s purchase price (the price at which the banks buy the gold from customers) ranged from RM121 and RM123, and the sell price (the price at which the banks sell the gold) ranged from RM126 to RM128. At the end of August, the buy price ranged from RM174 to RM178, while the sell price ranged from RM180 to RM185.

To enhance your returns, choose an account that has the smallest spread (the difference between the buy and sell prices). New players such as UOB and CIMB offer the narrowest spreads, with UOB outshining its competitors with 0.55% and 1.1% for the Premier Gold Account and Gold Savings Account respectively. Kuwait Finance House has the highest spread of 4.45%.

As always, watch out for fees that will negate your returns. CIMB, Public Bank and UOB impose a fee if the minimum balance falls below a stipulated level at month- and year-ends. Kuwait Finance House does not impose any additional fees. Public Bank levies the highest fees; when customers make a withdrawal of physical gold, the conversion fees ranging from RM220 to RM270 are the highest among the banks.

Think about the type of withdrawals that you want to make from these accounts. Not all banks allow you to withdraw physical gold, and if it does, a conversion fee might be levied. For example, at CIMB, if you withdraw 10g of physical gold, you would still get the best nett return despite the conversion fee of RM1 for every gram of gold (based on bank’s buy-sell prices as at Aug 22).

Consider, too, how much money you can set aside for your investment. Maybank offers the lowest entry barrier with a minimum deposit of 1g. It also imposes the lowest minimum balance of 1g. In contrast, UOB requires the highest minimum initial deposit and balance, although it offers the narrowest spread.

As with any other investments, do not forget to evaluate the risks. While such accounts permit you to reap favourable returns from appreciations in gold prices, you will make a loss if the price of gold plummets.

These gold investment accounts do not earn interest income and the balance kept in the account is not protected by the government’s deposit insurance scheme, Perbadanan Insurans Deposit Malaysia (PIDM).

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