Gold Investment In Malaysia

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Why Invest in Gold
According to World Gold Council, there is a depletion of western investors’ ExchangeTraded Fund (EFT) position in 2013. Consumers demand such as jewellery and gold bar
and gold coin remained very strong in 3rd quarter 2013 with approximately 72% of
gold demand. Furthermore, central banks continued to add gold reserves at a slower
rate.
Shortage of gold supply and demand, gold price would perform better in
2014.
Thomson Reuters GFMS of World Gold Council
claimed that the supply of gold decreased by
3% and there was a sharp fall by 1145.5 tonnes
in gold recycling activity more than offset a
modest increase in mine production. One of the
significance factors that affected gold supply is
the implosion in South Africa’s gold mining
industry like labour strike, higher labour and
power costs, time consuming for mining
maturing assets, electricity shortages and political
interference. It is expected that will be shortage
of gold supply in 2014. Moreover, India is the world 2nd largest sources of gold demand
with 720 tonnes of consumers demand in 2013. However, Indian government impose
tariffs on gold imports to ease the India’s account deficit. It affected the 3rd quarter gold
demand by dropping 148 tonnes of gold. If the government restriction will be removed
in 2014, it will create a large effect on demand for gold. This results in pressure on gold
supply chain. When supply of gold unable to fulfil gold demand, gold price would likely
have performed better in 2014.

Weak global gold production and changes in gold industry responding,
gold price is expected to bounce back in 2014.
Thomson Reuters GFMS of World Gold Council claimed that the supply of gold
decreased by 3% and there was a sharp fall by 1145.5 tonnes in gold recycling activity
more than offset a modest increase in mine production. One of the significance factors

that affected gold supply is the implosion in South Africa’s gold mining industry like
labour strike, higher labour and power costs, time consuming for mining maturing assets,
electricity shortages and political interference. It is expected that will be shortage of gold
supply in 2014. Moreover, India is the world 2nd largest sources of gold demand with
720 tonnes of consumers demand in 2013. However, Indian government impose tariffs
on gold imports to ease the India’s account deficit. It affected the 3rd quarter gold
demand by dropping 148 tonnes of gold. If the government restriction will be removed
in 2014, it will create a large effect on demand for gold. This results in pressure on gold
supply chain. When supply of gold unable to fulfil gold demand, gold price would likely
have performed better in 2014.

Weak global gold production and changes in gold industry responding,
gold price is expected to bounce back in 2014.
Citigroup Research investigated that gold mining companies worldwide are struggling
from the gold prices plunged dramatically in 2013. 98% of the industry bears production
costs matching or exceeding gold’s sale price. Gold companies have continued to cut
capex, exploration, and corporate costs dues to the price pressure environment.
According to PWC 2013 Global Gold Price Report, now miners are more focused on the
bottom-line. Jamie Sokalsky, president and CEO of Barrick Gold Corporation claimed
that the gold mining industry overall is becoming more disciplined in their capital
spending. Shareholders no longer focused on operating cash flow and more focused on
real cash generate from the business. Therefore, mining companies started to shift their
business strategy from focused predominantly on increasing production to a strategy
focused on increasing rate of return on each ounce. However, per unit costs would have
risen dramatically faster if capital spending were less. Citigroup Research found global
gold production fell by 5%, with unit costs rising 16% per annually. Number of projects
need to be cut off and unable to maintain production levels due to the low gold’s sale
price. Also, it results in delayed mine development and exploration budgets. Based on
the Casey Research, it shows precipitous decline in the number of drilling projects around
the world in 2013.

In addition, gold mining industry also faces heavy impairment charges, debt burdens and
uncertainty over U.S. monetary policy. When lower gold production unable to meet
with the increasing gold demand, bounce back in gold price may be possible in 2014.

Evolving of gold market structure, increasing gold demand in China and
India.
Prior to the financial crisis, consumers demand like gold bar and gold coin and EFT
demand (paper gold) were positive correlated with each other. However, since then the
relationship has been broken. In 2009, investor move in and out EFT market driven by
short-term-sentiment. Core investors holding gold as long-term assets, whereas tactical
investors continue EFT trading, which experiences volatility. With the gold price pressure,
it will leads to continuous outflow of EFT investments and it is possible that people shift
to gold bar investment. It is significant that gold flows from West to East. Western
investors move sold their gold EFTs and move into equities and other classes of assets.
However, the flow of gold from West to East especially China and India, which
continues demand for gold bars, jewellery and gold coins. It is expected that their gold
demand will continuously to increase by 2014, which will result the gold price to
perform better in 2014.

Termination of Quantitative Easing Three (QE3), favour US Dollars and
gold price.
In May 2013, the United States (US) Federal Reserve began hinting the stimulus no longer
be necessary due to improvement of economy. According to Bloomberg, Federal
decision on December 2013 to cut UD$10 billion a month from stimulus program. It is
estimated that the borrowing interest rate will raised and investors will divest their equity
investment from Asian countries back to the United States. This results in puling cash back
into US stock markets and boosting the US economy growth in 2013. It is expected that
QE3 will enhance labour market with unemployment rate to only fall to 7.6-7.9% by
end of 2013 and 6.7-7.3 % in 2014 from 8.1 % now. Hence, a better employment rate
will leads to an increase in the disposable income, which will lead to a stronger buying
power and favourable US dollar. Since commodity like gold is rated in US dollars, a
lower supply of US dollars may enhance the value of currency, which it is the right time
to buy gold due to the appreciation of US dollars.

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http://alliancegold.com.my/why

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