More attracted to gold savings account

By Elaine Ang
Uptrend in gold price and low interest rate regime add to lustre

PETALING JAYA: Banks’ gold savings accounts are expected to continue to gain popularity in anticipation of an uptrend in gold price and investors’ desire to diversify their investment portfolio in the current uncertain global economic conditions, industry experts said.

Malayan Banking Bhd (Maybank) deputy president and head of community financial services Lim Hong Tat said the number of Maybank Gold Savings Accounts had been growing an average of 8% every month so far in the current financial year ending June 30, 2011 (FY11).

In FY10, the number of gold savings account and investment value recorded an average monthly growth of about 11%. The total number of accounts as at Sept 10 is about 27,000.

“We are optimistic that demand will continue to be on an uptrend and we hope to register a 50% growth in this portfolio in the coming year owing to the infancy of the local market.

“Demand has also grown primarily due to the weakness of the US dollar and the perception of increasing uncertainty in the financial markets,” Lim said.

In addition, Lim said the bank’s active promotion campaign at branches on gold savings as an alternative investment option had a positive effect in creating awareness of investments in gold. He said the gold savings account was an alternative savings as well as investment option for those who wished to diversify their investments.

“Given the current high price of gold as well as greater awareness of the gold savings account, we are positive that it will continue to remain an alternative investment product,” he said.

A Public Bank Bhd spokesman said the bank’s Gold Investment Account had gained popularity since its launch in April 2008 as evidenced by the 54% and 68% growth in the total number of accounts and gold amount outstanding respectively for the past one year.

“We expect the gold investment account to continue to perform well next year in anticipation of higher gold price coupled with our latest initiative which enables our customers to perform gold purchases and sales online via our web portal,” he said.

New entrants to the gold savings account market Kuwait Finance House (M) Bhd (KFH) and United Overseas Bank (M) Bhd (UOB) also see good prospects for the product.

KFH chief executive officer Jamelah Jamaluddin said the KFH Gold Account-i which was launched nationwide on April 29 had been very well accepted.

“Demand has been more than expected, surpassing our business projection of 50kg for the year.

“Going by the current rate, we are confident of booking more than double our initial projection by year-end,” she said.

Jamelah expects the demand for gold to hold at current levels, given the public’s heightened awareness on its availability and affordability.

“Demand for gold has risen significantly as an array of buyers ranging from investors, speculators, hedge funds, central banks and the public, continue to buy gold,” she said.

Moreover, the continued low interest rate regime globally had also built expectations of eventual inflation pressures, and gold has always been viewed as the hedge against inflation, she added.

Jamelah foresees gold price remaining firm for the rest of the year despite minor adjustments along the way.

“Analysts have expressed expectations that the price of gold will rally between US$1,600 to US$2,000 next year, and we share the same view,” she said.

UOB recently introduced the UOB Gold Investment Accounts, comprising Gold Savings Account and Premier Savings Account on Oct 15.

The Premier Gold Account caters to high net worth individuals while the Gold Savings Account is designed mainly for the mass retail market.

UOB managing director and head of global markets and investment management division Michael Beh said 50 accounts were opened in just one week.

“Demand is expected to continue to be strong next year for investment in gold. Investors are basically still bullish on the metal,” he said.

Gold hit a high of US$1,381.15 per ounce on Oct 14, a 23% appreciation since the beginning of the year when it was traded at US$1,121.20 per ounce.

Gold is currently trading at about US$1,358 per ounce.

Beh said the gold market was well underpinned by fundamentals and expected to continue to perform well.

In general, banks’ gold savings accounts are statement-based accounts where customers will have a gold savings passbook.

When customers purchase gold, the amount is credited into their respective accounts and vice versa.

The gold invested in this scheme is pegged to international gold prices. Customers will make a profit when they sell the gold at a price higher than their initial purchase price.

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