Saranan Salleh - Multiply Property Value by Investing in Gold

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Utusan Malaysia

15/08/2011

Saranan Salleh - Multiply property value by investing in gold

For the first time in history, the price of gold surpasses US$1,800 per ounce. This follows the concern of the United States investors after the debt limit of the country has been increased for the 75th time and the quantitative relief will be done again.

Gold is seen as a safe investment since the government is incapable to overcome its economic problem.

The investors’ action has caused the Certified Gold Exchange and J.P. Morgan Chase and Co. updated the projection of the increase in gold price to US$2,500 per ounce.

So far Portugal, Ireland, Greece, Spain and Italy has undergone deficit problem and the entry of Italy, the third largest economy in Europe has increased the concern of investors. Since the last 10 years, the price of gold has increased 700 percent. The investors’ fear not only confined to what is happening in the United State but also spread to the Euro debt.

Last week, we were shocked by the tumble of the world share market prices, not only the United States but also Europe and Asia, with its market capitalization wiped out by US$4.4 trillion. Although the decision of the Federal Reserve in America not to increase interest rate for the time being put some relief in the market basically, America and Europe are still weak.

Despite the fall in Malaysia in term of percentage still low compared with other bourses, it is estimated that RM91 billion has been wiped out in our capital market value. When the share market plunged, investors run away to look for safer sanctuary and one of it is gold. In Malaysia, investment in gold is yet to make much headway especially among the Malays.

Most Malays like to buy jewelry mix with other metals and not the gold bullion where it its authenticity level is 999.99. When the jewelry is sold back, a discount of 30 to 40 percent is imposed from the current price. As such, it is better to invest in gold which has 999.99 authenticity level. Those who are interested, they can have gold coin through Maybank and saving book through Public Bank.

I would like to suggest that cooperatives invest in gold. We see that five years ago, the price of gold per ounce was US$520 and today it reaches up to US$1,800. This is not only a lucrative investment to the cooperatives but also its members. Membership of cooperatives in the country is no less than eight million. It is true that the arRahnu system has long been created as Islamic pawn broking system and the pledgers get up to 65 percent of the actual value of the gold being pawn. At the same time the management fee of between 0.5 and one percent is charged for a maximum rate for the period of six months.

For the cooperatives, they can give loans to buy gold to be kept as collateral and its members given 65 percent of the gold value kept and they can charge minimal interest far lower than the fees for safe-keep under arRahnu. We have the only cooperative which is linked to several other well managed cooperatives and very tactful in its investment portfolio, that is Angkasa. Angkasa can take the initial steps which will benefit the substantial number of cooperative members in the country. The Malays has not been keen on the investment of pure gold and many have been influenced for investment in FOREX which high risk.

The only bumiputera firm involve in the sale and purchase of gold is Serambi Emas, which has access to the London Gold Bullion Market and gold markets in Switzerland, Japan, Australia and Dubai.

Information session on gold investment is being actively organized to increase awareness of the society in gold investment trade. This is the only chance for the Malays to multiply the value of their properties. Past efforts have shown that we have not gone that far in term of wealth ownership.

DATO’ SALLEH MAJID is former President of the Kuala Lumpur Stock Exchange (now Bursa Malaysia)