Sometime back on the 4th October, I went to a seminar conducted by POEMS on ETFs and gold. Back then, it was chaos in the financial markets. Lehman Brothers just filed for bankruptcy protection, Merrill Lynch jus sold herself to BOA for 50billion, AIG managed to stay afloat with a 85billion dollars lifeline from the Feds and there was trouble trying to pass the 700billion bailout plan.
During the seminar, there were doubts about the 700billion bailout plan.
Will it be too late?
How will the 700billion dollars of taxpayers’ money be used?
Will it be sufficient to even buy up the toxic debts from the banks’ balance sheet?
Even so, what will be the consequences of the 700billion dollars on the world’s biggest economy?
Given all these uncertainty and volatility in the financial markets, equities were not as attractive as before. That brought us to the topic of the seminar, the investment case for gold as a financial asset. The speaker for the seminar was Albert Cheng from World Gold Council, his explanation on gold was succinct and informative, and I learnt more about gold than I ever did for the last 22 years of my life.
Basically, gold can be used as insurance in your portfolio due to its minimal correlation will the volatility in the financial markets and inflationary pressures. The next function of gold is liquid asset in your portfolio, when times are bad and equities have taken a beating, gold would probably increase in value and can be liquidated for cash when you are hard-pressed for cash.
As gold price is also affected by the underlying supply and demand, the rising of the emerging economies and the significance of gold in their culture will invariably increase the world’s demand of gold. At this point, Albert flashed a few slides which showed the breakdown of gold supply and demand; a striking point to note was that a huge percentage of gold supply came from new gold which is decreasing. The reason being high exploration and production costs and that even capital exploitation will take 6-7 years. Albert went on to explain the technicalities and difficulties of the process.
Lastly, Alfred explained how gold was available for investment via ETF in the secondary market, whereby 10 shares of gold EFT approximately 80USD will get you an equivalent of 1 ounce of allocated gold stored in London. That will save you the hassle as compared to buying jewelries which command the craftsman premium and GST, or buying the physical bar from bank which will incur delivery charges and GST.
On the whole, it is was a very informative seminar whereby we not only get to listen with the speakers but also interact with them; not to mention the scrumptious refreshment they provide. If POEM is going to conduct such interesting seminars during the subsequent Saturdays, I do not mind making this a permanent activity for my Saturdays.