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VGMC RETURN IN 3 YEARS

Current Price Share Per Unit For March 2012 = USD1.40/Share
Estimate Gold Price = USD1700/oz

Gold investment, paper style

BY LISA GOH

One can now invest in gold minus the bulk, through what is casually termed as paper gold'.
When Neng Azhanie Adzman, 27, got married in March two years ago, the first gift she received from her mother-in-law was a gold bracelet.
“Most Malay girls will have gold jewellery, that's the norm. Also, my husband's family from Kelantan really believes in investing in gold.
“The problem, though, is that I'm not really comfortable wearing jewellery, so I've never been the type to buy gold jewellery,” she says.
So when she and her husband chanced upon a leaflet promoting the gold deposit account at a local bank in June last year, they decided to go for it.
Since that initial investment of RM500, Neng Azhanie has invested RM15,000 in gold. However, she recently moved her investments back to physical gold, for personal and religious reasons.

“Over the years, the value of gold has been going up. I think this is something which will be valuable for me to have in the long term,” she says.
Another investor, who only wanted to be identified as Adrian, says he had just opened a gold deposit account.
“I've always known you can invest in gold but in my mind, it has always been physical gold. It was only recently that my family members told me about the gold deposit account,” he says.
“I've only made a small investment, but it's a start. I'll see how things go this year before I decide whether to invest more. I am looking at gold to diversify my portfolio.”
With the price of gold soaring about 511% from US$278.95 (RM840) per ounce 10 years ago, to about US$1,700 (RM5,115) per ounce to date, consumers are not the only ones realising the potential of gold investments. Banks have been taking note too.
Maybank's Community Financial Services head Lim Hong Tat says the public's response to its Maybank Gold Investment Account (MGIA) has been very good since it was relaunched in May 2011. (It was previously called the Gold Savings Passbook Account.)
Golden returns: With the price of gold soaring about 511%, demand for gold investments has grown. — AFP
“From the repositioning of MGIA from May 2011 till March 6 this year, the number of accounts has grown by more than 100%.
“Demand for gold investments has grown. Just over a period of 11 months, the number of accounts, as well as the investment value for MGIA, has more than doubled its size,” he says.
The MGIA allows investors to buy and sell gold at a daily price in ringgit via a passbook without the hassle of keeping physical gold.
“One of the key features is that it requires only 1g of gold to open an account. The subsequent buying and selling is also fixed at a minimum of 1g of gold.
“When investing in gold, customers look for affordability, security, better returns, better protection and convenience,” he says.
Similarly, CIMB Bank's Retail Financial Services head Peter England says the public's response to the bank's Gold Deposit Account, which starts at the ringgit equivalent of 5g of gold, has been “very encouraging”.
“Since launching the Gold Deposit Account in January last year, we have recorded a healthy average of RM25,000 investment per account. We now have close to 20,000 investors who have invested in this product,” he says.
What are the benefits of investing in gold?
We advise customers to hold gold as part of their portfolio. It’s a hedge against inflation. - STEVEN YONG
“Gold is a non-yielding asset, unlike stocks which give a return in the form of dividends, or fixed deposit which earns interest. However, gold has appreciated steadily over the last 10 years and has shown good returns.,” he explains.
“The price of gold in the interbank market has appreciated over 400% over the last 10 years, giving an average return of 40% per annum.
“Over the last 10 years, gold has benefited from safe-haven demand amid the turmoil in global financial markets, the fall of the US dollar, the hike in oil price, and various geopolitical events.”
Customers, he says, frequently ask whether “paper gold” is backed by an equivalent placement in the gold market. He assures them that all customer purchases are hedged back-to-back in the interbank gold market.
Storing gold
Investing in “paper gold” has its benefits, including the practical aspect of storage and security, says Steven Yong, Strategist & Research head ofCitibank's Wealth Management Products.
“If you're buying small amounts of gold, like jewellery and wafers, you have a place to store it and you're not worried about robbers. But if you're looking at investing in large amounts, then it becomes a problem,” he says.
“Where are you going to store the gold? Do you have adequate security? There are facilities to do that but in Malaysia, they are not readily accessible. Even with safe deposit boxes, how much gold can that hold? I'm talking about really large amounts.”
When advising customers on investments, Yong says Citibank always takes a portfolio basis approach.
“We advise customers to hold gold as part of their portfolio. It's a hedge against inflation. I can't tell you how much it will go up, but if you have it as part of your portfolio, gold can offset some of your volatility and the under-performers in other asset classes,” he says.
Citibank also offers a gold account, launched in July 2010, which requires a minimum investment of US$5,000 (RM15,050).
But what are the risks of investing in “paper gold”?
“The biggest risk would be market risk. Investors have to be aware that gold prices will fluctuate according to global market prices. And because it's in foreign currency, there is also an exchange rate risk as well. They have to take that into account,” Yong explains.
Naturally, the next question would be where is gold headed this year?
Oversea-Chinese Banking Corp Ltd economist Barnabas Gan says that while gold has shifted from being a safe haven asset to behaving like a risk asset, his forecast is that it will climb to about US$1,800 (RM5,417) per ounce by the end of the year.
“That is on the assumption that QE 3 (third round of quantitative easing in the US) does not roll out. If it does, we are looking at gold prices of over US$2,000 (RM6,019) per ounce at the end of the year.
“At the moment, it's at fair value. There's definitely room for it to go up,” he says.
(Quantitative easing is a government monetary policy which is occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital, in an effort to promote increased lending and liquidity. The US Federal Reserve has so far rolled out two rounds of quantitative easing dubbed QE1 and QE2.)
If you're wondering whether gold investments are for you, Standard Chartered Bank's general manager of Wealth Management Lilian Long has this to say: “It's important for you to know your own risk appetite, so that the bank can do the appropriate risk profiling for you. The investor also needs to know what his holding power is.
“If you put this money in, but you think you will need to take it out within a few months, then there is always that risk this investment may not work for you.
“With properties, it's all about location, location, location! With investments, it's diversify, diversify, diversify! One cannot go into a single mono-product solution. It's like putting all your eggs in one basket.”
The bank promotes gold investments through its Premium Currency Investment Gold, but it requires a minimum investment of RM250,000 or its equivalent in foreign currencies. For individuals with net assets exceeding RM3mil, they can invest RM50,000 or its equivalent in foreign currencies.

Citigroup: Gold at $2,400 in 2012 & $3,400 Ahead

BY MARK O'BYRNE
March 5, 2012
Gold’s London AM fix this morning was USD 1,698.00, EUR 1,286.17, and GBP 1,073.60 per ounce.
Friday's AM fix was USD 1,714.50, EUR 1,292.99, and GBP 1,076.14 per ounce.
Cross Currency Table – (Bloomberg)
Gold fell $3.10 in New York Friday and closed at $1,711.60/oz. Gold fell in Asia prior to modest price falls in Europe which has gold now trading at $1,696.43/oz.
Gold fell by nearly 3.5% last week – the largest one week fall since the week of Dec 18. Gold's intraday and monthly low from the "Leap Year Gold Massacre" is $1,688/oz. Technical damage continues and a breach of this level could see gold quickly fall to support at $1,650/oz.
Gold 1 Year Chart – (Bloomberg)
Gold is being supported by Asian physical demand, which has picked up again and was robust in Asia overnight. Asian jewelry makers are reported to have been using this dip to stock up on gold.
Besides Asian jewelers, many Asian money managers and hedge funds continue to see the value in the yellow metal and buy on price weakness.
Gold is also supported by good retail and institutional demand internationally as seen in the new record ETF gold holdings last week. CFTC data shows that hedge funds, bullion banks and other institutions also remain positive on gold and increased their net long positions last week – rising by 12,259 contracts or 7% from a week earlier.
The EU’s second three-year funding and a surprise policy easing by the Bank of Japan a few weeks ago has pressured the euro and the yen making gold increasingly attractive to holders of these currencies. Economists believe that the ECB will keep interest rates low at 1% until deep into 2013 on economic concerns and despite high oil prices and the impact of the money that they’ve flooded into the market.
Continuing negative real interest rates and global currency debasement are strong fundamentals leading most analysts to forecast much higher prices. 
Citigroup have said that they believe that gold will rise to $2,400/oz. in 2012 and by $3,400/oz. in “the coming years”.
However, Citi’s Tom Fitzpatrick warned of price weakness in the short term and said there is a “real danger” that there may be a correction to $1,600/oz. which would provide an even better buying opportunity.
Citi are also cautious near term on oil and silver.
Production of gold in Australia slid again last year, despite gold fetching higher nominal prices than ever before.
According to gold experts, Surbiton Associates, 264 tonnes of gold were produced last year, two tonnes less than in 2010.
The 264 tonnes equated to about 8.5 million ounces and ensures that Australia remains a major player in gold, with only China producing more last year. The United States was the world's third-biggest producer with 240 tonnes.
Australia's gold production was well below the nation's production peak in the late 1990s. 
This further suggests the possibility of peak gold production. Of the world’s four biggest gold producers (China, Australia, the US and South Africa), only China has managed to increase gold production in recent years and this Chinese gold is used in China to meet the rapidly growing demand for gold jewelry and coins and bars as stores of value in China.
Thus Chinese gold is not exported into the international market which means that the supply/demand balance in gold is remains tight and the last Wednesday's manipulated sell off provides yet another buying opportunity.
Other News
(Reuters Global Gold Forum) -- Morgan Stanley this morning say stay long gold, even after Bernanke's comments last week were interpreted as signaling less chance of QE3. However, we believe that the move last week was profit taking predicated by the news rather than a change in fundamentals. 
The drivers of the long-term uptrend in gold remain intact, most notably negative real rates," MS say. 
According to their "Commodity Thermometer", MS are most bullish on gold and most bearish on zinc, although of the 20 commodities listed, platinum is in 17th place. 
Morgan Stanley say: "We are less bullish on the Platinum Group Metals. Platinum lacks safe haven status and has limited investment demand. With jewelry and the automotive industry as key end markets, slowing global GDP and lower discretionary spending put demand at risk." 
(Bloomberg) -- RBS Says Central Banks Will Buy 300 Tons of Gold This Year  Central banks will buy 300 metric tons of gold this year, Royal Bank of Scotland Plc said.
China, Russia and India have been the biggest buyers and Switzerland, France and the Netherlands the biggest sellers since the first European central bank gold agreement to limit sales, according to the RBS report e-mailed today.
(Bloomberg) -- Morgan Stanley Says ‘Stay Long Gold’ on Negative Real Rates Gold will climb mostly because real interest rates are still negative, Morgan Stanley said. There is still a 75 percent chance of another round of quantitative easing in the U.S., Hussein Allidina, an analyst at Morgan Stanley, said in an e-mailed report today.
(Bloomberg) -- China’s January Gold Imports From Hong Kong 33,039 Kilograms  Hong Kong government announced January gold exports which showed China’s January gold imports from Hong Kong were 33,039 kilograms 
(Bloomberg) -- Gold Traders Increase Bets on Price Rise, CFTC Data Shows  Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended Feb. 28, according to US Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 193,220 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 12,259 contracts, or 7 percent, from a week earlier. 
Gold futures fell this week, dropping 3.7% to $1,709.80 a troy ounce at today's close. Miners, producers, jewelers and other commercial users were net-short 245,351 contracts, an increase of 16,049 contracts, or 7%, from the previous week. 
Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators' positions because such transactions can reflect an expectation of a change in prices.
(Bloomberg) -- Silver Traders Increase Bets on Price Rise, CFTC Data Shows Hedge-fund managers and other large speculators increased their net-long position in New York silver futures in the week ended Feb. 28, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 30,003 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 3,338 contracts, or 13%, from a week earlier. 
Silver futures fell this week, dropping 2.5% to $34.53 a troy ounce at today's close. Miners, producers, jewelers and other commercial users were net-short 44,593 contracts, an increase of 5,405 contracts, or 14%, from the previous week. 
Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators' positions because such transactions can reflect an expectation of a change in prices.
Silver Silver is trading at $34.22/oz., €25.95/oz. and £21.62/oz. 
Platinum Group Metals  Platinum is trading at $1,663.50/oz., palladium at $698.00/oz. and rhodium at $1,475/oz. 
Mark O'Byrne is executive director of Ireland-based GoldCore.

Gold Falls in ’Manic’ Plunge

By Debarati Roy - Mar 1, 2012 6:27 AM GMT+0800
Gold futures fell as much as $100 to below $1,700 an ounce on signs that that the Federal Reserve will refrain from offering more monetary stimulus to bolster the U.S. economy.
In testimony before Congress today, Fed Chairman Ben S. Bernanke gave no signal that the central bank will take new steps to boost liquidity. The dollar rose as much as 0.8 percent against a basket of major currencies, eroding the appeal of the precious metal as an alternative investment. Yesterday, gold reached $1,792.70, a three-month high, even as coin sales by the U.S. mint slumped in February .
Enlarge image
Gold in Atlanta. Photographer: Chris Rank/Bloomberg

Play Video
Feb. 29 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke delivers his semi-annual report on monetary policy to the House Financial Services Committee in Washington. (This report contains opening statements. Source: Bloomberg)

Play Video
Feb. 29 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke testifies before the House Financial Services Committee in Washington about the central bank's monetary policy. (This is an excerpt from the hearing. Source: Bloomberg)
Enlarge image
Gold bars. Photographer: Michal Cizek/AFP/Getty Images
“People were expecting that the Fed would loosen policies, even if the perception is that the economy is doing well,” James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in a telephone interview. “The investor sentiment changed as the Fed committed to nothing. This is the manic nature of the market.”
In electronic trading on the Comex in New York, gold futures for April delivery fell $90.30, or 5 percent, to $1,698.10 at 5:14 p.m., compared with yesterday’s settlement. Earlier, the price tumbled as much as $100, or 5.6 percent, to $1,688.40, the lowest for a most-active contract since Jan. 25.
The settlement at the close of floor trading was $1,711.30, down 4.3 percent, the most since Dec. 14. The price, down 1.7 percent this month, has gained 9.2 percent in 2012.

Bullish Bets

In the week ended Feb. 21, hedge funds and money managers boosted bullish bets on gold futures by 9.9 percent to 179,132 contracts, the highest since Sept. 13, the latest government data showed on Feb. 24.
Holdings in exchange-traded products backed by gold rose to a record 2,403.2 metric tons today, according to data compiled by Bloomberg. Assets increased 0.4 percent, the most since Jan. 27. The total reached an all-time high for the third time in four sessions.
“Bernanke’s comments seem to have eliminated hopes of U.S. quantitative easing coming anytime soon,” William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview after the Comex settlement. “There were excessive net longs on hopes of more credit easing, so the market was vulnerable to these kind of statements, and it almost seemed as if Bernanke was trying to take the steam out of the commodity market.”
Sales of gold coins by the U.S. mint tumbled 83 percent in February to an estimated 21,000 ounces from January, data on the Mint’s website showed today.

Inflation ‘Subdued’

The Fed chairman said today that the inflation outlook is “subdued.” Gold had climbed this month as gasoline costs jumped, spurring demand for the metal as a hedge against increasing consumer prices.
Keeping monetary stimulus is warranted even as the unemployment rate falls and rising crude-oil prices may cause inflation to accelerate temporarily, Bernanke said.
The Fed said today in its Beige Book business survey that the U.S. economy expanded at a “modest to moderate pace” in January and early February, bolstered by manufacturing.
Total Comex volume was an estimated 342,701 contracts, the highest since Jan. 27.

4 Reasons Why Gold Could Hit $2,500

And how these powerful catalysts threaten your finances

The gold express pulled into the station back in December, merely a pause to consolidate its 9.3% gain for 2011. It let some passengers off and let others get on board before it rolled again.
Now it’s about to leave the station again.
It’s new destination? $2,500? Or higher?
Let’s take a look at some of the powerful engines driving the price of gold.

Catalyst #1: Spend & Print

The new year got off to a reckless start for both U.S. monetary and fiscal policy. If you recall, on Jan. 25, the Federal Reserve committed to three more years of its zero interest rate policy. The Fed intends to maintain its Fed Funds Rate target of 0%-0.25% until late 2014.
You and I both know this deserves a moment of attention.
The Fed cannot maintain low interest rates by simply closing its eyes and clicking its heels together. For the Fed to maintain these rock-bottom rates, it will have to buy more U.S. Treasury bonds. That’s more debt monetization. That’s more money printing.
If you’re looking to grab a few easy bucks on your savings, forget about it. This policy means there will be little interest rate return to be found for your money for years to come.
Simply put, the Fed is driving Americans to spend, not save.
And spending is already out of control here in the U.S. Look no further than the burgeoning U.S. debt. Senate action in late January quietly let the national debt ceiling climb by another $1.2 trillion, up now to $16.4 trillion.
More Federal debt means a cheaper dollar.
But what’s even worse for you and me is that the Fed’s ultra-low interest rate policies don’t just equal no return on our savings … it also means more inflation … it means you and I are will pay a lot more for everything we buy in the months ahead.
Are you prepared for $9 milk, $13 bread and $10 gas?
Runaway inflation is by far one of the biggest threats to your family and finances in the months ahead. But you can prepare today. Join me for a FREE online seminar to discuss how to protect yourself from runaway inflation and an economic meltdown.

Catalyst #2: Global Printing Presses

The central banks of the world have all loaded up on new inkjet cartridges.
The Bank of England and Japan have fired up the money printing presses. China’s money printing has been massive. And even Switzerland began printing money to lower the value of the Swiss franc against the euro.
But here’s the one you really need to worry about …
The European Central Bank is orchestrating huge increases in the euro money supply to bailout sovereign European debt. It has shoveled the money out to hundreds of banks at 1% interest for three years. Altogether, it’s a $660 billion European money printing operation.
Do you understand what this means for Americans like you and me? For our answer, we need to look no further than the Fed’s massive debt buying operation, QE2, which was similar in size to the ECB’s current operation?
It helped drive gold to new highs in 2011.
This race to the bottom, as central banks rush to destroy the value of their currencies, could make 2012 history’s first year of worldwide inflation.
Runaway inflation and the impending Eurozone collapse are just two of the biggest threats we face in the months ahead. You must act now to prepare and protect yourself from the fallout.

Catalyst #3: Gold for Oil

We all know that global oil trade is priced in dollars. But thanks to the Fed’s 24/7 money printing press, this won’t be the case for much longer.
As I discussed at American Breaking Point, a news source in Israel reported that India intends to bypass the U.S. and European Union sanctions of Iran. India needs to import three million barrels of oil per day, and with this new agreement with Iran, India will purchase its oil for … gold.
And India is not alone. China is expected to begin using gold for oil purchases from Iran as well.
This all adds a powerful dynamic to the gold market. It promises substantial new world demand for gold to facilitate the oil trade. It also represents the global remonetization of gold as a key dollar alternative.
The changing role of the dollar in the oil market is eerily familiar. The world’s oil used to trade in British pounds. Even until the early 1970s, a fourth of the global petroleum trade was still conducted in the British pound sterling. But serial devaluations of the pound finally made it so unattractive that OPEC abandoned the pound entirely and implemented its policy of 100% dollar pricing.
What’s past is prologue.

Catalyst #4: Failing Banks

Just days before MF collapsed and $1.2 billion in client money went missing, its chief financial officer told Standard & Poor’s that it had “never been stronger.”
Maybe so. Maybe during its entire existence it was never to be trusted at all. But three years after the mortgage meltdown, it is an incident that should focus the mind: the risk of failing institutions — banks, funds, brokerages, insurance companies — remains as high today as it was in 2008 when they were falling like flies.
Since banks don’t mark their assets to the market, we don’t know the value of the assets on their books. They are awash in derivative risk, and the largest have dangerously large exposure to the European debt crisis. And the largest financial institutions of our time have demonstrated themselves to be utterly incapable of managing their own affairs.
As people begin to realize that banks are not the paragons of stability that they may have been in another era, they will continue moving their hard-earned wealth to gold.
Over the last year, the University of Texas endowment fund, the second-largest such fund, added a billion dollars’ worth of gold to its portfolio. This would have been unthinkable in an earlier era when conservatively run endowments invested in nothing but blue chips.
More astonishingly, the fund chose to take delivery of the gold. Kyle Bass, the Dallas hedge fund manager who advised the endowment in the transaction, told Bloomberg news that an assessment of institutional risk played a role in the decision. “If you own a paper contract where they can only deliver you 10 cents on the dollar or less, you should probably convert it to physical,” said Bass.
Gold Is Chugging Up the Track
When you and I — and all Americans — take a sober look at the risk of today’s financial system, the spending of governments enabled by the money printing of their central banks, and the quiet but accelerating movement away from the global dollar standard, we will seek an alternative — an alternative that cannot be printed or is not dependent on the promises of a financial structure that is evidently crumbling under the load of its debt.
There is only one such monetary commodity. It is gold.
The train is about to leave the station. All aboard!

2 Easy Ways to Invest in Gold

Got a brokerage account? You're already halfway there

So you finally decided to invest in gold.
Who could blame you? Gold’s surge to $1,900 per ounce was one of the biggest market stories of 2011, and while prices took a brief retreat, they’re back on the march again this year. Worries about U.S. finances, global spending, energy prices and a host of others have experts predicting everything between a “modest” increase to $2,000 and a rise to $2,500. Heck, one expert even thinks $10,000 gold is on the horizon!
But now that you’ve decided you want in the gold game, you have to ask yourself: How? While getting into gold isn’t as simple as walking up to Fort Knox and charging a bar of bullion to your credit card, investors with a basic brokerage account can play the yellow metal in a number of ways.
Let’s take a look at two of the most common methods of  investing in gold — beyond actually buying gold bars or coins, of course:

Physically Backed ETFs

Physically backed exchange-traded funds, or ETFs, are as straightforward as you can get without buying the bars yourself. They’re great for everyday investors, considering the high cost of actually buying, storing and securing gold bullion.
In short, a physically backed fund actually holds the metal, and the fund’s price changes pretty much along with the price of gold (minus the fund manager’s fees).
This makes for a pretty simple investment thesis: If you think gold is going up and you don’t want the hassle of holding gold bars or coins in your basement, buy a fund.

Click to Enlarge The market has a number of physically backed ETFs, but most investors can stick to the two major players: The SPDR Gold Trust(NYSE:GLD) and the iShares Gold Trust(NYSE:IAU), the respective offerings of State Street (NYSE:STT) and BlackRock(NYSE:BLK). These ETFs hold more than $80 billion in assets and are as liquid as they come.

Click to Enlarge As you can see in the accompanying charts, not only do the ETFs ride alongside the price of gold, but with each other. IAU is up just 0.5 percentage points over GLD during the past five years. Hardly a reason to pick one over the other, but if you’re asking, IAU does hold the edge.
That edge is largely because the iShares Gold Trust has a slightly smaller expense ratio — 0.25% to the SPDR Gold Trust’s 0.4%. That means fees eat up less of your returns. But most everyday investors won’t notice the difference, which comes out to $1.50 for every $1,000 invested.

Gold-Mining ETFs

Gold mining ETFs are a more indirect way to play gold.
While trusts like GLD and IAU are more tethered to the price of gold because they hold physical bullion and nothing else, gold-mining ETFs — which hold stocks of companies that mine gold — deviate a bit, for several reasons.