Your customers' claim to the gold through bailment is only as good as your records provided to the bailee.

If your records is messed up, intentionally or otherwise, then your customers have no recourse.

In contrast, a bank is a big corporation with long history in business. They carry high level of credibility and confidence to their customers

I think many would rather be a creditor to a bank then a bailor of an arrangement of a new company

Based on this analysis, your customers would be small gold buyers of less than 10g-20g

That is your niche market. Any bigger gold purchase, customers would be better off buying from UOB and GLD

Ya...new start-ups always face customer confidence issues. Glad to hear you are in the process of partnering big companies.

All the best to you and your venture !

I understand you are a start up and need all the margins to survive. Hope when you grow larger, you will be able to compete with the big boys !

1. It is good to diversify (you term it as "like insurance"). However, diversification is only worthwhile when a portfolio has reached a certain amount.

2. Your platform is aimed at lower income group.

3. However, low income group does not talk about diversification, as they don't even have a sizeable portfolio to talk about diversification

4. Your platform has high spread, and charges fees

5. So, for those investors with a certain amount in their portfolio to start diversification, they will not consider your platform because of the spread and fees

From the marketing point of view, talking about "insurance" / "diversification" puts you in a quandary. Your company will face difficulties convincing customers based on "insurance" argument. Or are you trying to ask the lower income group to "diversify" when they have not reached that level ?

I can't gauge the threshold of the portfolio of your intended customer. Can you put a rough number so that we can talk on the same page ?


*edit* - I can see your sell price in your website. Where can I see your buy price ?

This post has been edited by Showtime747: Sep 11 2017, 10:00 PM

No reply from you....hmmm....

Anyway.....I make a few assumptions on your targeted customers' portfolio threshold....please feel free to correct the assumptions if they are not accurate.



1. I disagree every income group has a need for diversification. When the low income group's salary is not even enough to make ends meet every month, they are not in the position to diversify. They don't even have money to invest. So these type of customers cannot buy the "insurance" as you propose.

2. For those who can afford RM100-RM200 per month, their portfolio should be less risky with more stable and reasonable returns. PNB products come to mind. ASx is a good choice for them at around 5%-6% pa (7+% for bumi). Gold on the other hand, has no return other than capital gains. As prices of gold is very volatile, gold is too high risk an investment for them.

3. And when they grow their investment portfolio to a higher level, they can consider diversifying into other vehicles like unit trust, shares, gold etc. However, as paper gold from banks are more cost effective, it is less likely they will buy from you. Except for a small number of ignorant people who never compare the cost of gold investment

Unless you bring your cost down to a level comparable to your competitors, how can your business grow ?



If they need to hedge their expenses against US$, why should they buy gold instead of buy US$ itself ?

1. Gold / US$ has typically an inverse relationship. Ie. when gold is up, US$ is down. When US$ is up, gold is down. So gold is not a good hedge against US$. It is a good diversification from US$ though.

2. US$ is easily available from money changer in shopping centre. And US$ is very competitive especially like the one in Mid-Valley. Their spread is typically below 1%. No other charges and fees. Buy and keep and hedge against US$ expense pure and simple in your scenario.

3. Whereas if they invest in your gold, they have to pay 2% each way for buy and sell, and subject to 2% annual management fee. Total = 6% already. That is even before your spread. Let's assume you have a spread of 2%, the cost is already 8% (correct me if the numbers are wrong). If they buy at RM190 per gram from you, 1 year later gold price must increase more than RM204 just to break even. If gold price remain the same at RM190, they already lose 8% on their investment.

So if they want to hedge against US$ expenses, buy US$ note directly will be a more straight forward method. Gold is an alternative, provided the cost is low, which is not the case with the fees involved.

Feel free to correct my numbers...

I believe UOB paper gold minimum is 10g without any charges ? So it is only around RM1900 to start investing in gold. This segment of customer just need to wait 4-6 months to accumulate enough money to invest. Their spread is just above 2% with no storing fees involved.


If you buy unit trust for foreign markets, although it is denominated in RM, but their returns are in forex because they invest in overseas market (but quoted in RM)

For example Asia Pacific Ex-Japan Equity (I believe it is called Ponzi scheme in FSM thread), the fund invests in Asia Pacific stocks. And the returns is on the mid teens % pa

If a person has "currency risk hedging" in mind, there are good alternatives besides gold.


The minimum for UOB is only 10g (I believe so) which is slightly less than RM2000 at current gold price. Is RM2000 a "significant deposit" nowadays ?

If you cost is similar to UOB bank, then I will agree with you. But your cost is too different from UOB.

Is your Aeon product launched yet ? Am I right to say Aeon will charge certain % to "pledge" the gold for cash ? If so, that will add further cost to invest gold through your company.



If we take the recent 2-3 years, gold return in RM is good mainly because of RM depreciation against other forex, not gold price appreciation. Good price is pretty flat after it falls from US$1800+ peak in 2012/2013. For the past 3-4 years, it is around US$1200 to US$1300+

And if you look back to the 80s to early 2000s, gold price hover around $300-$400 for the 20+ years period. Very very flat. While an investment with just 4% return will already double the principal in 20 years

So it is not true to say gold is a "good hedge" against RM.

If a person is worried about US$ expenses (like you said), then choose a direct hedge for RM/USD. Why put another uncertainty and risk (ie gold price fluctuation) into the equation if the purpose is US$ hedging ?

You don't need a significant deposit to hedge against USD account. Buying US$ notes is so easy through money changer. And the spread is <1%. Compare to your cost of at least 4%

If a person holds gold for 3-5 years, it means that the holding cost with your company will be :

Buying and selling 2%+2% = 4%
Holding cost 3-5 years = 6% to 10%

The total cost for holding long term is 10% to 14%

Gold price must appreciate that much just to breakeven.

Whereas your competitor only charges slightly above 2% for their spread, regardless of years of holding.



I guess the main issue of your business model is your cost of investment relative to your competition. Your offer of convenience is very attractive (but I saw in the gold investment thread UOB is launching online gold investment as well soon ?). Your only advantage is that you cater to low value investment, which if you must get significant number of these group of people only that your turnover would be big enough to cover your running cost.

I hope you can find ways to reduce your cost so that you can attract the middle class investors.

The other natural progression if the cost of investment is kept high would be turning into MLM model. Then sharing of profits with the layers of "business entrepreneurs" will also be a good alternative to grow the business

No lah, I guess the operational cost is low. Tutup kedai wont lah. Want to expand fast, a bit difficult.

They can expand to other countries. Just small offices to setup in neighboring countries can do business already. They have already the website so infrastructure no problem

There will always be "not so smart" people around which don't compare cost. So business will always be there

When they grow bigger, they can lower their cost. Then average income segment can be targeted.

This business can do one...just need to be patient because growth will not be fast.

Thanks for the link.

RM2.12 per month is punitive ?



Gold is not a good hedge for US$ at all. It is a volatile commodity. The recent years performance against RM is positive only because US$ appreciated ~30+%, not gold price.

If RM did not depreciate in US$ term over the last 2 years, then gold is a terrible investment over the last 5 years

Your argument of using gold as a hedge against US$ is very difficult to understand. In cold hard numbers, that is inaccurate. Please see below for the numbers



That’s what I said in my above posting about those hardcore poor. They can’t even afford to make ends meet every month. They should save up for rainy days first before even thinking of investment.

Investment should only start with 6-9 months of emergency funds. This fund should be left untouched. If you read the financial planning blogs/forum, that is the pre-requisite before a person starts investing.

Emergnecy funds should not be subject to risk too. Gold is a volatile commodity. If emergency fund is kept as gold, what if gold price reduce by 30% ?

A sound financial advice should be to keep emergency fund as FD/Savings/ASx funds which can cash out fast and principal guaranteed

If gold price depreciates, I will pity those poor people who thought they have enough but eventually finds out it is not worth as much as before



Hope you do explain to them for the past few years, gold price did not appreciate as much as RM depreciated against US$. Gold investment is profitable only because RM depreciated 30+% against US$

As such, gold is not considered a hedge against US$. Gold is piggy back on US$ strength

I am sure it is also your ambition that they are well informed of the true picture before they invest in gold



I don’t understand what are you trying to say about the different risk.

You initial claim is gold is a good hedge against US$ expense. That itself is currency devaluation risk (of RM).

If it is US$ expense (which is your original argument to hedge against), then what other hedging tool is better than US$ itself ? It is cheap, it is convenient and it has 100% hedging effect against RM devaluation. It is a natural hedge

Do enlighten what other risk you hedge against with gold ?




Let’s use “historical return”. Your 7% return is based on a certain period. And since you suggest a 5 year holding period, let’s look at how gold performed in the last 5 years.

Assume your company started 5 years ago, and an investor bought gold from you for period Sept 2012 to Sept 2017, the return of gold in RM is :

2012 RM5.4k+
2017 RM5.7k+

Source : https://goldprice.org/spot-gold.html

In RM term, total return for 5 years +RM300 or +5.6%. Simple annual return was +1.1% pa

After your charges of 14% over 5 years, the investor made a loss of -8.4%

If we look at gold price in US$ term, gold price actually made a loss over the period :

2012 US$1.8k+
2017 US$1.3k+

In US$ term, total loss for 5 years -US$500 or -28%. Simple annual loss is -5.5% pa

And to prove my point of US$ notes is a better hedging tool against RM (instead of gold), here is the numbers :

2012 USD/RM 3.0498
2017 USD/RM 4.1980

Source : https://www.bloomberg.com/quote/USDMYR:CUR

Total return for 5 years +37.6%. Against -8.4% if a person invest in gold through your company, Meaning if a person wishes to hedge against US$ expense, he is a lot more successful than using gold as a hedging tool

Gold is not necessary a good hedge against RM. Gold will fluctuate in price. It may work for you, or it may work against you (as we witnessed for the last 5 year period).

If you have US$ expense to worry about, don’t use gold, use US$ directly. It is a 100% natural hedge.




Their infrastructure is bad, but their cost is the best in the market !

For those bigger investors, they have SPDR, mining companies as even better choices


If you can match UOB’s cost, I will be your customer




TLDR version of what I wanted to say :

1. Gold is another investment. It has its merit and shortcoming just like any other investment tool
2. Gold is not necessary a hedge against US$ expense in RM term
3. Gold is possibly a good hedge against other investment like stock and money market though
4. Gold price could appreciate as well as it could depreciate. Just like other investments. The risk is high as it's price is volatile
5. As such, we cannot claim gold price appreciate like inflation. It depends on which period we look at.

This post has been edited by Showtime747: Sep 21 2017, 11:25 PM

We have a joke in this investment section about comparing %.

If % is used to judge whether an investment is good or bad, or the cost is high or low, then everybody should go into char kuey tiao business because the % profit is 50%

You mentioned hedging RM against US$ expenses. And recommending gold as a hedging tool.

Your recommendation is an indirect hedge, and could work against you as you are introducing something in between RM and US$ which the price might fluctuate

My point is simple :

If you want to hedge RM against US$, then just buy US$. IE. RM<-->US$. Nothing in between

Why put gold in between the two to hedge ? It becomes RM<-->Gold<-->US$. And as you said "gold is a good hedge against US$", the equation shows that gold in fact makes the RM/US$ hedge inefficient.

Same goes for THB. Gold distort the hedging process against US$

However, I would agree with you gold is a good hedge against US$ simply because gold is quoted in US$ and they have an inverse relationship based on empirical data. So there is nothing in between gold and US$. Ie. Gold<-->US$. As I have said above, since Gold/US$ is a good hedge, that make RM<-->Gold<-->US$ an inefficient hedge. Because gold will "soften" the effect of hedging. This is simple financial maths which I am sure you can figure out from the equation

For the simple minded investors, they might buy your argument because of the recent RM depreciation against US$. But for those who know the workings (and understand my example in post #116), they will understand to hedge RM against US$, using gold is a counter-productive method

Using historical data to invest into the future is a very dangerous investment guideline. If investment is that simple, then historians and librarians would be the richest people in the world by now

When you make a statement that "gold historically returns around the rate of inflation", it gives a false impression that gold price always go up. But in actual fact, historical gold price went up and down, depending on which period you are referring to. If you talk about from the 1980s to early 2000s, it hovers around US$300-US400 without much changes. That is practically 20+ years without inflation !

Can you show me how do you calculate the "rolling 5-year hold" which gives you a return of 7% ? I still can't figure out without a timeframe, you can come out with a meaningful number. I will bet that your 7% is cherry picking too

Have you notice those responsible banks and financial institutions selling their products always put a warning clause "the value of investment may go up as well as down, and that past performance is not indicative of future performance" ? They do use the past performance to attract customers, but they also very clearly and specifically warn their customers the danger of relying on past data

Using a PC helps a lot in editing and quoting, compare to using phone and tablet. But it's ok, I can read what you wrote

Is it very difficult to explain in a post ? You must have done some calculation on the raw data to come to the 7% conclusion right ?

Or you have not calculated the “raw data” and wants me to help ?

Here is the 5 year rolling return for gold price from 1980 to 2017. I used the yearly numbers instead of the monthly numbers. Over 38 years, a yearly rolling returns should be good enough an indication vs the monthly rolling returns to gauge the historical return of gold investment.

The source of data are from :

http://onlygold.com/Info/Historical-Gold-Prices.asp
http://www.canadianforex.ca/forex-tools/hi...y-average-rates
https://fred.stlouisfed.org/series/DEXMAUS


US$ Gold Price

US$ 5 year
Year Gold price rolling return

1980 594.90
1981 400.00
1982 447.00
1983 380.00
1984 308.00
1985 327.00 - 11.28%
1986 390.90 - 0.46%
1987 486.50 + 1.71%
1988 410.15 + 1.54%
1989 401.00 + 5.42%
1990 386.20 + 3.38%
1991 353.15 - 2.01%
1992 333.00 - 7.30%
1993 391.75 - 0.91%
1994 383.25 - 0.90%
1995 387.00 + 0.04%
1996 369.00 + 0.88%
1997 287.05 - 2.93%
1998 288.70 - 5.92%
1999 290.25 - 5.41%
2000 272.65 - 6.77%
2001 276.50 - 5.61%
2002 342.75 + 3.61%
2003 417.25 + 7.64%
2004 435.60 + 8.46%
2005 513.00 +13.48%
2006 635.70 +18.12%
2007 836.50 +19.54%
2008 869.75 +15.82%
2009 1,087.50 +20.08%
2010 1,420.25 +22.59%
2011 1,531.00 +19.22%
2012 1,664.00 +14.75%
2013 1,204.50 + 6.73%
2014 1,199.25 + 1.98%
2015 1,060.00 - 5.68%
2016 1,128.80 - 5.93%
2017 1,284.01 - 5.05%


RM Gold Price

RM 5 year
Year Gold price rolling return

1980 1,320.68
1981 896.80
1982 1,038.16
1983 887.30
1984 748.13
1985 791.34 - 9.74%
1986 1,015.95 + 2.53%
1987 1,210.90 + 3.13%
1988 1,111.51 + 4.61%
1989 1,083.10 + 7.68%
1990 1,044.62 + 5.71%
1991 971.26 - 0.90%
1992 847.90 - 6.88%
1993 1,008.29 - 1.93%
1994 1,005.53 - 1.84%
1995 970.34 - 1.46%
1996 928.20 - 0.90%
1997 808.70 - 0.94%
1998 1,133.25 + 2.36%
1999 1,102.94 + 1.87%
2000 1,036.10 + 1.32%
2001 1,050.84 + 2.51%
2002 1,302.35 +10.00%
2003 1,585.40 + 6.95%
2004 1,648.25 + 8.37%
2005 1,942.80 +13.40%
2006 2,331.15 +17.28%
2007 2,877.45 +17.18%
2008 2,897.01 +12.81%
2009 3,818.83 +18.30%
2010 4,573.83 +18.68%
2011 4,682.62 +14.97%
2012 5,137.70 +12.29%
2013 3,793.85 + 5.54%
2014 3,924.98 + 0.55%
2015 4,141.38 - 1.97%
2016 4,678.12 - 0.02%
2017 5,584.62 + 1.68%


As we can see above, gold investment returns over the years fluctuate greatly. With a range of -11% to +23% (in US$) and -10% to +19% (in RM)

Gold prices, as in other investment, fluctuate over time. If we look at gold price in 1980 and gold price in 2005 :

1980 US$594
2005 US$513

Over the 25 years, gold price did not go up but stagnant/decreased. So during this period, there is no "inflation" in gold price over a prolonged period

However, since 2005 :

2005 US$513
2012 US$1664

Over the 7 years, gold reached its peak, and from 2012, it has retreated back to US$1200-1300 now

robincflee do show us how you get a rolling 5 year return of 7% without cherry picking the period ?

This post has been edited by Showtime747: Sep 29 2017, 11:10 AM

No problem, we can wait for your explanation here. It’s better to hear from the horse’s mouth

I have calculated using the data I retrieved from the sources. It shouldn’t be much difference from your raw data. I have used the ordinary definition of “5 year rolling returns” to come out with the calculation

In the meantime if you can just comment on your methodology ?

What he means is if your request is lesser than 1kg worth of gold, they will get hold of a smaller gold bar for you

Eg. Let’s say you invested RM20000 in HelloGold and now you want to withdraw. You don’t want money, but gold bar.. They will give you a 100g 99.99% gold bar (assuming now price is RM200 per gram). They don’t melt their 1kg bar, but buy from market the 100g and give it to you. Of course, they will deduct any cost of physical gold delivery instead of Ringgit

Their platform concentrate of selling small fractional portion of gold in RM using mobile apps. They are not those shops selling gold coin or bar. But if you still insist to withdraw in gold bar, they still can do it.

You should go to shops like Nubex if you are after physical gold

Robin,

Looks to me you are AVERAGING the “5 year rolling return”

I think we should first establish why we need “5 year rolling returns” vs “average return”.

Average return is not a reliable indicator as opposed to 5 year rolling return

Maybe this explanation is useful :

Now, it looks to me you are AVERAGING the 5 year rolling return. Your numbers become chapalang by mixing the “average” to “5 year rolling return”. You have defeated the purpose of having a “5 year rolling return” which in the first place is formulated to overcome the shortcoming of “average return”

Just curious, which field are you from ?

Your original statement was “5 year rolling return = 7%”. You also claim this to be “inflation”

Apparently your numbers is more like “average blocks of 5 years return over 2 decades” to get your 7%.

Your original statement is therefore inaccurate. People may thought that given any 5 years period, he would make a return of 7% pa. But in fact, what you meant was “if you hold the investment for 2 decades, the average returns for the block of 5 years period is 7% pa”.

There is a huge difference for investment returns over a 5 year horizon vs 20 years horizon

And the 7% has got nothing to do with inflation as well. Inflation gives an impression that prices will always go up. In the case of gold, that is far from it