Tuesday, November 17, 2009

Thailand's new gold rush

While no investment can truly provide an iron-clad guarantee, one of the safer bets going into 2010 seems to be commodities and precious metals.

Gold, a traditional safe haven for investors, has rocketed to more than $1,100 per ounce in recent weeks, driven by investors seeking an inflation hedge and expecting further US dollar weakness in the years ahead.

At the SET in the City investment exhibition, signs of gold fever could be seen aplenty, with brokers and fund managers pitching the latest services in the form of gold futures contracts or dedicated gold funds.

For a gold investor, it’s never been easier to invest in the metal. Forget about queuing up at your local gold shop or worrying about the security of your home strongbox for holding coins, necklaces or bars. Investment can now be made through a simple call to a broker, or online anywhere at anytime, thanks to the proliferation of foreign investment funds, gold funds and the growth of the derivatives market.

One 58-year-old woman listened with interest to a pitch from a marketing official at Globlex Securities.

“I have been investing in gold bars for 20 years, and can remember when prices were just 800 baht per ounce. These gold futures sound quite interesting,” she said, as she peered at a educational banner through her white-framed glasses.

The investor admitted that the ins and outs of derivatives contracts could be daunting for a novice.

“I have been investing in stocks for a long time. But derivatives is something different. Money isn’t paper – you need time to climb the learning curve,” she said as she filled out an application to open a futures account.

For Globlex, investors already familiar with stocks and the securities market represent a natural target for expansion to futures and options trading.

Parkpoom Pakvisal, the managing director of Globlex Holding Management, said the company signed up 120 new customers in the first day of SET in the City.

“We’re delighted with the response. We had been expecting to get around 200 accounts for all four days,” he said.

Around half of the new accounts opened at the Globlex booth are for gold trading, with the rest a mix of securities and derivatives brokerage accounts.

“There are many investment tools available besides stocks. For now, though, gold is what’s hot, as we are likely to see prices continue to rise through Chinese New Year,” said Mr Parkpoom.

Gold prices, which closed at about 17,500 baht per baht-weight locally and at US$1,106 per ounce in Hong Kong, could reach $1,130 to $1,150 by the end of the month and $1,200 by year-end, he said.

Mr Parkpoom said gold is definitely an asset class that should be in any investors’ portfolio, given the short-term trends.

But new investors just entering the gold market should consider investing in physical gold before they venture into the futures market.

“If you compare gold bars with gold futures, bars are probably best for those looking for a savings vehicle, with a priority on wealth accumulation and limited risk,” Mr Parkpoom said.

“Gold futures, however, offer the chance to profit on either the buy or sell side. The potential is there for higher returns, but with higher risk. You need to know your investment objective first.”

Gold futures are traded on the Thailand Futures Exchange, with each contract based on 50 baht-weight of 96.5% gold, the standard purity used in the Thai market. Prices are quoted based on one baht-weight of gold, with settlement made in cash and contracts offered for each even-numbered month. Trading limits are set at 20% from the previous day’s settlement price.

Kesara Manchusree, the SET’s group head for product development, said that from Feb 8, the TFEX would introduce a new gold futures contract with a size of 10 baht-weight of gold.

Published: 16/11/2009 at 12:00 AM
Newspaper section: Business


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