In­vest­ments get golden edge as new fron­tier beck­ons

China Daily (USA) - - BUSINESS - By WU YIYAO in Shang­hai wuyiyao@chi­

When 52-year-old Ma Aiju in­vested 100,000 ($15,150) yuan in gold fu­tures on­line in late Au­gust, her hands trem­bled while tap­ping the lap­top’s key­board to en­ter her details.

Un­til that point, gold bars and jew­elry were the pre­ferred in­vest­ment op­tion for the Shang­hai-based Ma. She had in­vested big­ger sums in the past; but, some­how, fu­tures was a new fron­tier and ap­peared “scary”.

“Idon’t see one bit of gold (in fu­tures), and money flows in and out, and when you look at the price in­dex’s surges and dives, your heart­beats ac­cel­er­ate and you can’t sleep well,” she said, laugh­ing, rest­ing her palms on her heart.

In­vestors such as Ma are di­ver­si­fy­ing their port­fo­lios. Gold is in. Yields from such in­vest­ment chan­nels ap­pear stable rel­a­tively.

“If you sub-cat­e­go­rize gold in­vest­ments, you’ll see phys­i­cal gold, gold fu­tures and gold­backed (ex­change-traded) funds. They all pro­duce dif­fer­ent re­sults,” said Ma.

An­a­lysts said in­vestors now have more gold-re­lated in­vest­ment chan­nels than ever.

Ac­cord­ing to Thomas Huang, deputy CEO with Har­vest Wealth Man­age­ment Co Ltd, in­vestors can choose from at least three ways. To wit, gold fu­tures, stocks of gold-re­lated com­pa­nies such as min­ers and pro­ces­sors, and gold-backed ETFs. These are be­sides the op­tion of buy­ing phys­i­cal gold.

While phys­i­cal gold yields prof­its only if its price rises, the gold fu­tures mar­ket en­ables in­vestors book prof­its from short­ing, giv­ing more flex­i­bil­ity.

Also, fluc­tu­a­tions in prices of shares of gold min­ers, pro­ces­sors and jew­elry re­tail­ers may be wider than that of phys­i­cal gold be­cause more fac­tors are at play, like in­vestor sen­ti­ment, govern­ment pol­icy, com­pany per­for­mance and spec­u­la­tion, Huang said.

In­vestors are slowly learn­ing to ap­pre­ci­ate the nu­ances un­der­ly­ing the pric­ing ra­tio­nale be­hind var­i­ous types of gold in­vest­ments.

“For gold jew­elry, the costs of ma­te­rial, pro­cess­ing, brand­ing and mar­ket­ing are con­sid­ered. For gold bars and coins, you needto take the cost of de­liv­ery and stor­age into con­sid­er­a­tion. As for ETFs and gold fu­tures, prices can be more volatile as more fac­tors af­fect the mar­ket,” said Wang Bowen, 41, an in­vestor in Shang­hai who has been in­vest­ing mainly in gold-backed ETFs.

Yields from these chan­nels may vary and in­vestors need to have clar­ity about their in­vest­ment goals and risk tol­er­ance, said re­searchers.

Ac­cord­ing to Wu Hao, a re­searcher with Guo­tai and Ju­nan Se­cu­ri­ties Co Ltd, in­vestors need to test their own risk tol­er­ance and gain clar­ity about in­vest­ment goals be­fore mak­ing de­ci­sions.

“For ex­am­ple, mar­gin trad­ing in gold fu­tures could be quite risky. If risk tol­er­ance is not quite high, then in­vestors should put only a small amount of money into this cat­e­gory and more in ETFs and pa­per gold,” said Wu.


Two women ad­mire a gold bracelet at a jew­elry shop in Suzhou, Jiangsu prov­ince.

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