Gold - Preservation of wealth (might be wrong, but that is what I believe)

As I wrote this piece, I just opened my first Gold Account with Kuwait Finance House. A firm believer in Gold investment since early this year, I was searching for the best shariah compliant gold investment account. Luckily KFH launched their new shariah compliant gold acoount product just a few months ago.

In short, today I met a lovely Customer Service Executive by the name of Rafizah- Mrs Rafizah I would assume looking at the ring on her finger. (damn!). She guided me and my father on the product and was very nice and informative. To be honest, I already made up my mind 2 days ago that I would open a gold account with KFH. She did not actually "sold" me the product so to speak, but she did "assured" me that I made the right decision.

All I needed to do was to open a normal saving account with KFH, and all the gold transactions must go through this account. Minimum initial investment was 10grams, with the price of RM129.25 per gram (as of 24 May 2010). Unfortunately, I could not transfer my money from Maybank to KFH, so I needed to withdraw cash from the nearest ATM machine. That pretty much limited my initial investment. Anyway, not to be distracted by petty issue, I quickly withdrew money from the nearest ATM machine, and bought XX grams of gold as my initial investment.

The theory goes that gold prices will increase exponentially in the next few years as oppose to linear appreciation like in the previous years. The chief culprit is the world economic downturn has spark panic amongst investor and spook them out of bonds, shares and equities. So, people now are turning to land and gold to preserve their wealth. I am not jumping the bandwagon, but rather choose to diversify my investment and thought that gold would be the safest investment as the value will always be parallel with inflation at the least. Thus, owning say a RM10k of gold now would be the same "value" in the years ahead, whatever the inflation rate factor is.

Looking forward to monitor all my investment portfolios. I would expect my gold investment to be atleast double in value in the next 5 years. May this be the first steps of many good things in life. Amen.

Note : As far as I am aware, only KFH offers shariah based Gold investment account. The other two banks, Public Bank and Maybank, only offer conventional account. "What constitute a shariah gold investment account?" you might asked. I did some digging on this, and apparently to qualify to be shariah compliant account, one major criteria is that the bank must be able to show the buyer the physical gold whenever the buyer wants within 3 days maximum. As an example, if I bought 10 grams of gold, then decided that I want it in physical shape rather than just "statement on a piece of paper", the bank must be able to give me the physical gold within 3 days. I can't remember which bank, Public or Maybank, which mentioned that their gold is kept in a facility in New York, and would not be able to give the buyer the physical gold.

I also must note that KFH trades 99.5% fineness gold rather than 99.9% as used by Maybank or Public Bank. Although this means that the gold quality of KFH is slightly lower quality and cheaper than the two other banks, a gold is still a gold. Most important factor in my mind is the transaction must be Islamic, and until the likes of Maybank or Public Bank can offer islamic gold account, I will have to stick with KFH.

One other disadvantage of KFH gold is, although you can have the physical gold in your hand, you cannot turn it into jewellery. This is due to KFH gold is specially wrapped in a box with serial number and they will not buy back the gold from you other than in mint box condition. So, you can say farewell of turning the gold into pendant or ring if you have any intention of selling it back to KFH.