Friday, 28 February 2014

What about gold price

This may seem like a heavy topic to digest (trust me, it's not!), but it is important to master the basics to ensure you get the best deal.

Daily and Spot Price
Gold is traded internationally at an agreed price based on demand and supply. The daily gold price is fixed twice a day in the London exchange at 10.30am (London AM) and 3.00pm (London PM), while also being fixed at the end of the trading day on the New York exchange. This price is usually benchmarked by normal gold retailers.

The spot price refers to the current trading price which moves every minute. This price, together with the USD/RM exchange rate determines the price movement of Public Gold products every 20 minutes as featured on its website.

These prices are available on kitco.com where you could chart your desired historical data of other precious metals too. The quotes are in USD/oz (troy ounce) whereby 1 troy ounce equals 31.104g.

Cost Premiums
All gold bars and coins are sold at a premium over their spot of fixed daily price (at normal retailers). Generally, the premium is the production cost (refining/minting/packaging) to turn the raw gold into sellable items. It is normally set as an amount over the price per gram or troy ounce, which decreases the larger the coin/bar is. Other premium charges might include workmanship, transportation etc.

Buy and Sell price
Just like foreign exchange (FOREX), gold has different buy and sell price. This is called the margin spread. Premiums paid when purchasing gold are usually not taken into account when selling it back to a dealer.

Public Gold price
PG is very transparent in its pricing by displaying the price list on its website 24 hours a day, updated every 20 minutes. This is an advantage to the buyers should the price spikes up or down even for a short duration as opposed to whole-daily price at normal goldsmith outlets. Here is a snapshot.

PG Sell and Buy price of an item has a fixed spread margin as shown in table above on the right.
You can make your own calculation e.g. for a 100 gram Gold Bar, PG Sell price is RM 14,976 minus 5% spread @ x0.95 = RM 14,227.20 (rounded to RM 14,227 which is the PG Buy price). When the gold price appreciates to a percentage higher than the spread, then you are already making a profit because you can sell it back higher than the previous purchase price.

Starting 1st Dec 2014, PG has imposed new premiums (formerly known as Transport Charge) as follows. This is to accommodate the charges of new products with LBMA status manufactured in Turkey

*New spread rating will be announced soon

A good time to lock the price is when the gold price and the USD/RM exchange rate is low. But how low is low is subject to individuals. If you made a purchase before, you might already have a price benchmark. Otherwise, you might want to take a look at the historical data of gold price. 

How PG compares to other retailers
From my observation, many goldsmith shops charge higher premium. True examples
#1- Jan 14th: 10g. bar at WC was priced at RM 1600 when PG price was RM 1449 (10% higher)

#2- Feb 20th: 10g. bar at PK was priced at RM 1710 (buy back at RM 1500, spread of 13% for 'unused' gold, if 'used', minus 25% i.e. RM 1275). PG price was RM 1516 (buy back RM 1422). PK sells at almost 13% higher.
 *Most gold bars at the shops are sealed. To get 'unused' gold buy back rate, the item has to be from the same retailer, seal must be in perfect condition and must bring purchase receipt. Otherwise, it's considered as 'used' gold, automatically devalued at 25% from current market rate.

Datuk Louis Ng, the founder and chairman of Public Gold mentioned in an article featured in 'UNRESERVED' magazine (Jan 2014 issue) that PG's premium ranges only 5-8% above the international market. That being said, other jewellery shops put more than 15% margin which is huge money.

Ready to make the right choice? Read here for the step-by-step guide on price booking. Or contact me at my details below.

Norazharina Mat Amin
PG040197

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