By DAVID TAN
Public Gold to see double-digit growth in Q1 on softening gold prices
GEORGE TOWN: Public Gold Marketing Sdn Bhd expects its 2012 first quarter sales to achieve a double-digit growth due to the softening of gold prices.
Public Gold chairman Datuk Louis Ng Chun Hau said in an interview that since gold prices started softening early this year, the sales of Public Gold’s products had risen sharply.
“Many of our customers are buying gold products from us as the price is now more attractive.
“Gold prices has gone down, but it goes down gradually, and not all of a sudden, which would trigger panic selling,” he said.
The price of gold per ounce now hovers at US$1,630, compared to US$1,740 in January 2012, and US$1,800 in November 2011.
Since January 2012, due to the rise in demand for gold products, the company has been producing about RM20mil worth of gold dinars, gold coins, and gold commemorative items, compared to a monthly average of RM12mil, for 2011.
When the price of gold rises, Public Gold buys more from customers who want to sell and make profit.
“When gold prices are up, the demand for our gold products will then come from new customers who have yet to invest in gold and fear that gold prices will increase some more.
“This is the reason why our long-term business strategy of educating the people on our gold products and new market penetration is very important,” he said.
The success of Public Gold so far has been its unique business model, which allows a marginal spread of about 5%, which is the same as the spread for unit trust products.
“We marked up our gold products by about 6% above the market price, and the spread or the loss incurred by the customer is about 5% when we buy back the gold.
“The 6% marked up on the selling price and the 5% spread is very minimal, so we are able to get many customers to invest in Public Gold products,” Ng added.
On American billionaire investor Warren Buffet’s views that gold investment was unproductive and not worthwhile, Ng said Buffet’s thinking was influenced very much by the fiat monetary system, which was a departure from the Gold Standard, which ceased to be practised in 1971.
“Under the fiat monetary system, paper currency does not have any back up, and governments can print as much money as they want.
“The surplus money finds its way, eventually, into bonds, stock exchange and the property market, which are now filled with excess funds.
“This is not healthy and the fiat monetary system will collapse inevitably.
“I foresee a return to the Gold Standard in the future that will guide the use of financial instruments.
”When that happens, gold will no longer be regarded as unproductive, as Buffet views it to be, as it will then be able to generate interests like paper currency is able to do now,” Ng said.
On why Public Gold has diversified into silver products, Ng said the value of silver had been underestimated, and there was a scarcity of silver in the market.
“The value of silver has appreciated by over 600% since 2001 from US$5 per ounce to US$31 per ounce today.
“During the same period, the value of gold has also increased over 600% from US$270 per ounce in 2001 to US$1,630 per ounce today.
“The use of silver in jewelry products is also becoming increasingly popular, as gold prices are still high,” he said.
Public Gold would be setting up a sales and marketing office in Singapore later this year, when the government would have removed the general sales tax on precious metals on Oct 1 2012, Ng said.
“We expect to do well in the Singapore market as we are working to attract the Malay population there with our dinar products.
“We are also exploring opportunities in Indonesia, as it is a large market,” he said.
(source: The Star)