Jewellers hit limit up as gold prices surge

Poh Kong (pic), Tomei jump more than 30% to multi-year highs

PETALING JAYA: Shares in Poh Kong Holdings Bhd and Tomei Consolidated Bhd hit limit up after jumping more than 30%, as gold prices hit a fresh record high of US$2,000 per ounce.

With the yellow metal prices on a surge, Poh Kong’s shares rose 30 sen, or 38.5%, to close at RM1.08 yesterday, while Tomei shares also gained 30 sen, or 34.1%, to end at RM1.18.

Both counters are now trading at their multi-year highs, having more than doubled within a span of two weeks.

Fund managers and market observers reckoned that gold prices could go higher from the current levels should the fear of coronavirus (Covid-19) continue to loom over the market, government bond yields remain low and inflationary pressure creep up.

Year to date, the bullion has risen more than 32%, making it one of the best-performing assets.

However, the surge in the gold price, often regarded as a safe-haven asset in times of stress, is usually not a good sign on investors sentiment.

According to Tomei managing director Datuk Ng Yih Pyng, the gold rally will continue as investors are still grappling with the uncertainties from the Covid-19 pandemic.

“The gold price will continue with its upward trend should the US dollar remains under pressure, ” he told StarBiz.

“People look into gold as a hedging tool against inflation and also an alternative investment as it is more liquid than investing in properties, ” he added.

Touching on the sales of jewellery at Tomei shops, Ng said there has been a surge in sales, partly contributed by the Hari Raya Aidil Adha festivity.

He expected the company to enjoy higher margins this year, thanks to improved gold prices.

“We see higher sales after the movement control order mainly due to improved gold prices and festive seasons but it is hard to predict the overall 2020 sales for the group due to the uncertainties ahead, ” he said.

It is noteworthy that gold does not offer dividends or interest payments to investors in comparison to other safe-haven assets such as government bonds.

But the aggressive monetary easing by central banks, especially the US Federal Reserve’s massive bond-buying programmes and slashing of interest rates, have resulted in lower bond yields.

For instance, the benchmark 10-year US government bond yields is presently at around 0.52%.

“There are many reasons for investors to invest in gold and it is seen as a safe-haven asset. Under normal circumstance, it could be used as a hedge against inflation when returns in other asset classes cannot compensate for the inflation.

“It is also a safe-haven asset meaning when financial markets become volatile, investors will flock to gold to protect capital, ” said MIDF head of research Imran Yassin Md Yusof.

He pointed out that in the current situation where inflation is extremely low and stock markets are moving higher, investors are becoming more risk-averse due to high stock-market valuations.

“There is also the possibility that investors are projecting inflation to pick up with all the stimulus, ” he said.

Imran expected that gold could rise higher should bond yield remains depressed.

“Of course the low interest-rate environment will increase the liquidity and the depressed bond yield will make gold more attractive, ensuring a further rise in gold prices, ” he said.

He reckoned that while gold is a non-yielding asset, it could be used as a hedge against inflation and market volatility.

Other gold-related products including TradePlus Syariah Gold Tracker, which is the country’s first syariah-compliant commodity exchange-traded fund (ETF), has rallied more than 32%.

According to Financial Times, quoting the World Gold Council, investors stashed a net US$7.4bil of cash into gold-backed ETFs last month.

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