May 2013 Financial News

Trini investors go for gold

May 02, 2013

Five months after Scotiabank launched the sale of gold certificates on the T&T market, the bank executive in charge of the product is reporting good response from local investors.

Without confirming the exact number of investors in the gold certificates sold by Scotiabank in T&T, Savon Persad, the bank’s senior general manager, retail and small business said the number was in the hundreds.

Available at all its branches, gold certificates according to Persad, is a “claim on unallocated gold, that is, a claim on the assets of Nova Scotia. What we sell are those certificates that actually represent a claim on the assets of Scotiabank.”

There is no cap on how much can be invested. In the first instance, the investor can invest ten ounces at a rate which is offered in the international community. Later, the investor can purchase above that amount in increments of one ounce.

According to the ScotiaMocatta Web site, gold cost US$1472.00 per ounce on Tuesday.

The commodity is volatile as on April 15, gold posted its biggest one-day percentage drop in 30 years amid new signs of a global economic slowdown and fears diminished that central banks' easy-money policies would stoke inflation, according to the Wall Street Journal’s Web site. The April 15 price of US$1,360.60 an ounce on the Comex division of the New York Mercantile Exchange extended a bear-market descent of more than 20 per cent from its 2011 all-time high.

Persad explained if an investor opts for trading in bullion, as it is called, or in other words, gold or silver in bulk before it is coined or valued by weight, he or she must take into consideration the shipping and trading costs, physical storage and security issues.

This means it may not be too attractive to this market due to high crime and extra costs involved in securing and shipping it, therefore, the bank opted to trade using certificates.

“The advantages of the certificates is that they are convertible to physical bullion, it can be done at a branch in Canada. We don’t do the actual physical conversion to bullion in T&T. Really, what the certificates represent is an alternative investment for the investing public.”

He tells investors gold is an alternative to diversify the investor’s portfolio of investments and offer protection against “fluctuations associated with any single asset group. There are other advantages to having it in a portfolio, it’s a good inflation hedge. It’s also a good currency hedge, particularly against the US dollar.”

Declaring that investing in gold certificates is less volatile than most commodities and many of the equity indices, Persad said it holds its value over a very long period of time.

“We sell at exactly the price that would sell at the international market, through ScotiaMocatta in Canada, who is the market maker or price maker for gold because they are part of the London gold market fixing Ltd.”

ScotiaMocatta is an affiliate of Scotiabank and is one of the largest traders of precious metals in the world. One of the products ScotiaMocatta offers to the public is gold and they also trade in other precious metals, including gold silver, platinum and palladium.

Though gold may be less volatile than most commodities, it cannot be used as collateral to secure a loan.

“Gold is not a security and is considered more of a commodity. It is something that we may be thinking of in the future but, at this point, we are not using gold as any sort of collateral to secure any sort of lending,” Persad said.

He explained that gold is not a security and is not considered a security like equities or any type of bond. It is a precious metal. Investing in gold gives the investor more investment options.


Source:
Nadaleen Singh
Trinidad Guardian
Thursday May 2, 2013

http://www.guardian.co.tt/business-guardian/2013-05-01/trini-investors-go-gold