Is it time to buy gold?

Precious metal said to be consolidating and likely to rise in next few years
PETALING
JAYA: Now is the time to invest in gold as its price is consolidating
and likely to climb over the next few years, according to one expert of
the commodity.
“Gold reached US$1,900 (RM6,042) last year but
has fallen to US$1,600 now. This is a purely periodic correction,” said
Dar Wong, a trader and veteran financial consultant who was the guest
speaker at Tomei Consolidated Bhd's GoldSilver2U.com seminar.
He said prices would be “firm” but may trade in a sideways pattern till the end of the year.
Gold,
considered a safe haven in times of economic upheaval, has slipped some
15% since peaking at US$1,900.20 last September at the height of the
eurozone crisis, but is up 2.7% for the year at yesterday's average
spot price.

[You must be registered and logged in to see this image.] Wong (left) and Tomei group managing director Ng Yih Pyng showing gold wafers from Tomei. “In
my view, whenever the market comes off a high and starts to go
sideways, this period of consolidation is the best time for investors
to plan their portfolio.
“When the market starts to run up again
maybe next year, you will have to pay more and jostle with everyone
else,” said Wong, who started his career trading futures in the 1980s.
Wong
honed his trading expertise working for several banking groups before
striking out on his own as an individual trader in 1996.
“People
are saying it can reach US$3,000 per ounce. Based on my analysis, the
price of US$2,300 is achievable in the next few years. But in order to
get it that high, you need fundamental strength,” he explained.
He
opined that this would come from two sources: inflation, which would
force the hand of central banks to ease interest rates, and US monetary
policy.

[You must be registered and logged in to see this image.] “Gold
is traded in US dollars. Should the Federal Reserve decide on more
fiscal stimulus, the weaker US dollar will push gold to new heights.
“From
my studies, when the United States elects a new president after the
third quarter, whoever gets the job will most likely put in a
quantitative easing policy to consolidate his position. That will
result in higher gold prices.”
Central banks, he added, had little choice in the current global scenario other than to loosen the reigns on fiscal policy.
“The
world economy is stuck between inflation and recession. On one hand,
food and commodity prices are going up, which means higher costs.
“On
the other, manufacturing and growth is slowing while unemployment is
rising. Let's assume banks have to choose just one solution they will
choose to cut rates.”
Although Bank Negara left its overnight policy rate unchanged at 3% yesterday, the European Central Bank and China's central bank cut interest rates to stimulate the flagging global economy, while the Bank of England announced a further £50bil of quantitative easing.
On
his personal experience with the precious metal, Wong revealed that he
had bought 25 mint-proof gold coins after the Sept 11, 2001 attacks,
when gold plunged to US$320 per ounce.
“People said I was stupid. But the principle is how much money you can invest versus how long you can hold.”
Wong said he has so far sold 20 of those coins for a handsome profit.
“I
couldn't sell them at the peak last year. I'll be honest, no one can
time the market perfectly. I loaded them off at average prices of
between US$1,200 and US$1,500,” he said, adding that he was now waiting
for buying opportunities.
“It is not about how much you have
now. It is about how much you want to build now for the future. I built
my investment 10 years ago and have realised a profit.”