Precious Metal (PM) Trading

Week 11. 1 Precious Metal (PM) Trading

At the end of the day, you want to make profit. Profit can be in term of $$ or amount of PM holding. This article is mainly for small investor with few thousand ringgits to play work.

Money profit only

Buy low, sell high. Buy at USD1000/= keep for a while and sold it for USD1400/-. Make some profit in term of money. Once you sold your PM, you may not be able to buy it back unless there is a major price correction. I‘ve seen many buyer who sold off their metal at early stage of price rally for some profit taking only to regret at later stage.

OK, for those of you who have been trading PM for some time, after you done some profit taking would you still be able to buy back the gold you sold considering the spread. Most likely the answer is no. But if you can use the money to repay your loan or buy goods that you need that it’s OK. If it just fiat then it is a lost.

PM Holding

You agree that fiat money is not worth holding. If you make a trade over time the amount of PM you hold should increase. Then only there is an actual wealth increase. Agree.

For seller, if he sells 100 oz of Precious Metal, he must be able to buy back at least 110 oz if his gross margin is 10%. Otherwise, one day he will be out of business.

Technical player

Your profit is based on appreciation of PM at spot price. Thus, the spread have to be small. The average spread in Malaysia is RM5/gram of gold thus not worth our effort. The only worthwhile option is

UOB Malaysia gold saving account spread is just RM2/= per gram. Spread is about 1.5%.

However, you need to physically present in the UOB bank counter to do the buy and sell transaction. Thus, if you are not working or staying nearby a UOB branch, then it‘s not viable. FYI, you can have a join account with your wife, girlfriend, mom or dad who have easy access to UOB branch. If not then it is not viable. You can only play this if you have UOB paper gold/silver account where the spread is small.

But if you are a frequent traveler or visitor to SG or HK, you can invest some $$ there. If you are staying in JB you can consider UOB gold and silver account in Singapore. However, you take your own risklah. Cash out before COMEX default lah.

E.g.

 UOB SG gold saving account spread is just SGD0.10 per gram

UOB SG silver saving account spread is just SGD0.23 per gram.

Hang Seng Bank gold Passbook spread is just HKD2.2 per Mace Troy

Back then I got one customer, who was scouting every money changer in PJ shopping complex to exchange RM to SGD because the next day, they will go to UOB SG to open silver account.

You must physically present in the UOB counter to do the buy/sell transaction.

You still loss 2% each time you go to a money changer and most likely when the prices is right you are not at SG or HK to perform the transaction. Thus, it is mainly for mid-term investment 3 months and above.

Kitco Pool Account or Gold Money etc.

Every time you do a TT transaction, on the sender side

a)      USD15/=  to USD25/- will be deducted as a commission for routing the money

b)      RM30/- bank wire fee by local bank

When you receive fund from overseas, there is a TT charges of USD40/- approximately

a)      Then at the local bank you will lost on the forex exchange.

On 10^th March 2011, Maybank

1 US Dollar 3.0675 (selling TT) 3.0005 (Buying TT)

Every time you TT, you lose 2.23%

You will need to do TT twice, the first time is to send and the second time is to receive money.

So, in total you loss 4.46%, plus the TT fee, routing charges, spread differences. In the end the spread is 6-7% before any profit taking. It is worth your effort? You think about it. That leave you with 2 options.

Option 1:  Unless you have a foreign currency account which allow you to bank wire in foreign currency that is another storylah. To qualify for foreign currency account is not easy.

Option 2: Thus, either you keep your money with them and continue trading for 6 months to one year before profit taking.

Chicken

Sorry to say I’m a FUTURE CHICKEN and MARGIN CHICKEN. I won’t dare to go into that area. I heard from many people that 90% of the player lost all their money. I heard you need about USD20,000.00 to start with at UOB. With that kind of money better buy physical lor. What I said is what I dare to do want only? For more information on type of chicken, see

http://silvermalaysia.blogspot.com/2011/03/type-of-chicken.html

I told you most of the stuff, you make your own decision ok.