There are some of us who would be easily give in, when someone offered a high and fixed return every month. How do they forget the fundamentals of investing gold/silver as it should be. The universal rules apply in this case as well; When it is too good to be true, IT IS too good to be true!!
Unless you are a bullion trader (like us), there is no such thing as receiving fixed positive cash flow every month, especially when the gold just sitting there ideally. What does Newton Law teaches us? "For every action there will be an opposite or an equal reaction". How can you benefit from gold/silver which doesn't "moves"? If we can put it in a much simpler analogy, would it be logical to receiving monthly income when you purchased a bag of rice from your local grocery store? Of course it is ridiculous and buying gold/silver doesn't differ too much either.
But how, in the most logical way to explain, do these companies "so far" has not (what they claim) failed to give their customers monthly dividend? Things are getting even more confusing when the "consultants" started to show an iconic persona in their gatherings when the scheme was launched. For those who puts Syariah Compliance above anything else, guess what, they have this too! So what is really wrong then? Everything looks so .... perfect.
It is important for you to understand the pre-requisites before we start to uncover the "mystery" of these type of schemes. They are:
1) Is there a physical or is just a bunch of papers (the thicker they are, the more things they are hiding)
2) What is spot price?
The essentials of the discussion are:
1) Premium Over Spot
2) Spread Buy/Sell
Apart from that, it is also quite important for you to understand the rest of the criteria.
1) Size
2) Shape and Type
3) Workmanship
4) Reputation of the trader
THE PRE-REQUISITES COURSE!
3) Workmanship
4) Reputation of the trader
THE PRE-REQUISITES COURSE!
Pre-Requisites - If You Can't Hold It, You Don't Own It!
a) Density test using densimeter. First you have to measure the weight, before putting the metals inside the water basin for the machine to determine the volume displacement. Weight divided with the volume, the machine will come up with the density reading.
b) Acid test, though it is not as accurate as density machine, it is the oldest known technique to determine its purity. Different acid concentration is used to determine different purity grade. More concentrated acid is meant for the higher gold purity.
c) The most recent technology available for determining the purity of gold/silver is X-Ray. The machine will report whatever material that it can scan and available in the program. Though the test is considered accurate, it can only read at a certain depth of the metal.
d) Vernier caliper, ruler and weighing machine. If you don't have all the above machines, you can use these simple tools to determine whether its gold or not. Remember, to determine the density, you need to measure weight and volume. How do you measure volume of a coin? Its easy, get the surface area by multipying 3.1542 with the square radius (3.1542 X radius X radius). Than check the thickness. By multiplying the surface area to the thickness will give you the volume.
Where to find "Spot Price" and its importance
Let us see now where and how do you look for "Spot Price". The gold/silver price is divided into two types. Spot Price or Future. Spot price is based on the real demand and supply at the certain location which you can take the delivery immediately. Since everywhere in the world is trading gold/silver on a daily basis, the price never stops changing 24 hours/5 days a week. Unlike Spot price, Futures is meant for the future delivery contract. For an example of Spot price, please go to http://www.kitco.com/charts/livegold.html which is in USD/oz.
How do you convert it to RM/g (metric unit) then? You need to know the conversion. 1 Oz = 31.1035 gram (credit to Salehhudin Salleh who corrected me for the typo). Knowing this fact will not solve your problem as there is another variable that you need to convert i.e. USD to RM. To cut things short and sweet, we make everything easier for you. Please visit us at www.nubex.com.my and we have put the spot price for gold and silver converted for you, the best part is, IT IS UPDATED EVERY SINGLE MINUTE!
Why is it important to know about Spot Price? You need to equip yourself with this vital information to ensure the basis of every one's else price. It will be easier for you to gauge whether the price that you are buying its in the acceptable range or otherwise.
PRECIOUS METALS 101 - Premium Over Spot
Premium Over Spot
Most of the companies who offer a scheme whereby the customer will receive a monthly fixed income would normally sell 15%-20% above the Spot Price.
Let's see an example:
If A is selling at 17.7% higher than B which is selling at only 1.2% from Spot, which one would you pick? Naturally, we would pick B. But don't be surprise if someone who didn't read about this blog and had their first encounter with these companies will end up choosing A. Why? Especially when we are talking about the same exact weight and purity of the metal! What makes it so enticing?
The only good reason why people would still choose A is because of the monthly dividend a.k.a Hibah (read Mus"hibab" - catastrophe). That is the selling point! This is where a lot of people would fail, especially when other "spices" are added into it i.e. the "Syariah Compliant" (Halal) certificate. Let's do the math. Normally, the dividend is paid around 2% (1.8% to 2.2%) for 6 months tenure. That is the return that these people were candied to. For 6 months the return would be 12%. If the income of this 12% deducted from the premium that they paid initially, the final premium would give them +5.7% above Spot. This is still a 5 times more from B. If you are still with me to this very sentence, you will realize the money that they are paying the poor investors are none other than the investor's own money!! .... to be continue. (Precious Metals 201 and Precious Metals 301 coming soon!)
malaysia gold price, investment of gold, gold for investment
