Gold draws more retail investors amid price rise, greater ease of access

Fractionalisation means wider range of investors can buy the precious metal

- Chor Khieng Yuit

Investors who bought into gold, over the past year would have reaped a golden harvest as prices for the precious metal have risen almost 50 per cent.

It hit a new high of US$3,435.35 per troy ounce on June 13.

Gold's steady rise has attracted the attention of new investors, including retail investors, insurers and wealthy individuals, hoping toj find their own pot of gold.

Ms Priyanka Sachdeva, senior market analyst at Phillip Nova, an affiliate of Singapore's investment manager PhillipCapital Group, said! the precious metal is not just a hedge against inflation but also uncertainty.

She added that gold should be viewed as a strategic allocation by investors who want to build a portfolio that is resilient for the long term.

However, a troy ounce of gold currently costs more than US$3,400 and would be an expensive investment for a retail investor on a tight budget.

But fractionalisation has helped to make gold more affordable and accessible for this group of investors, said Mr Vasu Menon, managing director of investment strategy at OCBC Bank.

Fractionalisation essentially means that a troy ounce of physical gold is split into smaller denominations or fractions so the investment outlay is brought down to a fraction of the cost.

A troy ounce is used to weigh precious metals and is equivalent to 31.1 grams.

Ms Sachdeva said online platforms now offer access to gold in denominations as small as 0.1g.

So, instead of committing, sayl around US$3,400 into a troy ounce of gold, the investor puts in around US$10.90 for 0.1g of the precious metal.

Gold-backed exchange-traded funds (ETFs) give retail investors another option to hold a fraction of an ounce of gold.

They do not own the physical gold asset in this instance, as they are buying the ETF which tracks the underlying gold price.