Gold and Investment Planning: A Guide to Choosing the Right Gold Fund

Why Should You Pay Attention to Gold Funds Right Now

As the economy experiences volatility and the purchasing power of the Thai Baht changes, many investors are turning to assets with stability. Gold has become a widely accepted option, whether through purchasing physical gold bars or investing via modern financial channels such as funds. The latter has gained popularity due to convenience and professional management.

What Exactly Are Gold Funds?

Known as Gold Mutual Funds or Gold Funds, these are mechanisms for pooling capital from multiple investors. The fund management company (Asset Management Company (AMC)) collects the money to manage and invest in gold assets according to predefined policies from the outset.

Most gold funds are passive funds that track the price of gold in the global market. Most fund managers reference the SPDR Gold Trust price, a global ETF focused on physical gold investment. Additionally, some funds directly invest in physical gold bars, causing the fund’s price to fluctuate with international gold market volatility.

Main Factors Affecting Gold Fund Selection

Currency Risk Management

Since trading gold in the global market primarily uses US dollars, converting to Thai Baht requires consideration of the currency’s strength or weakness.

When the Baht depreciates, the Gold Fund Price (when converted to Baht) tends to increase. Conversely, if the Baht appreciates, the fund price decreases. This is where fund managers must decide whether to hedge this risk.

• Unhedged (Unhedge): Suitable for investors willing to accept high risk. Returns may be outstanding when the Baht weakens but could also lead to higher losses when it strengthens.

• Hedged (Hedge): Suitable for investors seeking certainty. Returns will follow the global gold price without being affected by Baht fluctuations.

Dividend Policy of the Fund

Some gold funds may underperform compared to others even with the same hedging policy. One reason is the distribution of dividends to investors. Cash outflows from dividends reduce the fund’s net asset value over the long term, but investors receive cash immediately.

Trading Market Selection

Some gold funds are traded on the NYSE (New York), others in Singapore, or elsewhere. The main difference lies in market liquidity. New York has higher liquidity, but due to different trading hours from Thailand, the announced prices may lag the actual market by up to 1 day (T+1). Singapore markets are closer but less liquid.

Examples of Gold Funds with Different Selections

TMBGOLD - From TMB, not hedged against Baht risk, invests in SPDR Gold Trust traded in New York.

TMBGOLDS - Same TMB fund but hedged against Baht exchange risk, traded in Singapore.

TGoldBullion-H - From Thanachart, invests in physical gold with at least 90% hedging.

TGoldBullion-UH - Same Thanachart fund but without exchange risk hedging.

SCBGOLD - From SCB, not hedged, invests in SPDR Gold Trust traded in Singapore.

SCBGOLDH - Same SCB fund but with at least 90% hedging.

K-GOLD-A(A) - From Kasikornbank, hedged against risk, no dividend payout.

K-GOLD-A(D) - Same Kasikorn fund but with dividend payouts (up to 4 times a year).

Gold Funds Compared to Other Instruments

Investing through Gold Mutual Funds has advantages: no need to store physical gold at home, no need to manage international transactions yourself, and professional management. However, the limitations include requiring an account with the fund management company and only being able to buy or sell once per day at the NAV price.

Therefore, Gold Funds are suitable for medium- to long-term investors who do not want to monitor prices daily.

For short-term traders or day traders who want real-time price tracking and to capitalize on daily volatility, more flexible tools like gold CFD contracts are recommended. These provide real-time market prices and allow flexible entry and exit at any time.

Summary of Choosing a Gold Fund

Gold Mutual Funds are a clear investment option with professional management, suitable for general investors seeking stability.

More experienced investors who want quick entry and exit or maximize trading volume might consider gold CFDs, which offer greater flexibility and potentially higher profits. However, they must also carefully manage risks in line with their capital.