A BEGINNERS GUIDE TO INVESTING IN PRECIOUS METALS

A BEGINNERS GUIDE TO INVESTING IN PRECIOUS METALS

Dear Investor, Welcome to the ABC Bullion first time investors guide. For thousands of years, people have turned to gold and other precious metals as a safe store of wealth. But, if you are new to precious metals, you are probably wondering how it all works. This guide helps in providing some answers. Whether you are a first time, individual investor looking to protect your wealth or to diversify, ABC Bullion has been Australasia s specialist in physical precious metals since 1972. We look forward to assisting you. Janie Simpson Managing Director ABC Bullion DISCLAIMER: This report is for educational purposes only and should not be considered either general or personal advice. It does not consider any particular person s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help of a licensed financial adviser. Performance is historical, performance may vary, past performance is not necessarily indicative of future performance. Any tax information contained within this report is also generic in nature, and investors should seek formal tax advice from their financial advisor, tax agent or accountant for specific taxation advice relevant to their circumstances. Any prices, quotes or statistics included have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness. 1

TABLE OF CONTENTS Main Reasons to Invest in Gold & Silver 3 Capital Growth Returns 4 Interest Rates 5 Portfolio Diversification 6 Economic Uncertainty & Inflation 7 Silver Deserves a Specific Mention 8 Learn More at the ABC Bullion Investor Centre 10 Frequently Asked Questions 12 2

MAIN REASONS TO INVEST IN GOLD & SILVER Whether worn as jewellery or held in investment grade bars, tablets or coins, physical gold and silver are some of the world s oldest asset classes. The demand for physical gold and silver as an investment remains strong today. Over the last 15 years, this physical demand has continued unabated. There have been a number of factors that have contributed to this demand including: CAPITAL GROWTH RETURNS LOW INTEREST RATES PORTFOLIO DIVERSIFICATION ECONOMIC UNCERTAINTY & INFLATION This guide examines the reasons that underpin demand for gold. A specific mention is also made of silver, another excellent invesment. We ve been trading and storing gold for clients since 1972. This guide explains some of the key reasons people are investing in bullion today. - Janie Simpson Managing Director, ABC Bullion 3

CAPITAL GROWTH RETURNS Like most investments, it is instructive to take a long term view. For example, over the last 15 years, gold rose from HK$2715 to just over HK$10,200 by the end of December 2017. This is a strong performance by an asset with no liabilities and no exposure to claims on the debt or profit performance of other companies. This performance is highlighted in the table alongside, which shows the returns over 3 years, 10 years and 15 years for gold in HK$, compared with other traditional asset classes including the Hang Seng Index and MPF returns. PERCENTAGE RETURNS TO END 2017 (%) 3YR 10YR 15YR Physical Gold (HKD) 3.74 5.71 18.42 Hang Seng Index 8.92 0.76 14.72 HKD Cash 0.71 0.73 1.37 HK MPF 10.75 2.47 Source: Bloomberg, Hong Kong Investment Funds Association, Lipper - Thomson Reuters Importantly, gold has performed well over the long term, and acts as an important diversifier in balanced portfolios, helping insure against weakness in other markets and generally smoothing returns from your portfolio. Given these properties, it is no surprise that many investors choose to allocate gold to part of their portfolio. 4

INTEREST RATES Historically, gold prices tend to strengthen most in environments where interest rates are low. AVERAGE RETURNS FOR GOLD AND HANG SENG INDEX AGAINST 3 MONTH CASH RATE (1997-2017 INCLUSIVE) Recently, gold in HKD has shown strong performance in periods of both high and low interest rates as measured by the HKD 3 month rate, and has outperformed the Hang Seng Index during periods of higher rates. Gold generally performs well at times of low real interest rates in most currencies, however gold in HKD has shown good returns in a variety of interest rate environments. 12% 10% 8% 6% 4% 2% 0% 1 HKD Gold (3 M Cash rates < 1%) HKD Gold (3 M Cash rates > 2%) Hang Seng Index (3 M Cash rates < 1% Hang Seng Index (3 M Cash rates > 2%) Source: Bloomberg 5

PORTFOLIO DIVERSIFICATION In the context of your investment portfolio, the age old adage that you shouldn t put all of your eggs in the one basket rings true. AVERAGE RETURNS DURING THE WORST YEARS FOR THE HANG SENG INDEX SINCE 1997 Gold has a long history of helping diversify portfolios. Good investments in equities and bonds can be improved with the addition of gold holdings that serve to smooth returns in the overall portfolio. Gold is uncorrelated to the HKD exchange rate, very weakly correlated with the Hang Seng Index, and slightly negatively correlated with the offshore Yuan (CNH) meaning that gold has a valuable role as a wealth diversifier. 10% 5% 0% -5% -10% -15% 3.12% -26.25% 7.45% -20% -25% -30% HKD 3 MONTH CASH HANG SENG INDEX GOLD (HKD) Source: Bloomberg 6

ECONOMIC UNCERTAINTY & INFLATION Today, health and life insurance are commonplace. Similarly, gold is an excellent form of investment portfolio insurance because of its reputation as a hedge against economic uncertainty and inflation. Historically, gold tends to perform well whenever there are recessions, rising geopolitical tensions and low real interest rates. Additionally, gold price performance is well connected with rising debt levels worldwide, and debt has risen dramatically since the financial crisis of 2007-8. Debt is forecast to rise still further as the US government engages in more unfunded spending and tax cuts. All these facts lead prudent investors to precious metals, and in particular gold. With many economic risks on the horizon, gold is likely to continue as an excellent hedge. Interest rates remain at or near historic lows, and after many years of aggressive quantitative easing, the process of moving from the today s ultra-low interest rate environment towards normalisation is clearly prone to risk including market instability, the return of inflation and a threat to other asset prices such as bonds, equities and property. 300 250 200 150 100 50 0 Source: BIS and IIF RISING GLOBAL DEBT: TRILLIONS (USD) $63Tn $144Tn $233Tn 1996 2006 2017 7

SILVER DESERVES A SPECIFIC MENTION Much of this guide has been devoted to gold. However just like gold, physical silver can also provide an excellent investment opportunity. Over the 21 year period from early 1997 to end 2017, silver in HKD terms rose by an average of 12.65 per cent per annum. SILVER IS AN INDUSTRIAL METAL Unlike gold (which is mostly seen as a monetary savings asset), silver is also widely used for industrial purposes. Indeed, silver s electrical conductivity, thermal resistance and reflective qualities are highly sought after. Whether it is electronic products such as mobile phones, cameras, laptops and monitors, or medical equipment like X-Ray machines, they all contain physical silver, and silver s application continues to rise. This adds another element to the silver story, encouraging people to accumulate the metal. 8

CAN SILVER OUTPERFORM GOLD? The affordability of silver compared to gold makes it an excellent option for investors to begin their precious metal investment portfolio. And although silver prices are historically low at the moment, the fact is that silver prices often outperform gold, especially in environments where both metals are rising in price. This gives silver a dual nature, dominated at times by the same impulses that drive gold as a financial asset, and at other times by industrial demand and new technologies such as solar. 1100 1000 900 800 700 600 500 GOLD AND SILVER IN HKD, INDEXED TO JANUARY 1997 400 300 200 100 0 3 Jan 97 3 Jan 99 3 Jan 01 3 Jan 03 3 Jan 05 3 Jan 07 3 Jan 09 3 Jan 11 3 Jan 13 3 Jan 15 3 Jan 17 3 Jan 19 Gold in HKD Silver in HKD Source: Bloomberg, ABC Bullion 9

LEARN MORE AT THE ABC BULLION INVESTOR CENTRE Your precious metals investment journey begins at ABC Bullion. As Australasia s leading bullion dealer, ABC Bullion brings you the ABC Bullion Investor Centre - Australasia s leading precious metals investment portal. It contains a wealth of knowledge on the key factors influencing the physical gold and silver markets, as well as research into currencies, interest rates, share and fixed income markets, property and superannuation. ABC Bullion is a regular contributor to numerous International news media outlets, including Bloomberg, CNBC, Forbes, the Australian, The Financial Review, Livewire and Reuters. Join the ABC Bullion Investor centre by visiting abcbullion.com.hk/investorcentre and establish your precious metals investment account with ABC Bullion today. As seen in: 10

FREQUENTLY ASKED QUESTIONS This section contains answers to some of the key questions we are asked by new clients regarding investing into physical bullion, which we hope you find useful.if you have other questions, please contact us on +852-3904 2148 or over email at info@abcbullion.com.hk and one our experienced staff members will be happy to assist you. WHAT IS THE SPOT PRICE? The spot price is the current trading price of the metal as listed on the metals exchanges, which we use as a benchmark for our pricing. The spot price is based on huge, bulk orders of bullion and doesn t take into account the cost of making the metal into coins or bars, transporting it, storing it or retailing to the investor. WHAT IS THE PURITY OF PHYSICAL GOLD AND SILVER BARS AND COINS? To be classified as an investment grade physical gold bar or coin, the product must be at least 99.95% pure. For silver, the minimum purity is 99.90%. All bullion products sold by ABC Bullion are sourced direct from internationally accredited refiners, including our own ABC Refinery, and either meet or exceed investment grade standards. WHY ARE THE SELLING AND BUY BACK PRICES DIFFERENT? The difference between our sale and our buy back price is called a spread. The spread allows for different trading and handling costs associated with us selling and buying precious metals. Like any trader, we make a small margin on sales of bullion, and we make a small margin on the bullion we buy back. CAN ABC BULLION STORE PRECIOUS METALS FOR ME? Yes. ABC Bullion stores physical gold and silver for thousands of clients. We can also provide private vaults which clients can use to store precious metals, as well as other valuables like cash and jewellery. IS BULLION STORED WITH ABC BULLION INSURED? Yes. All precious metals stored with ABC Bullion, either in pool allocated metal or in secure or premium storage come with complimentary insurance. This is arranged through underwriters at Lloyd s of London. 11

IS BULLION STORED WITH ABC BULLION INDEPENDENTLY AUDITED? Yes. All precious metals stored with ABC Bullion, either in pool allocated metal or in secure or premium storage are externally audited, on a quarterly basis. HOW OFTEN WILL MY BULLION BE VALUED? Bullion valuations are available online twenty-four hours a day. ABC Bullion also emails a quarterly valuation to clients, so as a minimum, you will receive four updates a year. DO I HAVE TO PREPAY FOR BULLION PURCHASES? No. There is no need to prepay. You order your metal first, either online, over the phone, or in our showrooms in Sydney and Perth. Once you ve made your order, you will receive an invoice, which you can arrange payment for, either via EFT, cheque or BPAY. HOW EASY IS IT TO SELL BULLION & HOW LONG DOES PAYMENT TAKE? Selling can be done either online, with a phone call or in our offces. ABC Bullion will repurchase any metals we store instantly. ABC Bullion will make payment to your designated bank account with funds typically received within 1 to 2 business days. CAN I PICK MY BULLION UP OR HAVE IT DELIVERED TO ME? Yes. Any products purchased through ABC Bullion can either be collected from our offces in Sydney or Perth. Alternatively, ABC Bullion can arrange to deliver metals anywhere in Australia, or internationally. CAN ABC BULLION WORK WITH MY FINANCIAL ADVISER OR MY ACCOUNTANT? Yes. ABC Bullion works with a number of leading financial advisory and accounting groups. 12

For more information on investing in precious metals, please contact our Client Services team on info@abcbullion.com.hk, call us on +85 2 2774 1900. www.abcbullion.com.hk ABC BULLION HEAD OFFICE Suite 30, Level 6 88 Pitt Street Sydney NSW 2000 Australia P: +61 2 9231 4511 F: +61 2 9233 2227 PERTH OFFICE Level 3 40 St Georges Terrace Perth WA 6000 Australia P: +61 8 9325 0888 F: +61 8 9325 0889 HONG KONG OFFICE Unit G1, 5th Floor, Kaiser Estate Phase 2 47-53 Man Yue Street, Hung Hom, Kowloon, Hong Kong P: +85 2 2774 1900 F: +85 2 2774 1677