When gold savings are not right for you: 7 situations to stop and think first

Why we wrote this

As an education site, we would rather you start at the right time than at the wrong one. The list below is general guidance based on official sources. It is not personal financial advice.

Seven situations to stop and think

1. You don't have an emergency fund yet

BNM's guide is a buffer of three to six months of monthly expenses. Without one, a small emergency can force you to sell gold at a bad time. Read gold as an emergency fund.

2. You have high-interest debt

BNM Museum education material advises paying all debts and, if you can't, prioritising those with higher interest. BNM also suggests paying credit card balances in full, or leaving only a small amount outstanding. The interest you pay on that debt is a certain cost, while the gold price is not certain.

3. Your loan instalments are already high

BNM's guide is that total monthly debt repayments should not be more than 60% of net income. If you are close to or above that level, taking on a new monthly commitment, even a small one, may not be the priority.

4. You need the money soon

If you will need the money within a few months, the spread and price swings can leave you with less than you paid. Selling GAP gold also takes time: money is credited after confirmation, within 1 to 2 business days (GAP terms, clause 3.5).

5. You can't stomach seeing the value fall

The World Gold Council (a gold industry body) records that the gold price fell close to 30% in US dollars in 2013. If a fall like that would make you panic and sell, rethink how much you start with, or when.

6. You want a quick profit, or are promised a fixed return

Public Gold's terms state there is no guarantee that buying precious metals will yield a profit. BNM lists key features of financial fraud, including high or unrealistic returns, guaranteed risk-free investments and pressure to commit quickly. If anyone, dealers included, promises these things, stop and check.

7. You are using borrowed money or money for commitments

Buying gold with money meant for instalments, rent or bills can hurt your cash flow. Buying gold with borrowed money adds debt on top of price risk.

When gold may make more sense

• Your cash emergency fund is in place.
• High-interest debt is dealt with, and instalments are within what you can afford.
• You are using spare money you won't need for several years.
• You understand the spread, the Gold Premium and how selling back works.
• You can watch the value fall without being forced to sell.

Risks and costs

• Price risk: no guaranteed profit; losses can happen.
• Spread: see how to read prices and spread.
• Gold Premium: on physical gold withdrawals (clause 2.3).
• Cancellation charges: clauses 1.17, 2.7 and 3.7.
• Not a deposit: GAP is not a financial product or a deposit (clause 1.2) and is not protected by PIDM.

Quick FAQ

I have credit card debt but want to start small with RM100. Is that OK?

It is your decision. BNM's guidance is to put high-interest debt first. Compare the certain interest cost with the uncertain return on gold before you decide.

Someone is pushing me to buy now because they say the price will rise next month. Should I?

No one can guarantee the direction of the price. Promises of profit and pressure to decide right away are warning signs listed by BNM.

If I have already started, can I stop?

You can stop buying at any time. You can also sell on business days, minimum 1 gram. Keep at least 1 gram to keep the account active, or close the account if you want to sell everything.

Does this article mean gold is bad?

No. It means timing and circumstances matter. Gold can be part of long-term savings once your financial basics are solid.