Five tips in manipulating Ar-Rahnu safely
The following are some tips for consideration with regards to reducing loss potentials:
- Proceed to pledge gold items only if the gold price drops drastically, about 10 - 15% from its current peak price point. Usually, when the gold price crashes, it is highly likely to appreciate its previous level sometime in the future.
- Set aside the safekeeping fee for the whole six months from the loan amount obtained. This way, we could still pursue extending the duration should the gold price appreciation not occur as expected.
- Pledge gold items in reasonable quantity
Should we have 200g of gold items, do not pledge all in one go. Consider limiting the pledging quantity to 100g because if the gold price depreciates by 5%, the potential loss would be about 17.90%. If this happens, we will still have ‘back-up’ gold to our rescue.
- Buy gold items that have a low spread margin.
As seen earlier, the lower the spread, the bigger the profit potential. Usually, gold items such as gold bars or dinar coins have lower spread value. Gold jewelleries may not be suitable due to the higher spread margin.
- Consider doing gold related business
If we pursue doing business by being gold agents, we can save the spread margin by selling the gold items to new buyers at market price.
Gold profit after 2012
Before 2012, this technique worked like a charm. The gold price was appreciating steadily, and whichever time point we bought the gold had no effect because, in six months, the gold price would have appreciated. Profit was almost always guaranteed due to ever-increasing gold prices. However, after 2012, the gold price began to portray inconsistencies, causing the solid Ar-Rahnu pledger to break their sweat. Their profits began turning into a loss, and this was indeed not a good sight for those who pursued without thorough analysis.
However, since 2012, the group of happy people are none other than gold savers (not speculators) such as my colleagues in Public Gold, my Mentors, and myself (though I started slightly later, I consider myself a gold saver). Whenever the gold price drops, it is an opportunity to buy expensive assets cheaper. Our aim as gold savers is to accumulate the grams of gold as this would eventually determine our wealth (or financial strength).
Those who store their long term savings into physical assets such as real estate, property, precious metals (gold and silver) would eventually have their wealth appreciating because such assets always go up in value over time. However, those who store their savings in paper money are not guaranteed to stay wealthy over time because there is a high chance that the cash savings will be spent away or the value of the savings will get depleted due to inflation.
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Your buddy on gold investing,
Naresh G