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Gold’s Enduring Safe Haven Appeal & Opportunities in Asia


Published on September 20, 2019

Gold is still a safe haven, especially when compared to the dollar, but it is not the only one, Rhona O’Connell, INTL FCStone head of market analysis, EMEA and Asia, said in her keynote address at the third Asia Pacific Precious Metals Conference about where the precious metals market is headed.

She said that in the current environment, gold is still liquid, deep, comparatively stable, ands a hedge against risk. “It is truly a global commodity and predominantly a currency,” Ms O’Connell said.

Alistair Hewitt, director of market intelligence, World Gold Council, said that gold’s attributes – returns, diversification, liquidity, portfolio impact – give it an important role in investment portfolios, which are struggling with return generation, market volatility, liquidity risk, and capital preservation.

Gold production is well-diversified, and the yellow metal is a deeply liquid market, he said. Additionally, gold is a global market, which means it is exposed to different business cycles and different customs and cultures. This manifests itself in terms of demand, which is diverse and dynamic.

Bart Melek, global head of commodity strategy, TD Securities, agreed. He said that it is an important hedge as it has intrinsic value – even if it gets hit, its value will go down but not to zero, adding that emerging markets still have room to grow their gold reserves.


There is enormous opportunity in Myanmar for the gold community, Marcus Loke, senior constant, Myanmar Gold Development Public Company, said. The country’s five-year average growth rate (6.92%) is one of the highest globally. The country’s gold jewellery consumption reached $1.88 billion in 2017. In terms of production, the four large mines and 300+ small-scale mines produced 80-160 kg of gold daily, and there are another 1.3 billion tonnes of primary gold ore reserves to be exploited.

Gold is already exportable, but due to supplier payment terms, there is some resistance to contracts being done in Myanmar, Loke said, adding that there has been mining interest from East Asia and Australian companies. While the one-stop service centre, which launched in September 2018, has helped promote gold exports, Loke said more finetuning is necessary to iron out payment terms and to improve the movement of gold out of the country.

Physical gold demand in Vietnam remains strong, with 10% year-on-year growth. Gold bar consumption stood at 40.7 tonnes, while jewellery consumption reached 18.3 tonnes, making the country the top market for gold in ASEAN after Indonesia and Thailand.

Changes are afoot with the ratification of the New Decree on Gold Management Policy expected in Q3 2019, with a raft of changes that is expected to give this sector a boost, said Huynh Trung Khanh, managing director of Vietnam Gold Consultants. In particular, the production and sales of gold jewellery will be completely liberalised and become an unconditional trading activity (no need for licensing by the State Bank of Vietnam), while the production and sales of gold investment will be relaxed, he said.

Malaysia one of the few jurisdictions where there is no tax on gold, Erwin Siow, advisor, Federation of Goldsmiths & Jewellers Association of Malaysia, pointed out. The current tax-free status gold provides easy access for foreign players, and several big foreign players like SK, Chow Tai Fook, Emperor, Lukfook, TSL, Joyalukkas, and Malabar, have already entered the market.

The new government has had no significant impact on the gold industry, and here has not been an upswing in sales post-GST removal and SST exemption, he said, pointing out the increasing imports of 24K gold jewellery mainly from China, likely to cater to Chinese tourists from the mainland. Opportunities also exist in digital gold as apart from Hello Gold, no other players have had a significant impact on market. Additionally, there are 19 operating gold mines in the country, but only four have sizeable capacity, with a combined annual output of 6-8 tonnes. There are no regulations and no duty on gold dore/scrap exports, though they must be declared.

Indonesia’s gold market grew 12% year-onyear, with 26 tonnes exported and domestic market consumption of about 40 tonnes, Muhammad Abi Anwar, general amanger, PT Antam said. He noted that by law, all gold mined in Indonesia has to be refined before export. He also highlighted the Treasury’s new app, Brancas, that is helping drive a new approach to gold investing.

The members of the panel also pointed out the importance of the pawn shop business to the gold industry in the region, saying that it is an area to look at when entering a market, being a source of supply and part of the ecosystem when running a refining or jewellery business, and allows players to enter micro financing.


Australia, the world’s second-largest gold producer, mining more than 315 tonnes of gold in 2018, has an important role to play for the Asian market, said Thuong Ngyuen, an economist with the Australian government. Australian gold exports are already dominated by Hong Kong and China, which accounted for 37% and 31% in 2018 respectively. Thailand (8.2%), Singapore (6.2%), and India (3.8%) are also important destinations for Australian gold, he said.

The country has five of the world’s 20 largest mines, or 2.8% (95 tonnes) of annual global gold production, with an all-in sustaining cost of US$742 per troy ounce – more competitive than the United States, Canada and South Africa. Australia currently enjoys favourable market conditions, with high prices in US dollar terms, and its long-term future and sustainability is reflected by the growing exploration expenditure and its economic demonstrated resources of gold, which is the largest in the world at 10,070 tonnes – able to last another 30 years at the 2018 rate of production, Ngyuen said.


India’s gold sector faces a number of challenges, including its unorganized and fragmented nature, lack of a central authority, large grey market, as well as the lack of price transparency and a fair and effective trading market. However, there is a “general feeling that gold can become a major contributor to the economy” but authorities want this sector to be transparent, Somasundaram PR, World Gold Council managing director for India, said.

Since 2015, the country has seen a raft of policy and regulatory changes to improve transparency and ease of business, as well as to spur inclusive growth and digitalisation. He pointed out that the changes are already showing its effects – the gold market is now more organised, with 30% of market now part of regional and national chains, as opposed to 95% unorganised before.

“The direction is very clear – we will see a very organised Indian gold market, which is good news for the global industry”, Somasundaram said, adding that digital platforms are emerging as a strong influencer of gold demand and that this space is growing exponentially.


major topic of conversation was regional connectivity and the growing economic ties between China and ASEAN – which stood at US$600 billion in 2018 – and the opportunities this presents for the precious metals industry.

Jewellery fabrication is one area brimming with potential given ASEAN’s demand for gold jewellery and China’s strength and innovation in this area. The country already fabricates one-third of global production and continues innovating in this sector with new products, intelligent fabricating processes, and more, said Roland Wang, World Gold Council managing director for China.

He pointed out China and Hong Kong together exported $621 million of jewellery and 4.6 tonnes of gold jewellery to ASEAN in 2018, a fraction of the region’s consumption (for example, the demand in Vietnam was 40 tonnes of gold jewellery and 97 tonnes of jewellery in total). “As such, it is strategically important to foster development and foster connectivity”, Mr Wang said.


One of the key strengths of LBMA is establishing best practices and setting standards through its Responsible Sourcing Programmes, the Good Delivery List and the Global Precious Metals Code. These standards deliver integrity and credibility to the industry, which all LBMA members benefit from. We are continually striving to improve standards, with the latest iteration (Version 8) of the Responsible Gold Guidance introduced on 1 January, encompassing Environment, Social and Governance issues.


Precious metals players are recognising that climate change is a mainstream issue and it is how the world is moving terms of what expectations are, especially in terms of investing. In the precious metals industry, consumers are now demanding gold that is produced in an ethical, responsible and environmentally friendly manner.

Supply chain accountability is now mainstream, not fringe. It’s truly mainstream in today’s markets

According to Terry Heymann, CFO, World Gold Council, the precious metals sector has to show a willingness to engage in the dialogue on climate change and demonstrate its commitment to responsible business practices such as responsible mining and responsible sourcing. “This is something we need to think about collectively”, he said.

Heymann said that WGC is hoping to address such issues with its draft Responsible Gold Mining Principles, a new framework that sets out clear expectations for investors, downstream gold supply chain participants and other stakeholders as to what constitutes responsible gold mining.

Participants on the panel on supply chain regulation discussed the increased regulation in the precious metals supply chain, not only because of market regulations, but also investor demands.

“Supply chain accountability is now mainstream, not fringe. It’s truly mainstream in today’s markets”, Perth Mint CEO Richard Hayes said. He noted that while gold mining is heavily regulated in most countries, the gold supply chain is highly fragmented with many regulations, and that there is no one overarching regulation of the gold industry.

Sakhila Mirza, LMBA general counsel, explained the value of self-regulation, describing it as a way to stay ahead of the regulators and increase process efficiencies. Mirza said that regulations have largely achieved their intended aim, but not all refiners are LBMA accredited or will abide by this or other programs. Areas that still need to be addressed are refiners that cheat rules and grandfathering arrangements that go against the spirit of such regulation, and penalties for non-compliance, which are currently unclear or weak.

“I think standards have to be higher and be respected. This is something the market has to recognise and assess”, Metalor Technologies’ head of laboratories and new business development, Jonathan Jowdry, said.

Find out more about the Asia Pacific Precious Metals Conference at