Golf replacing gold as middle-class Asian investment (GLD, SLV, PPLT)

Precious metals such as gold (GLD, quote), silver (SLV, quote) and platinum (PPLT, quote) have a lot of their shine as speculative vehicles for a number of reasons. But in once-gold-hungry Vietnam, bullion is being spurned as investment in favor of golf country club memberships.

According to a recent Wall Street Journal by James Hookway, “Par Value: Vietnamese Investors Sink Savings Into Golf Memberships,” Do Din Thuy, a 48-year old management consultant in Hanoi, stated that, “Buying a membership is better than putting cash in the bank, better than putting it in the stock market and better than putting it in gold.” 

That is good news for the golf clubs, but Vietnam imported nearly 40 tons of gold last year, primarily to meet retail demand for bullion. Taking that demand off the market could weigh on commodity prices in the new year.

As much of the price support for precious metals such as gold, platinum and silver has come from consumers in Asia, particularly China and India, who do not have faith in fiat currencies or lack more sophisticated ways to invest their excess cash.

From a year high of around $185, SPDR Gold Trust (GLD, quote) the exchange-traded fund for gold, is now under $165.  The exchange traded fund for silver, iShares Silver Trust (GLDquote) has dropped about 20 points from $48 to $29.

ETFS Physical Platinum (PPLTquote) has fallen from almost $190 to under $145 a share. 

If consumers across Asia stop buying precious metals as investments, these exchange-traded funds for gold, silver and platinum have much farther to fall as the fundamental economic demand, particularly for gold, may not be enough to sustain the current price levels.

 

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