Are there Bursa proxies for gold?

Case Notes 26. This article explores whether there are Bursa Malaysia gold proxies. It also considers whether an investor would be better off investing in a Bursa Malaysia gold proxy rather than gold. 
Are there Bursa proxies for gold?

The world is currently experiencing high inflation. While Malaysia has yet to see an inflation rate over 8 %, many believe that this is due to price controls and/or subsidies. In times of high inflation, gold is seen as an inflation hedge. 

For thousands of years, gold has been used as money and considered a store of wealth. Gold is an excellent choice of investment for many reasons. It can be used as a hedge against inflation and will always be of value due to scarcity. It is also a great portfolio diversifier.

If you are looking to invest in gold, you can invest in physical gold or gold funds. This is because the values of gold funds move closely with the price of gold. Alternatively, you can consider at investing in gold miners as proxies for investing in gold. This is because many think that gold mining and gold are similar.

There is only one Bursa Malaysia gold mining company. But there are Bursa Malaysia-listed gold jewellers. In this article, I will explore 4 such companies to see whether they can be proxies for investing in gold. They are:
  • Poh Kong Holdings Bhd (Poh Kong) – jeweller.
  • Tomei Consolidated Bhd (Tomei) – jeweller.
  • Bahvest Resources Bhd (Bahvest) – gold miner
  • Niche Capital Emas Holdings Bhd (NICE) - jeweller.

Should you go and invest in them? Well, read my Disclaimer.


  • Company profiles
  • Gold vs gold proxies
  • Are there Bursa Malaysia gold proxies?
  • Are you better off investing in gold?
  • Method
  • Conclusion
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Company profiles

The 4 companies covered in my analyses are of different sizes as shown in Table 1.

Company size
Table 1: Size

To wash out the size effect, I constructed indices and compared the performance of these indices with that of gold.

I had covered Poh Kong in my blog some time back. For details of this company refer to “Is Poh Kong a proxy for gold?

Brief profiles of the other 3 companies are:
  • Tomei was founded in 1968 as a jeweller designer and manufacturer. It was listed on Bursa Malaysia in 2006. Today it has more than 50 retail outlets in Malaysia under 4 different brands. Tomei also exports its products to Singapore, Vietnam, Thailand, Indonesia, and Europe.
  • Bahvest was listed on the KLSE’s ACE market in 2005.  The group engages in the gold and silver mining business in Malaysia. Its gold mine deposit covers a total mining area of 318 hectares located in Tawau, Sabah. The group also has an aquaculture operation, but this accounted for less than 10% of the group's revenue in 2021.
  • NICE is principally involved in investment holding, trading, distribution and retail of jadeite stones, gold jewellery and ornaments, construction and project management. The non-gold segments accounted for about 43 % of the group's revenue.
There is another Bursa Malaysia company with gold jewellery operations – Zhulian Corporation Bhd. This is a multi-level marketing company initially distributing gold-plated jewellery through its channel. However, in 2021, jewellery accounted for about 10% of the total revenue. As such I have not included it in my analysis.

Gold vs gold proxies

Resource World Magazine has the following view on the difference between gold and gold miners.

“A popular misconception about gold and gold miners being similar has to do with the symbiotic relationship between the two. Mining companies have claims to, or outright ownership of, gold that is in the earth. The gold resources need to be extracted, processed and then sold to cover the costs of operations for the company to make a profit. 

Gold in the ground is very different than a gold coin that can easily be transferred from a seller to a buyer. Mining companies are dependent on the price of bullion in relation to fiat currencies. Specifically, if gold is too low in price, a mining company is unable to extract the gold from the ground, because it is uneconomical…The higher the price of gold, the more economical it becomes to dig for lower-grade sources of gold. Mining shares can move up significantly as gold moves higher, but that is not always the case.”

Gold proxies such as gold miners or jewellers use gold as their raw materials. Investing in gold proxies is thus investing in companies where gold is one of the factors of production. Whether gold is a big component of the factor of production will depend on the nature of the business. 

The following quote from illustrates the point.

“…In the end, a miner is a company that seeks to maximize profits for shareholders. Profitability is going to vary for each of the miners depending on their output, cost structure and other considerations…Miners can hedge their output providing steady profits for the firm…Management can have a tremendous impact on profitability.”

For those investing in gold proxies, they hope that there is a “multiplier” effect of gold on the profits. This in turn will lead to a larger share price movement compared to the gold price movement. At the same time, there are the potential dividends. 

This is different from investing in gold where the only way to make money is from the gold price movements.

But when you consider the investment benefits of gold vs gold proxies, you have to also look at the impact on the portfolio. This is because physical gold and mining stocks react differently within a properly diversified portfolio.

Impact on portfolio

According to Resource World Magazine,

“Gold is the most negatively correlated asset class to traditional financial assets such as stocks and bonds…Multiple studies show that a portion of physical gold held within an investment portfolio improves returns and reduces risk, whereas shares of gold mining companies increase the amount of risk within a portfolio, and can negatively affect returns over the long run.”

The chart below illustrates this. You can see that a portfolio with gold will provide better risk-adjusted returns compared to a portfolio with gold mining stocks.

Portfolio comparison
Chart 1: Portfolio Comparison      Source: Resource World Magazine

Are there Bursa Malaysia gold proxies?

To answer this question, I compared the performance of the 4 Bursa companies with the price of gold. I looked at two scenarios.

In the first scenario, I compare the gold price movements with the fundamental performance of these companies. I covered 15 years from 2007 to 2021 looking that the year-end prices with the results for the year. I used 2 metrics to represent the fundamental performance – revenue and PAT.

In the second scenario, I compared the gold price movements with the share price movements. I looked at two situations. 
  • The first covered the year-end prices over 15 years from 2007 to 2021. 
  • The second situation was for a shorter time frame from Jan 2019 to Aug 2022. I knew that gold prices had a significant jump around mid-2020 and I wanted to see the impact of this. For this analysis, I look at the prices every 10 days.

Refer to the Method section for other details of the approach.


The rationale for this analysis was that gold represented the raw materials for these companies. Any changes in the price of gold would affect the revenue and profit margins. 

If these companies are proxies for gold, there should be significant correlation between the price of gold and their performance. I would consider a 70% of higher correlation as significant.

Table 2 summarizes the correlation between the year-end price of gold and the revenue and profits for the year. You can see that only Bahvest had any significant correlation, but this was based on its revenue. There was a negative correlation when it came to profits. In other words, it lost money as the price of gold increased. 

I would consider the correlation between gold prices and profits to be borderline for both Poh Kong and Tomei.

The analysis suggests that there are other factors rather than the price of gold that drove the profits of these 4 companies. Since dividends are generally tied to profits, investors should not hope for higher dividends when the price of gold increases.  

Correlation between gold prices and fundamentals
Table 2: Correlation between Gold Prices and Fundamentals

Share prices

The share price of a company is a function of the business fundamentals and market sentiments. Rather than try to explain which has a greater impact, this part of the analysis merely takes the share price as one variable. The other variable is the gold price.

I look at 2 situations:
  • In the first situation, I took the perspective of a long-term investor by looking at year-end prices over 15 years. 
  • In the second situation, I took the perspective of a shorter-term investor looking at more frequent price changes.

Table 3 summarizes the results of the correlation between gold prices and stock market prices of these 4 companies.

You can see that there is no significant correlation based on the year-end prices. But when you look at price changes every 10 days, we can see significant correlations for Poh Kong, Tomei and NICE. The links between the gold price and the share price can be seen in Chart 2.

Correlation between gold price and share prices
Table 3: Correlation between Gold Price and Share Prices

Gold price and share price trends
Chart 2: Gold Price and Share Price Trends
Notes to Chart 2
a)  The indices were computed by dividing the price at various points in time with the respective price as of 4 Jan 2019.
b) Because of the higher price movements for Bahvest, refer to the axis on the right for the index readings. For the others, refer to the left axis.

According to Merriam-Webster, a proxy is an agency that acts as a substitute for another. In the investing context, a gold proxy is then an instrument that behaves like gold when it comes to gold price movements.

The analyses show that when looking for gold proxies, we should not consider the fundamental metrics such as revenue or profit. Rather we should look at prices. Even then we should look at price movements within short durations.

On a short interval basis, only Bursa Malaysia gold retailers can be considered as proxies for gold. Forget about the one Bursa Malaysia gold mining company.

Are you better off investing in gold?

To answer this question, I compared the gain from the various investments based on the short-term situation ie 2019 to 2022. 

From 4 Jan 2019 to 26 Aug 2022, gold appreciated by 35 %. If you have invested in the Bursa gold jewellers, your compounded annual gains are shown in Table 4. The gains comprises both capital gains as well as dividends.

You can see that only NICE achieved a better compounded annual total return than that for gold. But then this was due to its low share price. I would consider those from Poh Kong and Tome to be more representative. On such a basis there is no advantage to investing in proxies.

Shareholders' gain
Table 4: Shareholders' Gain

Other studies

The conclusion that it is better to invest in gold rather than Bursa Malaysia proxies is not limited to Malaysia. There are similar conclusions for other parts of the world.

Chart 3 is extracted from “New Evidence on Whether Gold Mining Stocks Are More Like Gold or Like Stocks”. This is a graph showing the price per share of the Market Vectors Gold Miners ETF (GDX), SPDR Gold Shares ETF (GLD), and the SPDR S&P 500 ETF Trust (SPY). You can see that you are better off investing in gold compared to gold miners.

Gold Miners vs Gold
Chart 3: Gold Mines vs Gold    Source:

Swiss Gold opined as follows:

“…physical metal outperforms gold miners over the long run, and it should always be the preferred precious metals investment…Mining stocks are attractive because they are leveraged; this means that when gold prices go up, these stocks tend to move up MORE due to debt and financial leverage. 

In the short term, mining stocks seem to outperform gold. However, gold mining equities carry many risks that physical metal does not have. Gold mining stocks can fail even if precious metals are in a bull market.”

Chart 4 reinforces this view. It shows the relative performance of gold and gold miners since 2000. Gold is in gold colour and the miners are in dark blue. Over the period from 2000 to 2018, gold has gone from below $300 an ounce to $1350. The HUI has gone from just below $75 to $182. The HUI is up around 150%, while gold is up around 350%.

Note: The NYSE Arca Gold BUGS Index, better known as the HUI Gold Index, is an index of publicly-traded gold-mining companies. 

Chart 4: Gold Miners vs Gold
Chart 4: Gold Mines vs Gold    Source: Bullion Vault


The sources for my analysis were as follows:
  • The financial data for the 4 companies were extracted from
  • The share price data for the 4 companies were extracted from Yahoo! Finance.
  • The annual gold prices from 2007 to 2021 were extracted from Macrotrends.

To compute the correlations, I first converted the respective values for each metric into indices. This was obtained by dividing the values at various points in time by the respective initial value. For example;
  • The 2007 to 2021 revenue indices for Poh Kong was obtained by diving the annual revenues by Poh Kong’s 2007 revenue.
  • The 2019 to 2022 share price indices for gold was obtained by dividing the gold prices on the various dates by the gold price as of 4 Jan 2019.

Note that the gold prices from Bullion Vault were based on prices every 10 days starting from 4 Jan 2019.  When matching the share prices for a particular day, there were days when there were no share prices. 

I then took the share price of the nearest day to represent the share price for that day. Sometimes this was one day before the reference date. Sometimes it was one day after. Most of the time, the share prices for the day before and after the reference day were the same.


The article looked at 2 questions:
  • Can gold miners or jewellers be proxies for gold?
  • Are you better off investing in gold or gold proxies?

To determine whether an instrument is a proxy, I looked at the correlation between the gold price and the appropriate metric. The analysis shows that there is no correlation between revenue or PAT and gold prices. There is only a significant correlation when we look at the stock prices on a short interval basis.

In the Bursa Malaysia context, investing in gold jewellers can be proxies for investing in gold. But I would not draw the same conclusion for the sole gold miner.

You should not be surprised by this result. 
  • In the short term, share prices are influenced more by market sentiments than business fundamentals. Over intervals of 10 days (as covered in the analysis), business fundamentals do not change significantly. Besides companies only announce their business performance quarterly.
  • An investor can only guess how the business fundamentals would change as a result of daily or weekly changes in gold prices. But this is enough to influence market sentiments and hence changes in market prices.

As for the second question, the approach is to compare the gain from investing in gold with the gain from investing in proxy companies. In the Bursa Malaysia context, it is better to invest in gold. This conclusion is the same as that for other parts of the world.


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Disclaimer & Disclosure
I am not an investment adviser, security analyst, or stockbroker.  The contents are meant for educational purposes and should not be taken as any recommendation to purchase or dispose of shares in the featured companies.   Investments or strategies mentioned on this website may not be suitable for you and you should have your own independent decision regarding them. 

The opinions expressed here are based on information I consider reliable but I do not warrant its completeness or accuracy and should not be relied on as such. 

I may have equity interests in some of the companies featured.

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