KUALA LUMPUR: Gold prices are expected to remain buoyant in the long term as the market recovers, and the demand for diamonds and gemstones will have a stronger chance to rebalance and grow.

Poh Kong Holdings Bhd (PKHB) believes gold prices are expected to plateau in 2022 and investors will continue to be enamoured by gold and the demand for gold and gold jewellery. 

With the opening of borders and easing of travel restrictions, experts predict a marked increase in the number of large-scale events such as weddings, family commemorative events and corporate functions.

PKHB believes that demand for gold and gold products will pick up in 2022, with demand for gold, jewellery, and precious stones likely to rise, barring any global health or economic crisis.

"Differed spending on gold in 2020 and 2021 will cascade into higher retail purchases of gold jewellery and other gold products in 2022.

"Further, it is forecast that in the coming year rising income levels will be the most powerful driver for gold, according to World Gold Council Report 2021, and this is expected to lead to a period of robust demand for PKHB products," executive chairman and group managing director Datuk Choon Yee Seiong said in the company's annual report filed to Bursa Malaysia.

While the higher gold prices have been a boost for PKHB's profits, the company remains cautiously optimistic of the company's prospects for 2022 the weaker ringgit affected the company's operating profits during the financial year ended 31 July 2021 (FY21).

On earnings, PKHB registered revenue of RM903.10 million for FY21 compared to RM748.80 million in FY20 by sales volume.

Group revenue increased to RM903.10 million from RM748.80 million in the previous year on the back of increased demand for gold jewellery and gold investment products.

PKHB recorded a profit before tax of RM52.82 million in FY21 compared to RM38.98 million in the preceding year, and this was higher by RM13.84 million or 35.51 per cent.

The company reported a 50.47 per cent increase in full-year net profit to RM36.76 million for FY21 against RM24.43 million for FY20.

"PKHB is well aware that gold is a resource that has an uncertain and scarce supply, and this supply is continually dwindling, which means the demand will keep rising along with the price.

"The Covid-19 crisis and the ongoing need for a safe haven asset are expected to ensure continued demand for gold," Choon said.

Investment demand, especially from large exchange-traded funds (ETF), is another factor that is expected to keep gold prices buoyant, adding that gold products offer a hedge against inflation and a commercial hedge for investors seeking opportunities outside traditional equity and fixed income securities.

Choon said PKHB would plan its growth strategies and expansion by leveraging the country's economic outlook and gross domestic product (GDP) growth.

He said the re-opening of the economy will no doubt support a gradual recovery in the fourth quarter this year, with higher global growth and sustained policy support providing a further lift to the overall economy.

The recovery is expected to accelerate further going into 2022, supported by a gradual normalisation of economic activities and the positive spill-over effect from continued improvement in external demand.

"We believe we are in a good position to register higher revenues this year based on activity in the commodity markets, and are poised to capitalise on demand when the Covid-19 situation improves," he said.