Should You Invest in Gold?

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Since gold was discovered thousands of years ago it has always been the ultimate store of value because it never loses its value, even in turbulent times when it can be used to buy currency or barter. 

Gold is also one of South Africa’s most famous exports and people often wonder if they should invest in gold.

But then the market turns, the gold price drops and everybody decides to invest in something “safer”.

Some experts call gold one of the best investments, while others say they will never touch gold and only recommend it for wedding rings.

Gold investments in South Africa

Local investors like gold because it has a good history, apart from the fact that South Africa is the third biggest producer of gold in the world.

Gold has performed well in the past and has a history of appreciation that cannot be matched by other commodities.

Is it wise to invest in gold?

Gold could be a wise investment if you’re looking to hedge against inflation and rising costs because investors usually buy gold when they expect that inflation will increase.

If prices go down, they sell; but many asset managers prefer to have some 5 to 10 percent gold in their portfolios.

Others say that you must remember that gold does not pay dividends and is only worth what someone else is willing to pay you.


Buying gold

You can buy and invest in gold in various forms:

  • Gold futures for risk takers who like to speculate on the gold price in the short term, where you trade on the futures market.
  • Kruger rands are a good option if you want to invest in gold due to their small premium over the value of their gold content. Their value does not depend on their condition or how rare they are. Kruger rands are probably the easiest way for the average person to invest in gold.
  • New Gold ETF can be bought like any other share listed on the JSE via your stockbroker. You get to own gold bars without physically having them, with a corresponding amount of gold held in trust in the vault of Brink’s Limited in the UK.
  • Having gold shares in gold mines lets you choose if you want to go for the big companies which are safer and pay dividends or take a risk on smaller companies.
  • A South African gold fund can be a better choice if you do not want to own gold or have shares in a gold mine.
[tip title=”moneysmart tip”]If you’d like to invest in gold, ensure that you understand your options for gold investments and that your investment portfolio is balanced. If you’re unsure of anything, seek professional advice or guidance.[/tip]

Did you know?

Gold is primarily produced for accumulation while other precious metals such as platinum, palladium and silver are produced mainly for industrial use.

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About Author

Ina Opperman has an honours degree in Consumer Science from the Northwest University. An award-winning consumer journalist, she is the co-author of "Understanding the Consumer Protection Act" published by Juta. She writes for various magazines such as Finweek and Farmlink. Ina is a non-executive member of the Board of the National Credit Regulator as well as the Board of the Motor Industry Ombudsman.