There are so many options when it comes to investing and so many things to think about. But what about good old-fashioned gold? It’s probably one of the oldest forms of investment and is documented throughout history as a symbol of wealth and status. Let’s look at why and how to invest in gold in South Africa.
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Why invest in gold?
Gold is tangible
One nice thing about gold is that it’s tangible. You can purchase a gold bar or Krugerrand and actually hold it. Of course it’s best to store it away safely but it is cool to be able to see it and feel it in your hand. Krugerrands are one of the easiest ways to invest in gold but you can also purchase bullion bars (literally a small bar of gold) or other coins which are valued by their Numismatic Value and sometimes resold for the gold value only.
Don’t get confused about gold jewellery though as that is only worth the weight in gold (and the quality). The craftsmanship and design of the jewellery is not always valued and the over-inflated price you paid at the jewellery store will not be matched when trading it for cash. So your gold chains and bling are probably not as great investments as you may have thought, but they can still be sold if you need cash quickly.
Gold is US-dollar based
Gold makes an excellent investment choice because it is valued in US dollars and isn’t linked to the local economy. That means that the weaker the Rand, the more valuable your Gold becomes. This makes it a sound investment for all South Africans. It’s also very liquid meaning that you can sell it quickly and usually get your cash on the same day. And of course everybody knows what gold is and even if they don’t know the actual value. They understand that it holds value.
Gold helps you diversify your investments
Gold, along with other precious metals can help you diversify your investments and because of its extreme stability and long-lasting value it generally performs well during any financial crisis. The international gold price is what dictates the price of gold on any given day and just like any other commodity, the price fluctuates. You may sometimes hear on the news that the gold price has sunk or that gold is out-performing other commodities. Whatever the case it all averages out over time and the value of Krugerrands have more or less doubled every 5 years since inception in 1967 with an
average growth of around 14% per year over the long-term.
How can I invest in gold?
It’s really easy to buy gold in South Africa, but be sure to work through a reputable Bullion Dealer such as Mr Kruger. Avoid pawn shops and quick gold-cash-exchange shops as they will probably not serve you in your best interest.
Krugerrands start off at the smallest size of one-tenth of an ounce for approximately R3,700 * (the gold price changes daily) and are also available in a quarter-ounce, a half-ounce and a full ounce. The price increases as the size and weight increases. Other precious metals are sold in the form of Bullion Bars which are even more friendly on your pocket. You can buy a 100g Silver cast bar for under R1,700 *. Its’ up to you how much you would like to start investing with as there are several options available.
Gold and other precious metals can be traded without getting involved with banks. There are however legal requirements such as proof of identification and address details that will need to be supplied. But you don’t have to sign up for an account or sift through any legal jargon to start investing in gold in South Africa.
Note the commissions when buying gold
Something to note is that when you buy gold (or other precious metals) you would usually buy it at the gold price of the day plus a commission of up to 10%. On top of that you may need to pay VAT which we know is at 15%. There is no VAT charged on gold Krugerrands but do be sure to ask about other investments. When selling though you would get the price of the day less a commission of up to 10%. What this implies is that when investing in gold or other precious metals you should ideally keep them for at least 3 – 5 years to make up for any commissions paid. In my own experience, holding onto Krugerrands for a period of 5 or more years has proven quite valuable.
In closing
Investing in gold in South Africa is a great way to start investing or to simply diversify your portfolio. With several options available it should be easy to find something that suits your pocket and current circumstances. And if you’re worried about actually storing Krugerrands at home, don’t be because some dealers such as Mr Kruger offer a free safe storage service for items bought through them. So no need for your creative hiding places that you can’t remember in 3 – 5 years time. Perhaps you should consider whether to invest in gold.
So if you’re wondering how to buy gold in South Africa, it’s easy to start.
You can also look for other places of where to buy gold in South Africa. Just always ensure that they are a reputable company and that they can be trusted.
* The gold price fluctuates daily. These estimates are from October 2020.
This post is sponsored by Mr Kruger, a Bullion Specialist company which offers the expert evaluation of Gold, Silver and other precious metals and stones. The company also deals in Krugerrands and collectable coins. Mr Kruger is an approved member of SAAND (South African Association of Numismatic Dealers) and the Jewellery Council of SA.
Take a look at my personal finance spreadsheet where I track all my investments.