Gold has always been a storage of wealth. The lustre of gold has attracted investors for centuries. Over the best part of the last decade, however, it seems to have lost its shine. Peaking at levels around $1900 a few years ago to $1100 of late the big question is, “Will it be the next best investment when investors take flight from the stock markets and look for what has traditionally been their storage of wealth?
If you think that gold still has its traditional place as a “safe haven” from risk then you have some options. From a South African point of view gold has the benefit of being priced in US Dollars. This provides a hedge on a weakening rand. So if the rand keeps on weakening the rand price of gold will improve.
Kruger Rands
These have traditionally been the popular option as they give investors a tangible feeling of wealth. You can touch them and you can move them. They will cost you about 5% on the “buy and sell” and you should also remember that you should account for capital gains tax on the sale.
ETF New Gold
ABSA have a gold fund which invests directly in the bullion. You get the same return as a Kruger Rand but at a lower cost. You do not have to hold the gold as it is done for you. So no worries as to where to store it your gold or concerns about it getting stolen or lost.
ETF in a Tax Free Savings Account
What about opening a tax free savings account investing in New Gold? Here you get the full benefits of the gold price (if it moves in the right direction against the rand), at a low cost and you don’t have to pay any tax on disposal.
Do your homework before considering this as an investment. It is purely reliant on the Rand/Dollar exchange rate and the US Dollar price. It is risky as we don’t know with certainty which way either will move. So, perhaps a portion of your investment will do to diversify.