An Introduction to Gold Investment

THE DESIRE FOR GOLD

Throughout history, gold has been recognised as a highly valued asset. Ancient records detail its desirability not only as a decorative art form but also as a robust form of currency. Since around 550 BC when gold coins were first minted, they have played a pivotal role in establishing our monetary systems. However, archaeological finds reveal that gold's significance dates back even further, with treasures dating as early as 4000 BC, linking this precious metal to power and wealth across the ages. Even as nations transitioned from gold coins to the convenience of paper money, the ‘gold standard’ maintained a crucial link to gold, ensuring that paper currency retained its value backed by this precious metal.

Gold’s intrinsic value is underscored by its rarity and scarcity, elements that continue to captivate and intrigue people worldwide. To illustrate, consider this: the world produces more steel in a single hour than all the gold mined throughout history!

Gold is not only coveted for its aesthetic and monetary attributes but also for its practical applications. Over half of the gold used today goes into jewelry making, and about 25% is utilized in minting coins and bars, but it also plays a vital role in various industries. With technology driving demand, gold, alongside other precious metals, is essential in manufacturing everything from smartphones to electric vehicles.

Yet, in today's digital era, with myriad investment options at one's fingertips, why does gold continue to hold such a foundational place in the portfolios of astute investors?

WHY INVEST IN GOLD?

Individual investment motivations may vary, but many see gold investment as a means to preserve and protect their wealth. For instance, an investment of around ZAR 3,500 could have bought an ounce of gold at the end of 1990. If someone had purchased an ounce of gold and kept ZAR 3,500 in cash, today, the gold would have appreciated approximately 650%, while the cash, impacted by inflation, would have diminished in value.

Many investors also turn to gold to mitigate risk and enhance the diversification of their portfolios. It is prudent to not invest exclusively in gold but to use it strategically within a balanced portfolio. The price of gold typically has a negative correlation with stock markets; it often rises when other markets falter, reinforcing its reputation as a ‘safe-haven’ during market volatility.

Lastly, the potential financial returns, especially over the long term, attract investors. Simply put, buying gold and holding it until the price increases can lead to profitable outcomes when sold.

HOW CAN I INVEST IN GOLD THROUGH SA GOLD INVEST?

Gold investment has become more accessible than ever before. While traditionally limited to physical formats like coins, bars, or jewelry, digital trading platforms have expanded access to these markets. Through SA Gold Invest, investors can purchase gold coins in various sizes and designs, either individually or in tubes containing multiple coins. Even small coins, which are more affordable, can serve as an entry point for new investors.

Gold bars, known for their iconic representations in media, are available from small sizes like 1g or 5g, making them an attractive option for those new to investing. While the larger bars may be prohibitive due to high costs, smaller bars offer a more accessible price point.

The tangible nature of physical coins and bars means they require secure storage, whether at home in a safe or through a custodial service like SA Gold Markets' vault, which might involve a storage fee. However, this cost could be more economical than purchasing and maintaining a safe and insurance at home.

HOW GOLD IS PRICED?

All forms of gold investment are priced based on the 'premium' over the spot price of gold. This premium reflects the costs associated with manufacturing, packaging, and distributing the gold product. Smaller products typically have a higher premium due to higher relative manufacturing costs compared to larger ones. Therefore, it’s generally more cost-effective to purchase one large gold bar rather than multiple smaller ones.

SELLING GOLD

Gold remains one of the few universally recognised commodities, allowing owners to sell it almost anywhere in the world. The process usually involves authenticating and weighing the gold, then receiving an offer based on a percentage of the spot gold price. Prices can vary significantly between dealers, so it’s advisable to shop around to ensure the best return on your investment.

While SA Gold Markets offers a comprehensive 'Sell Gold' service, allowing you to sell back your gold at any time, the convenience and flexibility of this service ensure that your investment remains both secure and liquid, ready to be monetised whenever needed.