The Golden Truth: Why Your Grandfather's Investment Advice Wasn't So Crazy After All

How a single Krugerrand bought in 2005 would have outperformed every sophisticated portfolio strategy in South Africa.

Remember when your grandfather used to mutter about "storing wealth in gold" while the financial advisors on TV preached the gospel of diversified equity portfolios? Well, it turns out the old man wasn't as out of touch as we thought.

A sobering analysis of South African investment returns over the past two decades reveals a truth that might make every financial advisor squirm: gold didn't just beat the market, it absolutely demolished it.

The Numbers That Changed Everything

Picture this: In August 2005, you had R1,000 burning a hole in your pocket. You could have been the sophisticated investor, putting it into the FTSE/JSE All Share Index. You could have played it safe with bonds. You could have parked it in cash. Or you could have done what seemed antiquated at the time, bought gold.

Fast-forward to today, and here's what that R1,000 would be worth:

• Gold: R21,100 (a staggering 16.5% annual return)

• SA equities: R8,100-R9,600 (around 11% annually)

• SA bonds: R5,200 (8.6% annually)

• Cash: R3,870 (7% annually)

Let that sink in. Gold didn't just edge out other investments, it more than doubled the returns of South Africa's premier stock index.

The Perfect Storm

What created this golden anomaly? It wasn't just one factor, but a perfect storm of economic forces that turned the traditional investment playbook upside down.

First, there's the elephant in the room: the rand's relentless decline. What cost R2,814 per ounce in August 2005 now commands R59,250. That's not just inflation, that's currency depreciation on steroids, amplified by everything from political uncertainty to global risk-off sentiment.

But gold's rise wasn't just about South African woes. The metal rode three massive waves: the 2005-2011 bull run as emerging markets exploded and real interest rates plummeted, the 2020 pandemic spike when central banks went into overdrive, and the recent 2024-2025 surge driven by central bank buying and geopolitical tensions.

The Uncomfortable Questions

This analysis raises uncomfortable questions about everything we've been taught about long-term investing. How do you recommend equity portfolios when gold has outperformed them 2:1? How do you justify management fees when buying and holding a single commodity beats professional fund managers?

The truth is, this isn't really a story about gold's brilliance, it's a story about currency debasement and the unique challenges of investing in an emerging market. The rand's weakness amplified gold's dollar gains, creating returns that would have seemed impossible to Western investors holding the same metal.

Beyond the Glitter

Before you rush to convert your entire portfolio into Krugerrands, remember what this comparison doesn't show. Equities paid dividends, real cash that could be spent or reinvested. They represent ownership in productive businesses that create jobs, build infrastructure, and drive economic growth. Gold, for all its gains, sits in a vault and glitters.

Moreover, this analysis assumes perfect timing, no transaction costs, and no taxes, assumptions that don't exist in the real world. Try selling gold quickly in a crisis, or storing it safely for two decades, and those theoretical returns start looking less attractive.

The Real Lesson

The real lesson isn't that everyone should become gold bugs. It's that in emerging markets, currency risk isn't just a footnote, it's often the primary driver of returns. South African investors who ignored this did so at their peril.

The most successful emerging market investors understand that they're not just picking assets, they're making currency bets. Sometimes the best hedge against your home currency isn't a sophisticated financial instrument, it's something as old as civilization itself.

Your grandfather might not have understood modern portfolio theory or efficient market hypotheses. But he understood something more fundamental: when paper money loses its way, people turn to what has held value for 5,000 years.

In a world of negative real interest rates, currency wars, and unprecedented monetary expansion, maybe it's time to listen to the old man's advice. Just don't tell your financial advisor we said so.

The analysis covers August 2005 to August 2025, assumes no fees or taxes, and uses benchmark indices. Past performance doesn't guarantee future results, but it sure makes you think twice about conventional wisdom.