How do you invest in gold in South Africa?

Gold was once a currency. However, it became too costly and there were limited supplies. So other currencies emerged. International trade was facilitated for a long period by the exchange of gold.

The world considers gold a “safe-haven investment”. Not too long ago, currencies around the globe were backed with gold by the central banks of the government.

For centuries, gold was used as a currency until it became too costly and there were limited supplies. Then other currencies emerged. International trade was facilitated for a long period by the exchange of gold.

Gold is still considered a liquid asset. This means that gold can be converted into cash easily when required. Investors turn to gold in times of uncertainty because it is considered a safe investment that won’t lose value.

The price of gold, for example, has risen significantly since the COVID-19 pandemic. This was due to the chaos that resulted in the global economy.

The global appeal of gold is due to its global price. Many people choose to purchase and keep gold, rather than holding onto currency that is susceptible to losing its value due to inflation.

This article will explain the different ways you can invest in gold and the factors that you should consider before you make an investment in it.

Six ways to invest in gold in South Africa

1) Physical Gold

The best way to invest in gold is by buying physical gold. This is often in the form of jewelry. You can also invest in physical gold by buying pure gold coins and gold bullion. There are four types of gold coins you can purchase from the South African Mint, which is the official mint of South Africa. These include the Krugerrands (Natura, Protea, and Rhino) coins.

South African Reserve Bank considers Krugerrands and Natura coins legal tender.

Private mints can also produce gold coins, such as Rand Refinery or Gold Reef City Mint. However, it is best to only buy gold coins from the government mint.

You should always ensure that these coins are purchased from dealers authorized South African mint. This will ensure that the gold you purchase is 100% original and pure. Investors need to be cautious when purchasing gold physically, as there are many counterfeit coins on the market.

This is also true if you purchase gold jewelry. You should only buy jewelry from trusted dealers or those who have a history of selling jewelry on the market.

You need to find a safe place to keep physical gold. Consider buying a safe to keep your gold safe at home, or putting it in a vault or safe custody of a bank.

2) Gold Certificates

You can also purchase gold certificates from different South African investment banks if you are concerned about how to secure your gold. Gold is stored in your name by the bank when you buy a gold certificate. You will be charged an upfront fee by the bank for storage.

The market rate for gold will affect the value of your investment when you purchase a certificate in gold.

These certificates can be used to trade on Johannesburg Stock Exchange’s ETF sector. To take advantage of the price movements, many private investors and institutions sell and buy gold through this exchange. Krugerrand Custodial certificates by Rand Merchant Bank are one example.

3) Gold Shares at JSE

Many investors choose to invest in gold mining companies rather than directly. When gold prices rise, gold mining companies make more money.

You can also indirectly invest in gold by purchasing shares of mining companies. You can purchase quite a lot of shares and not invest too much. This makes it a cheaper way to invest.

The Johannesburg Stock Exchange’s gold mining index is known as the J150. This index includes all of South Africa’s best-performing gold mining stocks.

4) ETFs for Gold on JSE

Many Exchange-Traded Funds are tied to gold. These ETFs’ performance and value are directly related to gold. Another way to indirectly invest in gold is through this ETF.

ETFs can be more complex financial instruments than others. You may want to research how ETFs work, how they make money, and the risks involved.

There are many gold ETFs available on JSE, including ETFGLD (AfricaGold ETF), NewGold ETF), KCCGLD [Krugerrand Custodial Certificate], etc.

5) Gold Futures and Options

For more sophisticated investors, you can also invest in options and futures for gold. This allows you to profit from price fluctuations in gold as well as a hedge against these risks.

Investing in futures or options (F&O) is basically a way to participate in the global market for gold. Futures and options can be used to protect your money against inflation.

The futures and options markets are often used to make speculative bets on short-term fluctuations in gold.

JSE has Gold Futures & Options Contracts that can be traded through their authorized derivative members.

F&O investing requires knowledge of derivative instruments, leverage/margin, and the risk associated with the financial markets.

6) The use of gold as a CFD instrument

CFDs allow you to participate in the gold market. CFDs (or Contracts for Difference) are complicated financial instruments that CFD brokers offer. They are linked to commodities such as gold and oil.

Brokers back CFDs, while the exchange delivers futures and options. CFDs are backed by brokers who act as counterparts to your transactions and spread the cost of each transaction.

CFDs are riskier than the other options, so they are best suited for traders and investors who have more experience. It is important to fully understand the risks, leverage, fees, rollover fees, and how brokers charge commissions. Before you invest in CFDs.

To offer these instruments in South Africa, CFD brokers and Forex traders must be licensed by FSCA

Before investing in CFDs, you must thoroughly research the risks, concepts, such as margin trading, and fees associated with CFD instruments. These are complex and risky trading instruments. Before you can trade CFDs, you must prove your financial ability and adequacy.

What are the things you should consider before investing in Gold?

You must decide which investment option is best for you as an investor who wants to invest in gold.

You don’t need to have any experience buying physical gold or through Gold Certificates. There is less risk and everyone can invest in gold through these mediums.

Other options for Gold Investing require knowledge of capital markets as well as complex financial instruments such ETFs, Futures & Options, and ETFs. These instruments can be subject to market risks, trading fees, and commissions.

You should also consider the security and storage of gold if you’re considering purchasing it physically. It needs to be safe from theft.

Many factors affect the gold price, including supply and demand, inflation, interest rates, etc. These factors should be monitored so you can determine the right time to invest. It is not a good idea to invest in gold at its highest rates. It is important to examine historical gold prices.

Diversifying your investments is a better option than relying solely on gold.

Before you invest, it is important to fully understand the risks as well as the costs. Before you invest, it is a good idea to seek the advice of a licensed financial advisor.