Gold is considered to be a safe asset – even in unstable financial times – but what about gold in 2020?
We look at the current trends and ask if investing in gold now is a good idea.
Gold price in 2020
The gold price has seen a boom during the pandemic.
In July, the price per ounce hit US$1,800 (more than R30,000) for the first time since 2011.
In early August, it reached US$2,000 for the first time.
It marks a price increase of more than 30% during the pandemic.
In the face of a weaker US dollar – which is traditionally an investment competitor to gold – and a potential spike in unemployment post-COVID, investors tend to look for so-called haven investments like gold.
This could drive up demand and, in turn, the price.
Is investing in gold a good idea right now?
Not all investors are sold on gold, no matter what the price.
The consensus with any investment is to buy low and sell high.
With gold prices at an all-time high, now doesn’t seem to be the ideal time to invest.
However, economic turmoil looks sure to be on the horizon.
If you buy now, there’s a good chance the price will go even higher.
Overall, gold has been on an uptrend for the past 50 years.
What’s driving the gold price?
The increase in demand due to economic uncertainty is playing a role in the gold price.
Gold has what’s called positive-price elasticity.
This means increased demand raises gold’s value as a commodity.
Another driving factor – especially now – is inflation.
Gold is a common investment to hedge inflation because, unlike currency, which loses value as supply increases, the gold supply is pretty constant.
How to invest in gold in South Africa
If you’re interested in investing in gold in South Africa, there are a few ways to go about it.
1. Gold shares
South Africa is one of the biggest gold producers in the world, so there are many mining companies listed on the Johannesburg Stock Exchange.
Gold shares are more volatile than buying gold directly.
Buying shares can require a large upfront cost, so make sure you do thorough research.
2. Gold unit trusts
Instead of investing in one company, there are numerous options for gold unit trusts through investment companies like Old Mutual.
These investment companies buy shares in multiple mining companies to reduce risk.
The fund managers decide which companies offer the best returns.
Buying Krugerrands (or other gold medallions) is a way to buy gold directly.
They’re the easiest way to invest in gold.
There are different weight options, depending on your budget. The coins range from 1/10 of an ounce to a full ounce each.
Gold versus silver in 2020
The high gold price is having a positive effect on the price of silver.
As it recovers from unusually depressed levels in 2020, some investors see it as a cheaper alternative to gold.
Silver is still a safe haven investment during troubled times.
In March 2020, the price of silver was US$11.64 per ounce.
It has since increased more than 140% to reach prices not seen since 2013.
In July 2020, silver outpaced every major global financial asset, rallying 34% in a single month.
This was its highest monthly gain since 1979.
At Lamna, we can help you unlock the value of gold in 2020 without having to sell it by using it as collateral for an asset-based loan.
We offer fast, discreet loans against the value of a wide range of assets, from gold and silver to luxury watches and jewellery, vehicles and artwork.
Client borrows R10,000 for 90 days.
Total Cost of Loan
Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.