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But if you want to buy gold bullion or invest in gold through the stock market, how do you go about it? To find out, let’s take a closer look at how and where to buy gold in South Africa.
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When most people hear the term gold bullion, it immediately conjures up images of bank vaults stacked to the ceiling with chunky gold bars. In reality, gold bullion refers to gold that is at least 99.5% pure and has been transformed into bars or ingots or minted into coins. Bullion is the form in which gold is traded on commodities markets around the world.
If you want to gain exposure to gold, there are a few ways to go about it. You can physically buy and store gold, you can invest in gold prices or companies via the stock market, or trade gold on the financial markets as contracts for difference (CFDs).
It’s possible to invest in gold through the stock market by profiting from gold prices rather than physically owning gold. Stock market investors can buy shares in companies that have gold exposure, such as gold miners, or they can buy units in a gold-themed exchange traded fund (ETF).
With this approach, you don’t actually buy any gold – rather you’re investing in the performance of the gold industry or the mining company. If you want to invest in gold via the stock market, you need a full-service broker or you can do so using an online trading platform.
This approach allows you to invest in gold without having to go through the hassle of buying, storing and insuring it. However, because you don’t actually own any gold, it exposes you to all the usual risks that the stock market carries, such as market volatility, company bankruptcy and the possibility of losing your investment.
When you buy units in a gold-themed ETF, you’re tracking the price movements of the commodity itself or stocks in multiple companies with gold exposure. Gold-themed ETFs listed on the South African Stock Exchange include:
If you want to buy stocks in companies with gold exposure, there are dozens to choose from on the Johannesburg Stock Exchange.
An alternative to buying gold stocks or units in an ETF is to speculate on price movements through CFD investing in the futures market. CFD investors seek to profit from bond price movements – whether up or down. That means that even if gold prices are falling, CFD investors can still make a profit. However, because CFDs can be highly risky and are complex derivative products, CFDs are better suited to advanced traders.
This is the traditional approach and involves buying gold as a physical asset and owning it yourself. It allows you to get your hands on a tangible asset and avoid the counterparty risks associated with exchange-traded funds.
If you decide to buy physical gold, you’ll then need to consider what form you’d like to acquire. You can buy gold bullion in bars or in coins. Bars are larger and therefore more expensive, but they are an effective option if you’re looking to make a sizeable investment. Gold coins are smaller and less valuable, so they can be a more convenient option when you need to liquidate some of your investment.
Gold bars generally range in size from 1/10oz (ounces) to 1kg, but there are bars of up to 500oz available. However, remember that precious metals use troy ounces and that one troy ounce equals 31.1 grams.
There are two types of gold bars: cast bars and minted bars. Cast bars are produced by pouring molten gold into an ingot mould, while minted gold bars are manufactured via a minting or stamping process. Cast bars are cheaper to produce, but minted bars look better and are generally easier to sell.
Mints around the world also produce gold bullion coins. Typically smaller than bars and ingots, they’re generally considered to be a more convenient option for many investors. Not only are they cheaper to buy, but they also make it easier to liquidate a small portion of your investment when you need cash. Coins contain between 1/10oz and 1oz of pure gold.
These coins also have a nominal monetary value and can be accepted as legal tender in the country where they’re made – examples include the Kruger Rand, the American Gold Eagle, the Canadian Maple Leaf and the UK’s Gold Sovereign.
There are several options to consider when choosing where to buy gold, so make sure to consider the following factors before deciding where to buy:
Once you’ve purchased your gold, you’ll also need to find a safe place to store it. There are several options to consider, including the following:
If you’re searching for ways to protect your wealth or diversify your investment portfolio, gold may be a practical solution. However, please be aware that just like any other type of investment, buying gold comes with certain risks.
Do your research to make sure you understand the risks involved in buying gold, including the costs of storage and security as well as the fact that the returns may not match those provided by other investments. This will help you make an informed decision about whether buying gold is the right choice for you.
Thinking of investing in physical gold? Make sure you consider the pros and cons first:
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