Gold Bull Run Continues

2011 has seen a post-recession gold rush topping record prices. Many investors have moved away from property, shares, bonds and other commodities to get their foot in the door with gold. Everyone wants a piece of the action!

And the gold Bull Run continues: gold smashed through the $1800 per ounce resistance point earlier this year, and then through $1900 in August.  As the 11-year Bull Run continues, it is not unreasonable to expect gold to reach levels of $2000 and beyond, sooner than anyone expected.  Gold coins, medallions and bullion sales have consequently ballooned in 2011.

The reasons behind the continued Bull Run of gold are:

  • Post-recession uncertainty in the market
  • Economic turmoil in the Eurozone and emerging markets
  • The unclear economic policies of the USA on quantative easing
  • Riskier investments such as shares and emerging markets avoided
  • Gold remains the safe haven or hedge against inflation

From Investor to Collector

While most buyers venture into the gold market with profit in mind, many become connoisseurs of gold coins and gold medallions. Bullion is subject to periodic profit taking when gold prices are high, but collectable coins tend to show a greater return on investment over the long term. Thus investors become collectors, knowing that over the longer term they can build a collection of a series of coins, and gain more from an entire set than from single coins or medallions.

When to Buy and When to Sell

With the current gold price at record high levels, any correction (or dip) in gold prices will signal the buyer to action in building a gold portfolio. Buying gold bullion coins, numismatic coins and collectable medallions is a tangible and exciting way to own gold. It is also a market which is easy to understand, easy to get into and easy to make a profit in.

  • Collectable gold coins and medallions should always be bought when their price is lowest, or nearest to their release date. To financially benefit from collectable gold coins, they should be sold when their price is at its peak, normally four to seven years from the release date.
  • Bullion coins should be bought when the gold price is low, and the Rand is strong. Conversely, bullion coins should be sold when the gold price is high and the Rand is weak to make the most profit. Bullion is viewed as a long term investment since the gold price in day-to-day trading can be volatile, yet an upward trend is visible over the longer term. South Africa’s bullion coins are the Krugerrand coins.
  • A combination of collectable coins and Krugerrand bullion coins is preferable, to spread the risk of your portfolio and to give you the best opportunities of both. Bullion coins are not subject to VAT, but both bullion and collectable coins are subject to capital gains tax on reselling.  Speak to your tax advisor or local SARS branch for more details

Where To Buy Your Gold

As with any investment, it is advisable to do your homework before making any purchase. Deal only with reputable companies and be careful when buying coins from the public. Many new players have recently entered the market, so it is wise to compare the product offering and pricing, keeping in mind the terms and conditions. Prices may vary if larger amounts of coins are purchased. Hidden costs may be in the delivery and storage terms, and brokerage fees.  With all that said, there will never be a better time to start your gold portfolio than now!