Gold can reduce volatility in a portfolio

© Sergey Volkov 123rf.com

Catastrophe insurance

“Gold has historically been known to act as catastrophe insurance in times of market uncertainty. This is primarily because the yellow metal does not derive its value from the financial system. As a means of portfolio diversification gold is able to create a shield against volatility. Gold is also a liquid asset in that it is recognised globally as a means of exchange in many countries,” Carin Meyer, CEO of FNB Share Investing, says.

Krugerrands or ETFs

“There are several ways that one can gain exposure to gold, the most common being via Krugerrands or Exchange Traded Funds (ETFs) on the JSE. Krugerrands generally trade at prices close to the contained bullion; this is less true for collectible coins in the market place or jewellery as jewellery may constitute less than 50 percent in gold value,” she says.

Zero-rated

“Exposure to gold via Kruggerrands is a cost effective way to gain protection against the weakening local currency. And unlike other metals, Krugerrands are zero rated for VAT, for example when purchasing a collectible coin one would have to pay 14% VAT,” adds Meyer.

“South African’s have an opportunity to protect their hard earned money against a weakening Rand through investing in Krugerrands,” she says.