Have you thought about investing in gold? - CNBC Africa

Have you thought about investing in gold?

Southern Africa

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South Africans should consider investing in gold. PHOTO: Wall Street Daily

Bernard Stern, founder and CEO of Metal Contractors (Metcon), said that during the economic crisis, the value of gold increased.

“This is often the case in times of financial unrest and economic insecurity. Gold has always been one of the popular options to store value and generate return on investment when the going gets tough. It is an investor's safe haven,” he said.

(READ MORE: Central Rand Gold enters into MOU with Beijing Ankong)

The price of gold began to drop last year. Factors that contributed to the drop include the strengthening of the dollar, tighter security on the international stock markets and the referendum in Switzerland, where citizens rejected a plan for the Swiss National Bank to hold at least 20 per cent of its 520 billion franc balance sheet in gold.

“This higher demand would have pushed up the price. Being in the gold business, I keep a close eye on what the experts say,” said Stern.

"In the event that interest rates in the United States increase, the gold price is likely to decline. I do not believe that it would decline below 1,100 dollars per ounce. After that, it will stabilise for a while. It will not crash.”

He added that as the rand loses value against the dollar, this creates an investment opportunity for South Africans as the rand-dollar exchange rate is set to drop at a faster rate than the value of gold.

(READ MORE: S.Africa's Harmony Gold says to cut jobs at Kusasalethu mine)

When deciding on what kind of gold to buy, Stern recommended buying bars. 

“Bullion bars are 99.99 per cent pure gold, or 24 carat, as opposed to Kruger Rands, which are 91.67 per cent pure gold or 22 carats. I would recommend buying 100-gram minted bars, which are the largest minted bars available to the South African public,” he said.

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