I believe that the best type of investment is in tangibles. Things like gold, silver and property can’t be electronically disappeared or inflated away. I would like to share a few of the things I have learned through my research.
Forms of precious metals:
There are 3 main forms of owning precious metals. These are:
- Bullion – amounts of precious metal where the weight is the only determining factor on the value.
- Jewelry – I have no information on the use of jewelry as a form of investment.
- Collectors Coins – mostly coins, where the weight as well as the face of the coin determines its value. Like a cross between bullion and a collectors item.
To summarise: I you melt down bullion into a blob no value would be lost, but if you melt down a collectors coin you would lose a great deal of value.
The international standard of measurement for precious metals is the Troy ounce. One Troy ounce is equal to 31.1034768g. Collectors coins are usually sold in ounces or fractions of ounces. ½ and ¼ ounce sizes are common. With collectors coins the face value has no effect on the value of the coin. Bullion can be sold in ounces or in grams or in any other weight measurement.
Prices and Value:
The price of various precious metals vary greatly. The value of bullion can be easily determined by multiplying its weight by its spot (current price). Collectors’ coins value is determined on a willing buyer, willing seller principle. This aspect of perceived value is a negative aspect of collectors coins in my opinion. You will pay a certain percentage above spot price to buy bullion and you will mostly sell it for a percentage below spot price. These two links will be very useful to South Africans who want to get a price in Rand per gram: [Gold] & [Silver].
I don’t see precious metals as form of investment but rather as a store of value. There is a well worn quote that sums this principle up quite well:
Under the Roman Empire, an ounce of gold purchased a Roman citizen his toga, a leather belt, and a pair of sandals. Today, one ounce of gold will still buy a man a suit, a leather belt, and a pair of shoes.
I feel that this is honest and fair and does not unrealistically create (or extract) value from some obfuscated source.
See for yourself:
Where to buy:
The best place I have found to buy bullion is MetCon. I haven’t bought from them yet and they seem to be very expensive especially for silver. They do have online ordering and they are situated in the Cape. Other suppliers that I know of are the SA Mint and the SCoin shop (the retail arm of the Gold Coin Exchange). The easiest way for South Africans to buy gold bullion is to purchase Kruger Rands. Just be careful since there are bullion and collectors coins types of Kruger rands.
I hope this gave you a better idea of the precious metal picture. I am still trying to find somewhere to buy silver at a few percent over spot price. Silver is know as the poor man’s gold. Just make sure that you don’t pay too much over spot price for bullion since you will have to sell at a few percent below spot price in the future.