Gold as the only hard currency where you don’t rely on government actions

“Gold is a hard currency and is not vulnerable to government actions”. Hilton Davies, Managing Director of SA Bullion reminds us that 2,000 years ago an ounce of gold could feed a family for a month and can do so still today. Gold has demonstrated itself to be an excellent store of value – and stands head and shoulders above all other currencies over long sweeps of time.

Currencies today are not backed by any value. They have notional value that is dependent on faith and confidence in governments. As faith and confidence are eroded, the value of a currency declines – a point that is all too relevant in South Africa today. “The value of a currency behaves like the share price of a country. If there is bad news around a country, the unit of value declines. Gold on the other hand stands apart from all modern currencies in that it is unaffected by governments, and it cannot go bust”, says Davies.

Most money today is held in bank accounts. This money is on the balance sheet of the banks, and is therefore subject to counterparty risk. Gold is not held on the balance sheet of banks and when owned directly is entirely outside of the banking system. In addition to its hard currency benefits, gold therefore also offers security where there might be concerns around banks. “For thousands of years gold has demonstrated that it is an incomparable store of value” says Clint O’Brien, Director of SA Bullion. “We are keen to get our message out to all South Africans today: gold remains a screaming buy and it is a highly relevant time right now to convert 5 to 10% of your wealth into physical gold”, says O’Brien.

SA Bullion is a unique investment management firm, dealing exclusively in physical gold. They believe that South Africans are in a rather unique position because the Krugerrand is legal tender, meaning that the South African Reserve Bank stands behind the instrument and it attracts no VAT.

Furthermore, with more Krugerrands in circulation than all other gold coins in the world combined, the Krugerrand has acceptability throughout the world. SA Bullion has addressed the traditional obstacles to viable gold ownership in South Africa, the costs of acquiring and disposing of Krugerrands, as well as the vaulting and insurance of these coins, which have been comprehensively addressed through their arrangements with the central bank and the largest gold refiner in the world, Rand Refinery Limited. SA Bullion is regulated by the Financial Services Board.

Historically, financial advisors have not been in a position to provide an investment service in physical gold. SA Bullion intends to inform financial advisors on the benefits of gold-ownership and how it fits into a client’s investment portfolio. In addition, the firm intends to explain the value proposition for financial advisors partnering with SA Bullion.

For twelve years we have delivered a compelling investment product – it’s a one of a kind on the continent – and we are delivering an investment proposition which is absolutely unique for financial advisors”, says Davies.

SA Bullion believes that in order to understand gold one needs to understand the US Dollar, which is the de facto reserve currency of the world, and the form of money to which all others are referenced. SA Bullion will be presenting around the history of gold as money – focusing on the modern era from 1971 until today.

This will be followed by legal, technical and practical aspects of gold ownership that should be of great interest to financial advisors. The presentation will conclude with an explanation of the arrangements that SA Bullion has with the South African authorities, and an overview of the company’s products available to investors. In terms of owning, holding and liquidating gold, SA Bullion has taken a heritage asset and combined this with a modern approach to appeal to today’s investor. SA Bullion’s products are suitable for financial advisors that have both young clients in the saving stage, as well as mature or wealthier clients who are looking to preserve their wealth over the long-term.

Article by Michelle Hodgkinson