Ive written about ways to own gold before so ill be brief. Ive had a couple of questions this am about one of todays groupon specials. Link below
The short summary is you can buy a gold bar as follows.
- Pay R6 500 for a 10 gram proof-quality minted 24-carat gold bullion bar
- Pay R35 000 for a 50 gram proof-quality minted 24-carat gold bullion bar
- Pay R65 000 for a 100 gram proof-quality minted 24-carat gold bullion bar
So is this good value. Lets look at the numbers then other considerations.
An ounce of gold in rand terms is +- R15500 or R498.39 a gram (approx 31.1 grams in an Oz)
Using some basic math (or a calculator) you can deduce that the gold in the bars is worth
- 4983.90 for the 10 gram
- 24919.61 for the 50 gram
- 49839 for the 100 gram.
Ok so thats a lot less than what groupon are offering. But we have forgotten that bars (unlike coins) carry not only a manufacture cost but also are subject to 14% VAT. Lets re look
- 5681.65 for the 10 gram
- 28408.36 for the 50 gram
- 56816.72 for the 100 gram.
Nope there is still a lot of “other” built into their figures. Sure there is a manufacture cost but if you telling me I need to pay just over R8000 for the manufacture of a 100g bar you have another thing coming. I havnt phoned today but Im fairly sure that lakeshoretrading (www.lakeshoretrading.co.za) will be cheaper for the same products. In case you wondering I have no financial interest in lakeshore Ive just dealt with them before and found them helpful and at the time well priced.
Lets contrast the bars to a 1Oz Kruger rand. I ususally add 5-8% above the spot price of gold to arrive at what I think at any time is fair value for a coin. Because today Im feeling cheap Im going to use 5% and also then I only have todo one set of calcs.
so … R15500 * 1.05 = 16275 for a coin. Thats what id offer someone as my top price. That equates to R523 / gram. If we then extrapolate those to bar weights we get this
- 5230 for the 10 gram
- 26165 for the 50 gram
- 52300 for the 100 gram.
Even with the coin mintage factored in its cheaper gram for gram to buy Kruger coins vs bars.
Here’s the fun part. Coins are VAT exempt at this time. They are also easier to resell because they are easy to identify based on look, weight, and diameter. In fact most coin dealers have testers who can tell you in a matter of seconds if its real. Now I cant say with certainty for these bars but whenyou sell large bullion bars you have to get them assayed to make sure they have not been tampered with or are fake bars and yes this isnt a free service. So when you come to sell this bar whose going to buy it and whose going to potentially have to assay it? Ask the groupon supplier if they will buy it back and if so at what price. The spread between buy and sell will depress you. Last week I phoned scoin for kurger rand prices. They were selling at 16200 and buying back at 15200. Thats a very large spread!
Bottom line, yes gold is a good investment, yes these will appreciate in price and protect your currency from the evil central bankers but be informed there are more cost effective ways to buy gold.
Cheers
– P
From → Financial
paulfcannell 