As investors around the world seek safe havens amidst global uncertainty, the gold price has surged to record highs March, with all indications pointing to a long-term rally. The yellow metal has returned over 40% in the past year in both ZAR and USD terms.
Analysts around the world are citing trade war fears and stubborn global inflation as the primary drivers behind the surge in demand for gold. US tariffs and reciprocal action has fueled global investor demand for gold as a hedge against economic instability while in the US, the Fed remains cautious on the back of inflation data and weaker retail sales. South Africa is not immune to market fears, with both the rand and the local market on edge as the country’s trade relationship with the US continues to dominate headlines.
Nonetheless, the investment case for gold is solid. Just how finite is gold? All the gold ever mined would fit into a cube just 22 meters wide and high. There’s far less mineable gold left below the ground than there is above it. This scarcity, coupled with the fact that most recoverable reserves have already been extracted, makes gold uniquely resilient, rare, sought after and valuable.
Historically, gold performs well during periods of high inflation. For example, gold spiked during the oil price shocks of the 1970s and monetary system changes. Gold was favoured as a hedge against government monetary expansion.
Today, central banks, especially China, are increasing their gold reserves at a time when there is a growing distrust globally in traditional monetary systems. China’s influence should not be underestimated. Coming from a comparatively low base, China is steadily building up its own reserves, which currently make up 6% of its forex stockpile. If China gets its gold reserves to US levels, it will be a massive market driver globally.
When measured in rands (which takes into account US dollar prices per ounce), the value of gold since 1971, has shown a staggering 15% compound annual growth rate. The power of compounding means that the value of gold, in rand terms, has grown 183 000% since 1971.
While the demand for gold in South Africa has stayed strong over the years, it reached its peak recently, underscoring the popularity of gold among local investors. However, there are a few barriers to entry, making investing in this unique asset class difficult to navigate, whether for seasoned investors or those wanting to start their journeys of adding the precious metal to their portfolios.
Now, new avenues have opened that offer investors – retail or institutional – the ability to invest in fractions of physical gold, via ground-breaking digital capital markets platform Mesh.trade, in the form of Krugerrand-backed tokens.
Mesh.trade MD Connie Bloem believes that the future of investing in gold needs to be open to all, with the solution for this being tokenisation. “The potential gold holds as a safe, proven hedge against market volatility makes it extremely attractive as an asset class, and tokenisation makes it accessible to just about anybody,” she says.
Krugerrand tokens are now available on registered FSP Mesh.trade’s digital capital markets platform. Each token represents full and immutable ownership of the whole or a fraction of a physical, uniquely numbered 1oz bullion Krugerrand, securely stored at Brink’s, an internationally recognised, secure precious metals vault facility, where the coins, procured from Rand Refinery are then vaulted.
“What’s unique about this offering is that because the gold has been tokenised, investors can purchase any fraction of a Krugerrand coin, starting with as little as R50,” she explains.
“Investors who buy a 1 ounce bullion Krugerrand token outright or those who accumulate fractional investments over time to the equivalent weight of a 1oz coin, can redeem their token for a physical coin at any time, following which the issuer, TroyGold, will securely deliver their Krugerrand coin to their place of choice,” explains Bloem.