Beginners guide to Gold trading in South Africa

Even today gold is considered as one of the most reliable and valuable assets to have. Gold mining and trading have a very long history. As gold was found in small pieces on the bottom of the river it was easier to find and later on, people started mining it as well, therefore gold was one of the first precious metals to be mined. Since then, different civilizations have agreed about the value of gold and have chosen it as the universal form of trading goods. Gold is a metal that does not really lose its value and therefore it is seen as one of the best ways for holding precious assets for some individuals. With this, many people are asking how to trade gold in South Africa and why you should do it.

Since gold become the universal way to trade goods, countries adopted the gold standard. It is a monetary system which basically means that the national currency like ZAR is backed up by the gold reserves of South Africa. All countries were using the gold standard until the UK abandoned the system during the first world war. Later during the 20th century, most other countries abandoned it as well. The reason behind it is very logical, the gold supply was increasing very slowly while the economic development was going faster and it would lead to currency inflation. South Africa abandoned the gold standard in 1932.

Gold trading is still a very lucrative business for many, especially in South Africa. In this article, I will talk about how to start gold trading in South Africa, what are the advantages and risks associated with it and what are the other ways to it.

How can you trade physical gold

When it comes to physical gold trading there can be a lot of questions, especially if you are a beginner and you do not know anything about trading. Where to buy physical gold, where to store, when to sell and so on. I will try to answer all of these questions for you in the simplest way possible and give you some gold trading basics. Let me start with defining gold as a trading asset.  Physical gold that you can trade with comes with two different forms, one is gold bullion and another is gold coins.

gold trading in South AfricaGold coins

As gold in its true form is very soft, pure gold is not suitable for making coins, therefore gold coins are usually made of an alloy. Meaning that the gold is mixed with other metals to give it more durability. Gold coins are issued by a predominant country or respected private entities, they are mostly used as collection assets or trading instruments. Gold coins are the best investment for small investors that cannot afford larger ones. Some of the finest gold coins you can trade with are U.S Gold Eagles, U.S Gold Buffalos, Canadian Gold Maple Leafs and of course South African Krugerrands.

gold trading tips for South AfricansGold bullions

another way to start gold trading in South Africa is to trade with gold bullions. These are the bars, nuggets or ingots you see in movies. A Gold bullion value is defined by its purity and mass rather than by a face value like money. This is why it is the safest and the most lucrative way to invest in gold. Compared to the coins the additional expenditure such as the commission of gold bullion investments is not high. It has very high liquidity and therefore it is easy to convert into cash.  Due to these reasons, many big investors prefer to invest and trade with the gold bullion as it is a good way to avoid the inflation of the dollar.

Where to buy and sell physical gold

Buying physical gold is not much of an issue, like everything, you can buy it online. There are many websites that are selling gold in different ways – as bullions and coins as well. You need to inform the seller which gold bars you want to purchase by its weight, price, and quantity. After the purchase, the company will deliver it to you.  There are some things you need to consider when buying gold

  • This is one of the main gold trading tips. When buying gold buy it in workable sizes. If you are making a huge investment make sure not to have big pieces of gold. You might want to buy a lot, but not everyone wants to buy that much from you. Therefore having more gold in small sizes will do you better when you want to sell them.
  • Before buying gold always check the actual spot price. When you are buying it there will be given a seller’s profit margin as well as some other charges like handling fee. You need to make sure that those charges are reasonable.
  • Check the reputation of the dealers. Look at the dealers as the Forex brokers. You would not trade with the broker without checking it out. Same goes about gold sellers. There are websites that provide information about major sellers. Also, all the reputable dealers should have displayed information about additional charges.

The answer to the question of how to trade gold in South Africa is pretty simple. You need to look at in the same way as anything you trade for making profits. You need to buy when the price goes down and sell once it raises again. The concept is as easy as it sounds like, however, it is harder in reality. If it was that easy to determine the prices, everyone would buy it when there was a major decrease in price. Hence, you need to be well aware of how and why the price changes and always keep an eye on the market. Let’s say you have gold and the price went up, where do you sell it?

Selling gold is a difficult part of gold trading in South Africa. However, there is one good way to do it. Most of the gold dealers that you can buy gold from also have the sell back option. Meaning that when prices go up, they are willing to buy it back from you. However, you need to be careful with the pricing as there might be better options for you.

gold trading in South AfricaAdvantages of trading physical gold

  • You can keep it as long as you want

One of the biggest advantages of owning physical gold is that you can store is as long as you want. If the price is stable for some time, you are not in a rush of selling it. Gold does not have high volatility, meaning that the price will not go down in a short time so much that it can damage your finances. At the same time in case it happens you can wait until the price goes up again.

  • You can easily sell it

Gold has very high liquidity, it does not matter what the price is if you are willing to sell it there is a good chance that people are willing to buy it. Hence, you can convert it to money easily.

  • It is lucrative

As I have mentioned, gold is not very volatile, however, if you own some amount of gold even small change in the price ( if it will go up ) will work well for you and make you gain a good profit. On the other hand, if the price will go down you can keep holding it until it raises up. However, it only works if you own a large amount of gold.


trading gold in South AfricaDisadvantages of trading physical gold

Of course, everything has its disadvantages and so does gold trading in South Africa or anywhere else. Here are some of the main disadvantages.

  • Transportation

When you buy physical gold there are two main problems – logistics and storage. Let’s review both of them. When you are buying gold with the dealer, the price will usually include transportation of the asset as well, and Gold isn’t very light might I add.

  • Storage – where to save safely?

Where do you store gold? Especially when you are not buying coins but gold bullions and in a high quantity? Storing them in the house is the first option for many, however – it can be a good call for burglars and thieves. If you decide to store gold at your house you need to make sure that pretty much no one knows you have them and they are stored in a good place that cannot be seen by others. It can be a locker that cannot be opened by others which is big/heavy enough to be impossible to take. Many investors are warned about storing gold on their own as it can be very risky.

Here are some gold trading tips when it comes to safe storage – investors should store it in a special safe deposit box in a bank or store it with companies that offer storage services. It might have a disadvantage in terms of the storage fee but with it, you are buying safety.

  • Liquidity can be bad sometimes

While liquidity is an advantage of gold trading it can be considered as a disadvantage as well. When you are buying gold from the dealer, the price of the gold is higher than the actual spot price, but when you are selling the gold to the dealer or any other party the selling price is the spot price. This will not work well if you are planning for a short time investment. Hence, my gold trading tip for you is not to trade with physical gold if you are not planning to make long-time investments.

how to trade gold in South AfricaAnother way to trade physical gold

As you can see, trading can be hard sometimes as the price of transportation and storage can make it more expensive for you. At the same time, you might find some hardship when selling it. Another way to avoid this is to buy gold from an online dealer which will not send the physical gold to you, instead, will store it for you until you want to sell it.

The advantage of it is that you do not have to deal with it by yourself. Also, if you do not want to trade gold in South Africa but buy it from the international dealer it will be easier for you to do so virtually. It has disadvantages as well though, first of all, you still have to pay for the storage and second, you do not have many options for selling it, rather than to sell it back to the dealer.

Trading gold on Forex

Gold is something everyone might want to have, why wouldn’t you want to have it and make profits when the price goes up? Unfortunately, not all of us can afford it. Making profits from gold trading works the best when you have a high amount of it and you are ready for the long-time investments. But what if you do not have that much money? The answer is CFDs on gold.

Generally trading with physical gold is now considered as an old-fashioned way of trading. Especially when you want to gain profits from it. Just imagine if you wanted to gain profits from the currency exchange and instead of entering online, you would go to the actual currency exchange point, exchange ZAR to USD, go back home, put it somewhere and wait for the currency rate to change. Then you would have to go back to the same exchange point or search for the other one to exchange the money back. It does not sound like a smart thing to do right? The same is for gold. Trading gold in South Africa is easier, more profitable and less time consuming when you trade CFDs instead of actual gold. Let’s see how CFD trading works exactly.

CFDs on gold

CFD is contract for differences, meaning that a trader when trading with CFD does not buy or sell actual gold. So how is gold traded without buying it? The trader is speculating with the changes in the price of gold. Obviously, to start CFD trading on gold you do not need to own the asset itself. CFD trading is done with the brokers that are offering CFDs alongside with currency pairs. Nowadays, as CFD trading is very popular almost all of the brokers are offering it. Contracts for differences can be on many different assets, gold is classified as a commodity and is under the subcategory of the precious metals.

The idea behind trading CFDs on gold is pretty similar to Forex or buying and selling the actual metal. You are making the assumption regarding the price movement and based on it you either sell it or buy it. To trade CFDs on gold you should understand how the CFDs work in general and at the same time you need to be aware of how the price of gold changes.

When trading CFDs on gold you are exposed to the real price of it, however, it does not mean that you need to actually have that much money on your account. This is the beauty of CFDs trading, you need to have the fraction of the amount of money that is necessary to buy actual gold. The leverage gives you the possibility to open a trade with only part of the money as the other part is supplied by the broker.  When you open a trading position, if the broker sees that you are losing money it might give you a margin call to close a position or deposit more funds to keep it open. However, it will not always happen and you should control positions by yourself.

Trading Gold CFDsAdvantages of trading CFDs on gold

Trading CFDs on gold online has some major advantages compared to physical gold trading in South Africa. Here’s some of them.

  • You do not have to deal with the actual metal itself, meaning that there will not be transportation costs, storage costs and need to protect yourself from thieves if you decide to keep it at home.
  • You do not need to have the amount of money in your pocket that is needed to buy actual gold, meaning that you can gain profits from trading gold even if you cannot afford it.
  • While making good profits requires big and long-time investments trading CFDs on gold is a short-time investment and you can get the profits quickly.
  • It is easier to find a broker that has a good service and conditions for CFD trading rather than South African bullion dealers.

The dark side of CFDs trading is that like any investment it carries risk with it.

With CFDs, you cannot hold the position for forever. When you own the gold you can have it buried in your backyard as long as you want it. With CFDs however, you need to be faster with your decisions. Keeping a position overnight or longer will accumulate additional charges. You need to be ready to close a position if your prediction was incorrect.

 how to start gold trading in South AfricaAfter all, should you start trading gold in South Africa?

As you can see you have three major ways to start gold trading in South Africa. If you have enough money and are devoted to long-time investments and at the same time do not mind to pay extra fees on transportation and storage, then you’re good to go. But if you want to avoid all of these hassles of transportation and storage – you can use the online platform, buy the gold from a dealer, and let them store it for you. Otherwise, if you want to make profits in a short amount of time without huge investments, can try CFDs on gold.

It is absolutely up to you which one you choose based on your own preferences and capabilities. The main thing is that you need to understand the gold trading basics and know how the prices change over time to make gold trading profitable for you.

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