Precious metal investors are not nutty conspiracy theorists who are anti-government or anti-ANC. Rather, they are hard-working people who are anxious about what it means for the broader economy to have a nationalized Reserved Bank. For example, in 2017, Public Protector Busisiwe Mkhwebane recommended a mandate change of the SARB from supporting the value of the rand to a broader mandate that is more developmentally focused. In simple terms, Mkhwebane suggested that the Reserved Bank print money to lift the masses out of property.
However, this is not broadening the mandate but doing precisely the opposite of protecting the value of the rand. Because printing money does not lead to more wealth – its leads to higher inflation and a weaker currency. While this recommendation has not been taken seriously and is not currently an official policy, many investors are concerned that the initial suggestion is a way of introducing ideas to the public in smaller doses to avoid strong opposition.
Given these realities, an idea that many of my clients expressed over the years is that by buying precious metals, they become their own reserve bank – in order words, purchasing silver and gold puts them on a personal gold and silver standard. This is an interesting and novel way to view precious metal investments. Their strategy is therefore not to invest in silver and gold as a speculative mechanism, but instead to gradually accumulate gold and silver as a reserve currency and a form of insurance.
South Africans, who own ounces are in a secure financial position and, together with their families, will remain economically protected from poor policy decisions.
Article courtesy of Going for Gold: A guide for the South African precious metal investor by Zoltan Erdey
