Despite the fact that the gold price has recently made new historical highs and traded above $1060 an ounce, in rand terms, the yellow metal is 25 percent less than what it was in February/March this year when it was around R10 000 an ounce. Since April this year the price of gold has drifted sideways despite the fact that the gold price in US dollars has moved from $940 to $960, an increase of almost 13 percent.

"At current levels of around R7500 an ounce, gold offers extreme value," according to precious metals analyst David Levenstein. "Even though it might be possible for the gold price in rand terms to trade even slightly lower in the short term, I believe that the next move is upwards. And I won't be surprised to see a re-test of R10 000 within the next six months."

Gold could go as high as $5000

While the price of gold can be extremely volatile in the short term, many analysts are predicting much higher prices in the long term. Some of their forecasts suggest the price of gold will go as high as $5000 an ounce. "Personally, I am not sure that we will see such high prices, but I am convinced that in the long term we may see prices of around $2500 to $3000 and a rand price of gold as high as R15 000 if not more," says Levenstein. He also recommends that now is the time for investors to accumulate a holding of gold bullion bars and coins.

Up until May this year it was illegal for South African investors to own gold bars, but now after some 99 years, this law has finally changed. "If you're not in this market you absolutely need to buy physical gold and silver here," says Levenstein. "Whether it stays above a thousand or drops below is of no consequence for a long-term investor. As it is likely that gold will go to $2000 or even $3000 or more, if you bought it as it broke through $1000 and then went back under $1000 for a while, you might be concerned for a short while, but ultimately it is going much higher in the longer term.

"But stick to bullion, and beware of dealers who try to persuade you to buy commemorative or inaugural medallions at highly inflated prices. Unless you are interested in collectables, stick to bullion."

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