Evaluation of gold as an investment asset: the South African context
Date
2013-07-26
Authors
Pule, Barrend Pule
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Abstract
This study examines potential benefits of investing in various gold investment vehicles in terms of
risk and return from a typical South African investor’s perspective. Furthermore, the study examines
the relationship between gold price and South African macroeconomic variables. Data used in the
study comprises of monthly closing share price data of JSE listed gold mining companies, gold
price, Krugerrand coin, NewGold ETF, FTSE/JSE all share index, gold mining index, unit trust
index (gold & precious metals), real GDP, rand/dollar exchange rate, repo rate and CPI. It was found
that gold bullion produced superior abnormal returns and yielded greater capital growth compared to
the JSE all share index. However, the JSE all share index exhibit lower volatility compared to gold
bullion. Abnormal returns for JSE listed gold mining companies tend to differ substantially from
gold bullion abnormal returns. Gold mining companies exhibit added risk which cannot be attributed
to the gold bullion. Gold has a potential to reduce systematic risk when added to a portfolio of
stocks. A multiple regression model was estimated which relates gold price to South African
macroeconomic variables. It was found that gold price depends on real GDP and rand/dollar
exchange rate.
Description
Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013.
Keywords
Gold, Investment, South Africa, Johannesburg Stock Exchange, JSE, Risk