In 1967, the Republic of South used gold coins called Krugerrand to promote South African gold. These Krugerrands were brought to international markets so that individuals could own the gold coins.
The Krugerrand coins have legal tender value in South Africa. However, a rand (ZAR) value was not assigned to the coins. The value of Krugerrand coins is determined by the latest price of gold when they are traded. Changes in gold value are directly proportional to the value of gold Krugerrand.
When the gold market was at its peak, gold Krugerrand accounted for 90% of the world’s gold coins. So, let’s take a deeper look into it.
Understanding Gold Krugerrand
The heads side of the Krugerrand coin is inscribed with Paul Kruger’s face, the President of the South African Republic between 1883 to 1900. The word Krugerrand is a combination of South Africa’s currency ‘rand’ with the surname of Paul Kruger.
The tails side of the coin is inscribed with a springbok Antelope, the national symbol of South Africa. During Paul Kruger’s presidency, the Durban Deep was founded in 1896, the world’s most profitable mines. His presidency continued until the Witwatersrand Gold Rush leading to the emergence of Johannesburg, one of the largest cities in South Africa.
Trading of gold Krugerrand is carried out at the Johannesburg Stock Exchange (JSE) through a regulated secondary market. The prices quoted for the gold coin are based on weight.
The Krugerrand is 22-karat gold, having 91.67% gold and 8.33% copper alloy. The South African Reserve Bank issues new Krugerrand coins. They can be redeemed at the bank.
Since gold Krugerrands enjoy the legal status, they’re preferred over 24-karat gold for decoration medals.
What You Should Know About Krugerrand
In 1967, the United States was against people owning gold bullion. However, it was legal to own foreign coins. So, Krugerrand was permitted to be imported and sold in the U.S. market.
Krugerrand suffered from reduced interest rates because of the country’s system of racial segregation. Between the 1970s and 1980s, the import of Krugerrand was disabled due to South Africa’s apartheid.
In the U.S. market, gold Krugerrand was banned due to the apartheid in 1985. However, the economic sanctions were lifted by 1994. On May 9, 1994, Nelson Mandela’s release from prison was a significant cause of the removal of apartheid.
South Africa was the largest producer of gold in the 1970s. The country held more than 75% of the world’s gold reserves. 1970 was an exceptional year of the gold Krugerrand. The coin became a leading choice for gold investors.
The peak year of the Krugerrand was 1980, where the coin dominated the gold market and investments. Krugerrand accounted for 90% of the world’s gold coin market.
Krugerrand’s Status in Present Times
After the removal of the apartheid, Krugerrand’s demand fell significantly. However, after 1994, the gold production skyrocketed, but Krugerrand could never achieve what it had in the 1970s and 1980s.
In 2016, South Africa experienced a drop of 85% in gold output. The country accounted for only 6% of the world’s gold reserves.
Look at the table below. South Africa’s gold production suffered a 30% loss between December 2018-19. Since the 2008-07 financial crisis, this is the country’s longest run of contractions.
Investing In Gold Krugerrand
For those who invest in gold, Krugerrand is still a good investment. They still have value and are easy to store. For private and professional investors looking to make direct investments in gold bullion, Krugerrand is a good choice. These investors can also hedge their portfolios against U.S dollars or diversify their portfolios.
Gold has been one of the choicest investments for investors that seek long-term security. Many believe gold is that everlasting precious metal that can resist any sort of market turbulence. Also, gold is a tangible asset that is considered superior to paper-based investment by many investors.
Krugerrand is an excellent choice if you’re looking to invest in gold. You need a well-thought-out plan for that. Also, beware of scammers, choose a trusted dealer, and educate yourself about the state’s tax laws, especially the sales tax charged on gold.
Here are some aspects of investing in gold.
- The gold market is high on liquidity.
- Since you invest in physical gold, it does not depend on the functioning of the gold mine.
- Gold is a non-renewable resource which makes its value trajectory one that goes high.
- Gold is a great diversification tool due to its marginal correlation with other assets.
Why Should You Invest in Krugerrand?
Easy to Trade
The reason why Krugerrand came into existence was for anyone to start investing in gold. Whether you’re a beginner or an expert-level investor, investing in Krugerrand is easy and hassle-free. Especially if you’re new to investing, Krugerrand is excellent to kickstart your portfolio.
As discussed earlier, Krugerrand’s value solely depends on the value of gold in the gold market. The fluctuations in the value of rand (ZAR) do not affect Kurgerran’s value. By its very nature, gold is a stable and ever-increasing asset, which makes Krugerrand a stable hedge in your portfolio.
Can Be Traded in Increments
You can own, buy and sell Krugerrand in various increments from one ounce to one-half, one-quarter, and one-tenth. The gold coin becomes an affordable asset for an investor whose capital is fluidic. Remember, the price of trade depends on the price of gold on that particular day.
Can Easily Be Converted to Cash
Investing in Krugerrand makes investing in gold bullion smooth. It allows you to trade the coins with any numismatic dealer. Before buying Krugerrand, ensure that your supplier is registered and approved by the South African Mint or is a member of the South African Association of Numismatic Dealers.
The gold Krugerrand has a history of success. The coin was at its peak in the 1970s and 1980s. Even if the gold mines in South Africa are at an all-time low, it does not affect Krugerrand. Krugerrand is direct gold. You invest in gold directly by owning Krugerrand.
Indeed, Krugerrand is a great place to start and diversify.