Heads or tails, SA gold coins are still worldwide winners

SOUTH African gold coins are proving popular with foreign investors. The retail division of the South African Gold Coin Exchange, or Scoin Shop, reported record sales of about 10 000 Krugerrands and collectible coins last year, 30% higher than in 2012.

Nearly 10% of sales by value were to foreign buyers. Scoin Shop does business in 80 countries through 40 shops as well as online. Most overseas sales are in Canada, the US, Germany and Australia.

Buyers seem especially keen on Nobel medallions, including those bearing the images of Nelson Mandela and Aung San Suu Kyi, minted in Norway.

Scoin Shop MD Alan Demby says the cheapest gold coin you can buy would be a one-tenth ounce Krugerrand, for about R1 500. The cheapest collectible item might be a Mandela onetenth ounce medallion for about R4 500. There is a small premium on the gold price at initial purchase, levied by the issuing party.

“It’s probably 3% to 5% over the spot price when new Krugerrands come on to the market. But later they’ll trade at whatever the market dictates.

“The same rule applies for medallions. The mint issues them at whatever price they think is suitable for the rarity, work done in research, packaging and the topic.

“They sell it using their price formula. After that, the market dictates. Sometimes it may pull back to the metal price, and sometimes it can run to ten thousand times the metal price,” Demby said.

South Africans are acutely aware that gold is a good rand hedge. One-ounce Krugerrands trade at almost R15 000.

Demby said that 20 years ago everyone who bought a Krugerrand was responsible for its collection and safekeeping.

The addition of a safe-custody service as part of the sales service has broadened the customer base.

About half of buyers still look after the coins themselves. “But the number of buyers has increased exponentially in the past two decades. There’s no way so many people would all be able to arrange their own custody services.

“The real benefit is that you never have to actually visit the sales office. Even when you want to sell you can do that telephonically, and have your cash in 48 hours,” Demby said.

There is competition on the world stage with hundreds of options for buyers.

South Africa issued the Krugerrand in 1967. It was a worldwide hit, spawning a huge industry. Canada followed with the Maple Leaf. The Nugget was made in Australia, the Philharmonic is from Austria, the Panda is from China and the $50 Gold Buffalo from the US.