Krugerrands: buy, hold, sell
TIPS: OWNING GOLD HAS NEVER BEEN EASIER
Digging a hole in the garden is no longer the easiest option to store your Krugerrands; now, at the press of a button you can trade your favourite coin online with minimal storage fees.
For people who worry about holding onto physical coins, there are an array of security options available and, bullion being what it is, you can even invest in them. RMB has introduced Krugerrand Custodial Certificates, a security listed on the JSE’s ETF sector, that gives the holder ownership of a uniquely numbered and packaged Krugerrand coin.
Direct ownership
Unlike a traditional ETF, where the holder has a claim on company-owned gold, the investor holds the gold directly. “It’s in their name; it belongs to them and they can take physical delivery of the underlying coin,” says Dr Ebrahim Patel, commodities strategist at Rand Merchant Bank.
Storage fees of about 0.22%/year, including insurance, apply.
The structure is licensed to the World Platinum Investment Council, which will use it as its flagship platinum coin investment structure globally.
You can buy Krugerrands online through FNB Share Investor. 1oz, ½ oz, ¼ oz or 1/10 oz coins can be instantly traded through the online banking platform. The coins are stored securely and can be delivered for a fee, about 0.84% per annum.
Many overseas banks deal in gold coins, Krugerrands included.
Others buy the coins through The Scoin Shop, the retail division of The South African Gold Coin Exchange. The JSE also offers trading in Krugerrands “through a well-regulated secondary market”, traded in the same way as any listed equity market instrument, with prices quoted on various types (weights) of coin.
“The price of a Krugerrand is directly related to the ruling gold price on the day. There is a small manufacturing premium that's added to that … If the gold price is R20 000 today per ounce, the Krugerrand might be R21 500,” says Richard Collocott, Rand Refinery’s executive head of marketing and a director of Prestige Bullion, the Rand Refinery and SA Mint joint venture.
In the collectables market, prices vary based on factors such as aesthetic appeal, scarcity and rarity.
“The Krugerrand is in fact one of SA’s currencies. It’s issued under the authority of the South African Reserve Bank (Sarb) and approved by the SA government as legal tender.” As such, South Africans can convert between rands and Krugerrands (and have rand hedges), without any additional approval or tax clearance.
Best year for Krugerrand sales in ounces: 1979: 4.9 million ounces sold. In dollars, 1981: $1.8 billion.
Worst year: 2000: only 10 000 ounces sold; $3 million total revenue.
Major competitors: American Eagle, Canadian Maple Leaf, Austrian Philharmonic, Chinese Panda and Australian Nugget.
In 1980, ½ oz, ¼ oz and 1/10 oz Krugerrands were added.
A limited edition 1967 Vintage Proof Krugerrand has been released in honour of the 50th anniversary. The coin costs R59 000 and only 1 967 have been minted.