First National Bank (FNB) reports that investors worldwide are showing a positive response to investing in gold Krugerrands. The partnership with Rand Merchant Bank Commodities Division, presented FNB with an  opportunity to sell Krugerrand coins to  its customers through their online banking  platform. Since its launch in 2011,  more than 1.5 t of coins have been sold to clients.

“The interest in Krugerrands as an  investment has been massive. Coin sales have been great, with one of the biggest spikes in  sales in August 2011, when coins to the value of R55-million were sold in one month.  In April this year, when the gold price  started declining, Krugerrands to the value  of  R67-million were sold,” FNB Share Investing CEO Gusta Binikos states.

She tells Mining Weekly that investing in gold is a good long-term investment  decision and cannot be compared with any  other investment. “Investing in gold  must be part of a healthy diversification  investment strategy. People should not  invest in gold with money needed for  daily living expenses or school fees, but  should rather plan gold investment as  one portion of a healthy long-term  investment portfolio,” says Binikos.

Krugerrands can be bought through  the FNB Share Builder and Share  Investor account through FNB online  banking and is attractive to clients across all markets. For investors who cannot afford to  buy a full ounce, smaller denominations  are available, being a tenth of an ounce,  a quarter ounce, or half an ounce.

“The  most popular purchase has been the  1/10 oz, especially among students and  the lower income group, who are aware  of the investment value of owning any  portion of the resource, while the full  one ounce has also been most popular  among some older investors,” explains Binikos.

FNB offers investors the added service  of storing Krugerrands at Rand Refinery,  in Germiston, Gauteng, since the cost  of gold personal insurance is high. FNB  also safely delivers the coins to investors, should they wish to take possession of it, at their own expense.

Krugerrands have always been sought after, since they offer the average person an opportunity to possess tangible gold.  It is illegal to own a gold bar in South Africa –  people can only own a gold ‘biscuit’, which is  a portion of gold, but even this must be  registered. “The idea behind the creation  and selling of the Krugerrand is to enable people to own physical gold,” she adds.

Analysts believe that the current general state of the gold industry means that strikes  at gold mines will increase the demand  for gold. Binikos says there is no real correlation  between the price of gold and when clients invest in it. There was a spike in Krugerrand sales in April 2013 when the gold price dropped.

In August 2011,  people invested heavily in gold when the  price increased. “People notice that there will always be value in gold and that buying  gold is a good investment in the long term,” she says. Investing in gold is not the same as investing in stocks on the stock exchange. When stocks are high, people opt to sell before the value of the stocks decrease, but with gold, the value will on average  always be high because it  is a currency.

Gold is the only natural  resource that is still used  in the world as currency.  The devaluation of currency in notes is making gold  a more attractive means of  investment. “Some people are investing in gold to hedge themselves against paper money fraud that happens globally.  All paper money is fiat  money – it is not backed by  gold.

People want security and gold is an alternative to fiat  money,” Binikos states. She adds that another  reason some people invest  in gold is because of its aesthetic  beauty and appeal and the  emotional attachment of  owning a rare and desirable resource.

“The Krugerrand is aesthetically unique, as it  comprises 11/12 gold and 1/12  copper, giving it a pinkish  colour because of the copper, whereas 24 ct gold is very  pliable and can, over time,  lose its shape and value,” Binikos adds. The Krugerrand is the most bought coin in the world,  with 65-million ounces in  circulation. Other collector coins have not had the same success.

“People who want to invest in gold need to do so long term, be aware of all the curves and ride out the waves in the market. Only then will they notice the true value of their  investment,” she notes. FNB does not sell other collector coins because they have no fixed price and are not  liquid.

The first gold coins were minted in Lydia, currently known as Turkey, in 610 BC, and has since been an attractive medium of exchange. Before Richard Nixon scrapped the dollar’s con- vertibility into gold forty years ago, most of the world’s currencies correlated with on  the gold standard, meaning that a unit of currency could  be exchanged by central  banks for a fixed weight  of gold.

“The American money  notes, which now read  ‘In God We Trust’ used to read  ‘In Gold We Trust’ showing  how valuable gold has been throughout the ages,” Binikos  concludes.