JOHANNESBURG (miningweekly.com) – Increased demand for gold has supported sales of the gold bullion Krugerrands and this year is predicted to yield the highest sales since the 1980s, with an expected 15% to 20% increase on the 1.1-million ounces of the coins sold in 2016.
This is according to precious metal smelting and refining complex Rand Refinery marketing executive head Richard Collocott, who was addressing the media during a site visit to the company’s facility on the East Rand, on Wednesday, to mark the coins' fiftieth anniversary.
The first 22 ct gold Krugerrand was manufactured on July 3, 1967.
He noted that the resurgence of demand for the Krugerrand returned it to being the world’s best selling new gold coin last year. In 2016, the Krugerrand held a 26% market share of the global gold bullion coin market.
Collocott highlighted that 50 years since it was first introduced in 1967, the Krugerrand has built an “indisputable legacy” as one of the leaders in the global gold bullion investment industry. Since its launch, more than 53-million ounces of gold, or over 60-million pieces, have been sold in the form of Krugerrands, more than its closest competitors, the Canadian Maple Leaf and the US Eagle.
Rand Refinery CEO Praveen Baijnath added during the visit that the history of investing in modern gold bullion coins could be tied to the Krugerrand.
“The original intent behind the Krugerrand was to create a gold product that the ‘man on the street’ anywhere in the world could legally own. The Krugerrand’s status as a legal tender means anyone is allowed to buy them.”
Baijnath elaborated that the purpose of the Krugerrand was to add value to South Africa’s gold production, which averaged 75% of the total global output between the 1960s and early 1970s.
Moreover, he stated that the coin was the earliest form of beneficiation of South African gold.
In 1980, the fractional Krugerrands (half ounce, quarter ounce and one-tenth ounce) were added to the 1 oz Krugerrand to enable investment in gold at more affordable prices.
“As a world-class liquid asset, the bullion Krugerrand provides investors an opportunity to buy physical gold which is recognised as a hedge against market uncertainty, as well as economic and political risk,” Collocott pointed out.
He further noted that an investment in the Krugerand was secure as its face value is denominated in ounces of pure gold, while other gold bullion coins have a face value significantly below the value of gold. This means that the South African Reserve Bank (SARB) guaranteed the purchase of any Krugerrand tendered for the ruling gold price on the day, whereas with other coins, the issuing government only guarantees the face value.
He mentioned further that gold as a “safe haven investment” had become more attractive to investors in recent times owing to low interest rates and global volatility, as a consequence of among others geopolitical uncertainty stemming from events like Brexit. “A hedge against inflation, a gold bullion Krugerrand bought in 1967 for $35 could return well over $1 200 today,” Collocott noted.
He said that, in fact, because of its gold content, a Krugerrand could be readily liquidated into currency in most countries.
Collocott highlighted that one of the most unique aspects of bullion investments was their resilience against the devaluation of currency caused by inflation. He explained that historically, inflationary pressures had led investors to gold and other precious metals. Collocott remarked that this was because, unlike currency, bullion investments do not lose their value as their “value is inherently stored” in the metal content.
The value of the Krugerrand is based on its gold content, which is linked to the prevailing gold price, as priced on the London market. When a Krugerrand is bought, a small premium is charged to cover manufacturing and distribution costs. Gold Krugerrands are not subject to value-added tax in South Africa.
To commemorate the golden jubilee year, the South African Mint has launched limited edition, collectible Krugerrands and the flagship offering in the anniversary range is the giant 50 oz gold coin. Only 55 of these coins are available for purchase.
Additionally, in commemoration of the fiftieth anniversary, a one-off limited edition of collectible Krugerrands are being offered in platinum and silver.
The golden legacy of the Krugerrand is also cultivated in the rest of the gold proof coin range with the 5 oz gold coin, as well as the much smaller one twentieth of an ounce and one fiftieth of an ounce coins. These coins are not bullion, and, as such are sold at a much higher premium than the bullion coin.
The bullion Krugerrand is jointly managed by Rand Refinery and the South African Mint. The South African Mint separately manages its business in limited edition and collectible coins, including the proof Krugerrand range.