What Is Krugerrands?
Krugerrands are internationally traded gold bullion coins initially struck in the Republic of South Africa in 1967. These coins enjoy the legal tender status in the country because of their cheaper costs and higher liquidity. However, they do not have a South African Rand (ZAR) value ascribed to them. Instead, the latest gold price determines their worth.
The Chamber of Mines of South Africa (present-day Minerals Council South Africa) developed gold bullion coins in partnership with Rand Refinery and the South African Mint. Its goal was to promote gold produced in the country on foreign markets and encourage private gold ownership. Individual and institutional investorsInstitutional InvestorsInstitutional investors are entities that pool money from a variety of investors and individuals to create a large sum that is then handed to investment managers who invest it in a variety of assets, shares, and securities. Banks, NBFCs, mutual funds, pension funds, and hedge funds are all examples. invest in ounce-denominated gold coins for portfolio diversification or hedging purposes.
Table of contents
- Krugerrands are internationally traded gold bullion coins first minted in the Republic of South Africa in 1967. It does not have a face value, and the current gold price determines the Krugerrands price, making it a safe investment during financial crises.
- It gets its name (Kruger + Rand) from South Africa’s former President Paul Kruger and its national currency, Rand.
- These gold bullion coins have a lower cost, higher liquidityLiquidityLiquidity is the ease of converting assets or securities into cash., and legal tender status in South Africa. They also have global acceptance and are available in different weights sets.
- Economic sanctions imposed on South Africa for its apartheid government restricted exporting gold bullion coins to many Western countries between the 1970s and 1980s.
Krugerrands are the most extensively held gold bullion coins. These are widely traded on international exchanges and can be converted into any currency. It derives its name from Paul Kruger (1883-1900), the former President of the Republic of South Africa, and the South African currency Rand.
The face of the coin portrays Kruger, while its reverse displays the national animal springbok antelope. Rand Refinery and South African Mint collectively produced these coins in 1967.
The increasing demand for gold bullion in the mid-1960s prompted the world’s largest gold producer to dominate the market. Also, it wanted to provide individual investors with a chance to own gold in some form.
As the world’s first ounce denominated and legal tender gold bullion coin, it achieved tremendous success until the late 1980s. Its value, however, never appeared on the coin as it trades for the current gold price. In 1979-1980, it became the world’s best-selling gold bullion coin due to lower manufacturing and distribution costs.
#1 – Gold Krugerrands
In 1980, Krugerrands made up nearly 90% of the global gold coin market and allowed most people to acquire gold. More so, these coins became investors’ preferred investment option in the 1970s. Its main characteristics include:
- The South African Reserve Bank Act (SARBA) declared it legal tender in South Africa.
- Krugerrands coins do not bear any face value equivalent to South African Rand (ZAR).
- They are less expensive than American and Canadian counterparts – American Gold Eagle (1986) and Canadian Gold Maple Leaf (1979) coins.
- A gold bullion coin is 22 karats and made up of a gold and copper alloy, making it more durable.
- These gold coins are routinely exchanged on the global market and may be converted to cash.
- With gold bullion coins, trading gold becomes easier without importing it physically in any form.
- These coins are available on a weight basis. As a result, it becomes a suitable investment option for investors with budget constraints.
#2 – Silver Krugerrands
Krugerrands were only available in gold form until 2017. Rand Refinery began minting one-ounce silver versions later and released the first-ever silver bullion coin in 2018. Its design and characteristics remained similar to gold bullion coins. The South African Mint started minting one million premium silver coins as proof collectibles to commemorate the 50th anniversary of gold bullion coins.
Now you can Master Financial Modeling with Wallstreetmojo’s premium courses at special prices
Best Financial Modeling Courses by Wallstreetmojo
Financial Modeling Course
* 12+ Hours of Video
Financial Modeling & Valuation
* 25+ Hours of Video
* Certificate of Completion
* 12+ Hours of Video
Krugerrands were introduced in South Africa on July 3, 1967, to help encourage individual gold ownership. Economic restrictions imposed on the country due to its apartheid policies made its export illegal in many Western countries between the 1970s and 1980s. In 1980, it issued three smaller gold coins – a half-troy ounce, a quarter-troy ounce, and a tenth-troy ounce. Since its introduction in 1967, more than 50 million ounces of gold coins have been sold by 2018.
Apartheid or racial segregation policies came to an end in the 1990s, allowing the export of gold bullion coins to different countries. However, a significant drop in its production occurred after the economic sanctions were lifted. Also, its growing popularity compelled countries like the U.S., Canada, Australia (Australian Nugget – 1987), Britain (British Britannia coin – 1987), and China (Chinese Gold Panda – 1982) to introduce their gold bullion coins to keep up with the global economic pace.
How To Invest?
Krugerrands are popular investment options for gold investors because of their small size, cheaper value, and worldwide trade. Originally issued as a one-troy-ounce gold bullion coin, it is now available in different weights to appeal to investors with budget limitations. As these coins derive their value from gold, it becomes a safe investment during financial crisisFinancial CrisisThe term "financial crisis" refers to a situation in which the market's key financial assets experience a sharp decline in market value over a relatively short period of time, or when leading businesses are unable to pay their enormous debt, or when financing institutions face a liquidity crunch and are unable to return money to depositors, all of which cause panic in the capital markets and among investors..
As an investor, one can buy Krugerrands weighing one troy ounceTroy OunceA troy ounce (oz t) refers to a unit of measurement used to represent the weight of an object. It is different from the standard ounce and optimal for noting the weight of precious metals like gold, platinum, and silver. of gold, a half troy ounce of gold, a quarter troy ounce of gold, or one-tenth troy ounce of gold. They can purchase these coins at a lower price and sell them at a higher value to earn a profit. Whether gold or silver versions, people can buy and sell them at a local shop or online.
Apart from investing in Krugerrands for sale, people can try other means of investment. These bullion coins trade on the Johannesburg Stock Exchange (JSE) at specified values based on their weight. It allows traders to invest in them rather than buying them directly. They are one of the most sought-after stock market securities since they trade on a well-regulated market.
The South African Reserve Bank (SARB) issues the current edition of gold bullion coins. It also handles redemption when traders invest in equitiesInvest In EquitiesEquity investment is the amount pooled in by the investors in the shares of the companies listed on the stock exchange for trading. The shareholders make gain from such holdings in the form of returns or increase in stock value. valued in these ounce-denominated bullion coins.
Frequently Asked Questions (FAQs)
Krugerrands are well-recognized, extensively held, and globally traded gold bullion coins initially minted in the Republic of South Africa in 1967. It takes its name (Kruger + Rand) from former South African President Paul Kruger and its currency Rand.
The worth of these gold bullion coins is determined based on their weight. Hence, an ounce of gold used to develop these coins would be considered to determine their market value. For example, as of July 31, 2021, one ounce of gold bullion coin costs 1859.25 USD.
Gold bullion coins were considered illegal for exports to many Western countries between the 1970s and 1980s. It was because of economic sanctions imposed on South Africa for its apartheid policies. However, apartheid policies ended in the 1990s, allowing exports of gold bullion coins to different nations.
This has been a guide to Krugerrands and its meaning. Here we discuss how to invest in Krugerrands along with history, types, and key takeaways. You may have a look at the following article to learn more –
- NumismaticsNumismaticsNumismatics deals with collecting and in-depth exploration of payment methods existent throughout history for buying goods or settling debts, including coins, tokens, medals, paper money, securities, and related objects. Its purpose is to study their physical properties, coinage process, and historical background.
- Gold StandardGold StandardThe gold standard was a monetary term used when gold exchange was used instead of paper currency.
- Gold FundGold FundGold funds are open-ended mutual funds or exchange-traded funds that invest in gold companies to mimic the performance of real gold.