A Comprehensive Guide to the Gold Price

A Comprehensive Guide to the Gold Price
The Krugerrand
A Comprehensive Guide to the Krugerrand
Table of Contents __________________________________
Introduction ..................................................................................................................... 2
Dimensions and Physical Specifications .................................................................. 3
Description.................................................................................................................... 3
Refining and Minting .................................................................................................. 5
Manufacturing .............................................................................................................. 5
History ............................................................................................................................... 6
Worldwide Markets and Dealers................................................................................ 8
Krugerrand Prices ....................................................................................................... 9
Why Invest in Krugerrands .......................................................................................... 9
Contact GoldCore ................................................................................................. 10
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A Comprehensive Guide to the Krugerrand
Introduction _______________________________________
T
he Krugerrand is a South African gold coin containing exactly 1 troy ounce of
fine gold, and is the world’s most widely held gold coin, with over 47 million
1oz coins sold globally since production began in 1970.
The coin is named after Paul Kruger, a former President of
the South African Republic in the late 1800s, and the South
African currency, the Rand, whose name in turn is derived
from Witwatersrand, the famous South African gold reef.
Krugerrands are sometimes known by their shortened name,
Krugers, especially in South Africa.
© 2013 GoldCore
Over 47 million 1oz
Krugerrands sold globally
since production began in
1970.
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A Comprehensive Guide to the Krugerrand
Dimensions and Physical Specifications __________
T
he Krugerrand is a 22 karat gold coin, with a fineness of 0.9167 or 11/12
gold. It is made of 11 parts gold to 1 part copper, creating an alloy known as
crown coin. The copper adds durability and strength to the coin and contributes
the reddish tint to the colour of the metal. Since the Krugerrand contains exactly 1
troy ounce of fine gold, or 31.103 grams, the gross weight of the coin is 1.0909 ozs
or 33.93 grams. The coin has a maximum diameter of 32.77mm and a thickness of
2.84mm. There are 180 serrations on the coin’s rim.
Description
The front (obverse) of the Krugerrand bears the profile of Paul Kruger. This
profile was designed by Otto Schultz of the Imperial Mint in Berlin and first
appeared on the South African Republic’s coins in 1892. It was again chosen in the
1960s when the design of the Krugerrand was being devised. Inscribed around
Kruger’s profile are the words “SUID-AFRIKA “, in Afrikaans and “SOUTH
AFRICA” in English.
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A Comprehensive Guide to the Krugerrand
On the reverse of the Krugerrand is an image of South Africa’s national animal,
the Springbok. The design, created by Coert Steynberg, a famous South African
sculptor, captures the typical pronking or strutting movement of the Springbok.
This design was also used previously on various older South African coins.
In a semi-circle above the Springbok is inscribed the word “KRUGERRAND”
and in the lower semi-circle the coin’s weight “1 OZ”. Then, to the left the word
“FYNGOUD" in Afrikaans, and to the right “FINE GOLD’ in English. The
coin’s mintage year is specified horizontally in two parts each side of the
Springbok, for example, 2012 being 20 and 12.
Although the Krugerrand has legal tender status in South
As legal tender
Africa and has a face value of 10 Rand, there is no monetary
Krugerrands can be
value specified on the coin. Krugerrands were never
imported free of import
intended to be used as legal tender since, in a free floating
duties.
gold price environment, the gold content would always be
of higher value than any legal tender value ascribed to them. This is known as noncirculating legal tender.
The legal tender status allows Krugerrands to be imported into various countries
free of import duties, and for this reason the South African government has never
looked to remove the legal tender status.
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A Comprehensive Guide to the Krugerrand
Refining and Minting
Krugerrands are produced in a joint undertaking between Rand
Refinery Ltd and the South African Mint Company (Pty) Ltd,
and ultimately regulated by South Africa’s central bank, the
South African Reserve Bank (SARB) under the direction of the
South African Treasury.
Rand Refinery is a private company owned by four leading South African gold
mining companies, namely, Goldfields, AngloGold Ashanti, Harmony and
DRDGOLD. The refinery, located in Germiston, east of Johannesburg, is the
largest single gold refining and smelting site in the world and has refined more than
25% of the world’s gold mining output.
The SARB authorises Rand Refinery to refine and sell Krugerrands through a
network of primary distributors both in South Africa and internationally. The
South African Mint Company, located in Centurion, between Pretoria and
Johannesburg, is a wholly owned subsidiary of the SARB.
Manufacturing
The manufacturing process of a Krugerrand is twofold. Rand
Refinery first manufactures the coin blanks. These are then
supplied to the Mint. The Mint strikes the coin blanks to
create Krugerrands. Although the vast majority of
Krugerrands created by the Mint are bullion coins, limited
edition proof Krugerrands are also made.
Bullion coins are stamped once by the coin stamping process. Only Rand Refinery
is authorised to sell these bullion Krugerrands, and then, only to primary
distributors in South Africa and abroad.
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A Comprehensive Guide to the Krugerrand
Proof coins are stamped twice using a sand-blasted die to create a frosted image
and then polished to a high quality finish. Proof Krugerrands are sold directly by
the Mint in sealed capsules with a certificate of authenticity.
History ______________________________________________
T
he South African Chamber of Mines devised the Krugerrand
in the mid-1960s as a new way of marketing South African
gold internationally. The logic of the coin was that the simple
design, low cost of manufacture and exact 1 troy ounce size would allow a low
premium over the gold spot price, and give investors an affordable way to track the
gold price through coin ownership.
The first Krugerrands were minted in 1967 but initially
From 1975 until the
only in small batches of proof coins. In 1970 Krugerrands
1985 import ban,
began to be mass produced and international demand
approximately 22
grew quickly. Britain lifted gold buying restrictions for
million Krugerrands had
individuals in 1971 followed by the US at the end of 1974.
been imported into the
Demand increased as the international gold price rose, but
US.
was also helped by successful Krugerrand marketing in the
US and West Germany. Annual sales of new production peaked in 1978 at over 6
million 1oz coins, but remained in an annual 2-3 million coin range until 1985.
In September 1985 the US Government announced a ban on the importation of
Krugerrands as part of sanctions against South Africa. In 1986, the European
Community introduced its own package of sanctions, also banning the importation
of the coin.
The US was always the Krugerrand’s largest market. From 1975 until the 1985
import ban, approximately 22 million Krugerrands had been imported into the US.
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A Comprehensive Guide to the Krugerrand
Trading of previously imported Krugerrands was still allowed but discouraged due
to various anti-apartheid campaigns.
Annual sales of new coins dwindled from 1985 to 1990 and although sanctions
were subsequently lifted, new coin sales remained low for the rest of the 1990s due
to a languishing gold price, but also because the existing holdings of Krugerrands
were so large. It wasn’t until the early 2000s that new Krugerrand sales again
strengthened as the gold price rose.
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A Comprehensive Guide to the Krugerrand
Worldwide Markets and Dealers __________________
K
rugerrands have a sophisticated primary distribution network and secondary
trading network.
The Johannesburg Stock Exchange (JSE) facilitates a
primary market where new Krugerrands are issued, and
a secondary market where they trade, just like an equity
market. In the primary market, the South African
Reserve Bank sells Krugerrands via tender but only
banks are allowed to bid on these tenders.
The JSE claim to be the largest and best regulated secondary market for trading the
coins in South Africa. On the JSE, stockbrokers trade Krugerrands just like stocks,
based on their gold bullion value. The coins even have their own trading symbol
KR as well as a futures contract KGRD, and the rules and directives of the
exchange govern Krugerrand trading, just like stock trading.
The Rand Refinery is the sole distributor of Krugerrands internationally via
authorised distributors. These include a number of major UK and European based
bullion banks and refineries, and appointed distributors in the US. Local banks and
dealers (depending on country) can then purchase through the authorised
distributors as well as on the secondary market.
South African stockbrokers are not allowed to deal in Krugerrands on behalf of
non-residents of South Africa. A non-resident could buy Krugerrands through a
South African bank, take delivery to a South African address, and then export
them in person but exchange control regulations limit the export of Krugerrands
by an individual to 15 ounce coins per transaction, and a Customs Declaration is
required, along with proof that the coins were acquired using foreign currency.
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A Comprehensive Guide to the Krugerrand
Krugerrand Prices
New Krugerrands are sold to authorised distributors based on the gold content
and a small mark-up to cover manufacturing and transport costs. The buying price
internationally for buyers will be based on the spot gold price, the Mint and
dealer’s mark-up, and a premium reflecting demand. Buyer’s premiums will be
lower for larger orders. Rand prices quoted in South Africa will be based on the
international price and the Rand / US Dollar exchange rate.
Why Invest in Krugerrands ________________________
The market for Krugerrands is highly liquid due to the large number of coins
produced historically, and the extensive trading network. This ensures competitive
pricing and ease of selling internationally.
The Krugerrand has a relatively low premium over the spot price of gold
because the South African Mint is able to sell to dealers at a low mark-up.
As a form of physical gold ownership, Krugerrand’s allow investors to gain
exposure to the gold price.
Krugerrands provide a cost-effective way to diversify an investment
portfolio.
The exact 1oz weight and lack of import duties and VAT makes the
Krugerrand easy to value and price.
The compact size, durability and portability of the coins allows for easy
storage options.
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A Comprehensive Guide to the Krugerrand
WRITTEN BY
GoldCore
ABOUT GOLDCORE
GoldCore are respected international bullion dealers who are experts in the execution and logistics of the
highly specialised precious metals market. GoldCore have been providing precious metal investment
solutions for an International client base since 2003. Today, our team of experts service all investor
classes from private individuals to companies and institutional investors. Whether you are a small or large
investor looking to take delivery or arrange for secure, trusted insured storage, GoldCore has a solution to
suit your needs.
CONTACT GOLDCORE
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GoldCore Ltd
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Dublin 2
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No. 1 Cornhill
London EC3V 3ND
England
USA Phone
+1 302 635 1160
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1 850 GOLD IE
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+353 1 632 5010
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+44 (0) 203 086 9200
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Disclaimer: The information in this document has been obtained from sources which we believe to be
reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the
purchase or sale of any investment. Any person acting on the information contained in this document
does so at their own risk. Recommendations in this document may not be suitable for all investors.
Individual circumstances should be considered before a decision to invest is taken. Investors should note
the following: Past experience is not necessarily a guide to future performance. The value of investments
may fall or rise against investors' interests. Income levels from investments may fluctuate. GoldCore
Limited ( www.goldcore.com), trading as GoldCore is regulated by the Financial Regulator of Ireland.
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