South African Gold Krugerrands

The South African Gold Krugerrands are perhaps the products that started the frenzy of gold coin production across the globe. In fact, it was the only gold coin on the market between 1967 when it first released and 1979, until the Canadian Gold Maple Leaf launched.

These coins aimed to increase private ownership of gold, and was struck using 0.9167 pure (22-karat) gold. However, economic sanctions against South Africa during the 70s and 80s saw this coin being banned in Western countries.

The proud Springbok Antelope appears on the reverse, while the portrait of Paul Kruger (the fifth President of South Africa) adorns the obverse sides.

What Are Gold Krugerrands?

Gold Krugerrands are coins minted by the government of the Republic of South Africa starting in 1967.  The original aim was to give visibility to the South African gold mining and refining industry so that individual investors could own physical gold.  Because of this the Gold Krugerrand became one of the most commonly traded gold coins in the world.

Being a coin Krugerrands are legal tender in the country of South Africa.  Interestingly enough, and unlike other sovereign coins, the Krugerrand was never given a currency value.  The Krugerrand was intended to have pure intrinsic value.  Meaning that the current price of gold set the value of the coin.

The Design Of The Gold Krugerrand Coin

The obverse (face) of the Krugerrand coin bears the image of Paul Kruger, who was president of South Africa from 1883 to 1900. The name of the coin comes from combining the last name of the president with the word rand, which is the name of the South African currency unit.  On the reverse is the national animal of South Africa, the springbok antelope.  During the presidency of Paul Kruger South African gold mines enjoyed some of their best economic periods in history.  Famous mines like the Durban Deep prospered.  The Witwatersrand Gold Rush began in 1896 and led to the founding of South Africa’s largest city Johannesburg.

Krugerrands are traded on the Johannesburg Stock Exchange (JSE) in the same manner as other equity shares.  They are listed and quoted by their weight in troy ounces.  As with other sovereign coins the Krugerrand is designed to be more durable so their composition is not 100% pure gold.  Instead, like the American Gold Eagle, the Krugerrand has a composition of 22 karat gold.  An alloy of 91.67%, gold, with 8.33% copper.  The coin being legal tender, can only be issued by the South African Reserve Bank (SARB).

Important Characteristics To Remember About Gold Krugerrands

  • Minting of South African Gold Krugerrands began in 1967.
  • By 1980 Gold Krugerrands made up 90% of the world’s gold-coin market
  • Even though gold production in South Africa has declined in recent decades the Krugerrand remains popular among gold investors to the present day.

History Of The Krugerrand

Gold Krugerrands began production at a time when American citizens were not allowed to own US legal tender gold coins.  However the law allowed Americans to own foreign coins and the Krugerrand could be traded legally in the USA.  Unfortunately the Krugerrand suffered from diminished stature are awareness of South Africa’s racial apartheid grew.  As part of the economic sanctions designed to fight apartheid starting in the 1970’s, many countries prohibited the import of gold coins.  The prohibition on the Krugerrand was joined by the United States in 1985 which all but crippled worldwide distribution of the coin.  Even after the sanctions ended with the abolishment of aparthied in 1994 the popularity of the Krugerrand remained low until investors could fully digest the lifting of sanctions.

South Africa became the largest producer of gold in the world by 1970 having more than 70% of the above ground reserves of gold.  During that time, and until the beginning of economic sanctions, Krugerrands were the top choice of gold investors.  At the height of the gold market in 1980 the gold Krugerrand made up 90% of investable gold coins worldwide.

The Krugerrand Today

Minting of the Krugerrand dropped off dramatically after the abolition of apartheid in 1994.  Gold mines eventually increased production but never approached the peak levels of the ‘70’s and ‘80s.  By the second decade of the 21st century South African gold production had fallen back to 15% of the peak and South Africa produced 6% of the world’s gold supply.  

South Africa’s gold production continues to fall through the present time.  From 2018 – 2019 gold production declined by more than 30%.  The long term trend is continuously downward.

Gold Krugerrands as an Investment

Despite the late economic struggles of South Africa the Krugerrand still enjoys substantial popularity and distribution.  This is thanks to the Krugerrand’s intrinsic value and relatively small dimensions that allow for easier storage.  Institutional and individual investors inclined to make investments in physical gold bullion frequently include the Krugerrand as a hedge against fiat currency and as a vehicle of portfolio diversification.

Gold continues to be highly popular as an investment because of its enduring intrinsic value.  Gold has been considered a safe haven asset for hundreds if not thousands of years.  Owning and holding physical precious metals is an attractive concept for investors who put more faith in gold than paper and fiat securities.

As with all precious metals, if you are planning to buy Krugerrands then HT Bullion suggests that you have a safe and secure place to store them.  When buying you should vet the seller even when buying from a reputable bullion dealer.  Additionally when buying online you may be subject to US state and or import taxes when engaging in cross-border transactions.  See the HT Bullion Dealer Directory for specific details on the applicable taxes in every US state.  Based on on the experience of investing history we have bullet pointed some attractive features of investing in gold:

  • Gold is highly liquid.  It can be sold anywhere from local coin shops and over the counter trades to online platforms like eBay.
  • Gold has no counterparty risk, meaning that the value is not tied to a country business or individual.
  • Over the last 20 years gold has only had four down years beating every paper equity market.
  • Gold has a negative correlation with inflation.  As inflation is a constant gold continues to rise in fiat currency value.

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