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

A Comprehensive Guide to the Krugerrand

Introduction ______

he Krugerrand is a South African gold coin containing exactly 1 troy ounce of T 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 Over 47 million 1oz African currency, the Rand, whose name in turn is derived Krugerrands sold globally from Witwatersrand, the famous South African gold reef. since production began in 1970. Krugerrands are sometimes known by their shortened name, Krugers, especially in South Africa.

A Comprehensive Guide to the Krugerrand

Dimensions and Physical Specifications ______

he Krugerrand is a 22 karat gold coin, with a fineness of 0.9167 or 11/12 T 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.

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 Africa and has a face value of 10 Rand, there is no monetary As legal tender value specified on the coin. Krugerrands were never Krugerrands can be intended to be used as legal tender since, in a free floating imported free of import gold price environment, the gold content would always be duties. of higher value than any legal tender value ascribed to them. This is known as non- circulating 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.

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.

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 ______

he South African Chamber of Mines devised the Krugerrand T 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.

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.

A Comprehensive Guide to the Krugerrand

Worldwide Markets and Dealers ______

rugerrands have a sophisticated primary distribution network and secondary K 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.

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.

A Comprehensive Guide to the Krugerrand

WRITTEN BY

GoldCore

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