Krugerrands

This year (2007) the South African Krugerrand coin is 40 years old. Of all the world's gold coins this one is probably the most famous. So what is a gold Krugerrand and what makes it so special?

What Are Krugerrands?

Krugerrands are South African coins made using exactly one troy ounce of gold. This gold is mixed with a little copper to give a final weight of just over one ounce, a purity of 22 karats. The coins were first produced in July 1967 and named after Paul Kruger who fought against the British in the Boer War and became President of the Transvaal. Kruger's face is depicted on one side of the coin with a springbok - South Africa's national animal - on the other.

What Is A Krugerrand Worth?

Although the Krugerrand was officially declared to be legal tender it is unusual in that it has no face value. Although technically a coin basically it is a small round lump of gold bullion. Its worth is simply that of its gold content plus a small premium. This was a deliberate move on the part of the South African authorities to encourage the use of Krugerrands as an international investment vehicle.

The plan worked and Krugerrands became one of the most famous of all gold coins. Over 46 million ounces of Krugerrand bullion are in circulation worldwide mainly owned by investors and collectors.

So there's no set "value" for a Krugerrand, the cost of buying or selling varies along with the price of gold on the international commodity markets. Some years of issue are also more valuable to collecters and numismatists.

Why Buy Krugerrands?

With all the different forms of gold available on world markets, why do people like to buy Krugerrands as an investment? That's largely a matter of history. At the time the Krugerrand coins first went into production there were strict rules concerning the ownership of gold in the US. Because the Krugerrand was technically legal tender - even though it was never used as such - it was exempt from these rules and could be legally exchanged, bought and sold. Buying coins provided a legal way to invest in gold and thus attained massive "mind share" as an investment vehicle for private individuals that it still retains today.

Many Western nations declared the import and sale of Krugerrands to be illegal during the South African apartheid period of the twentieth century. The buying of South African assets such as this was seen as aiding and abetting the racist government policies of the time. The ban on Krugerrands resulted in the issue of rival bullion coins such as the Canadian Gold Maple Leaf, the Australian Gold Nugget and the American Gold Eagle.

Apartheid has now happily been consigned to history and conditions for many mineworkers have improved.

As always, check with financial experts and legal advisers regarding the suitability of Krugerrands as an investment for you and on any legal or tax issues.