the krugerrand -...

A Comprehensive Guide to the Gold Price

The Krugerrand

A Comprehensive Guide to the Krugerrand

© 2013 GoldCore 1

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


© 2013 GoldCore 2

Over 47 million 1oz

Krugerrands sold globally

since production began in

1970.

Introduction ________________________________________

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.

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© 2013 GoldCore 3

Dimensions and Physical Specifications __________

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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As legal tender

Krugerrands can be

imported free of import

duties.

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

value specified on the coin. Krugerrands were never

intended to be used as legal tender since, in a free floating

gold price environment, the gold content would always be

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.


© 2013 GoldCore 5

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.


© 2013 GoldCore 6

From 1975 until the

1985 import ban,

approximately 22

million Krugerrands had

been imported into the

US.

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

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

only in small batches of proof coins. In 1970 Krugerrands

began to be mass produced and international demand

grew quickly. Britain lifted gold buying restrictions for

individuals in 1971 followed by the US at the end of 1974.

Demand increased as the international gold price rose, but

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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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.


© 2013 GoldCore 8

Worldwide Markets and Dealers __________________

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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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.


© 2013 GoldCore 10

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

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.

© 2013 GoldCore. All rights reserved.

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