Definition
Krugerrands are gold bullion coins minted by the Republic of South Africa. They were first issued in 1967 and became an easy way for individuals to own and trade gold globally. The coin’s name combines the last name of Paul Kruger, a South African political leader, with “rand,” the South African unit of currency.
Key Takeaways
- Krugerrands are gold bullion coins minted by the Republic of South Africa. They were first issued in 1967 and became a popular investment vehicle due to their value being derived directly from the current global gold prices.
- Unlike other gold coins, Krugerrands are not pure gold but rather, they are an alloy composed of 91.67% gold and 8.33% copper. The addition of copper gives the coin its distinctive orange hue and increases its durability, making it resistant to scratches and dents.
- They are available in various weights, including one ounce, half ounce, quarter ounce, and tenth ounce. Their denominations do not have a face value because their trading value is linked to the daily gold price.
Importance
Krugerrands are an essential term in finance due to their status as one of the first bullion coins utilized globally for investment purposes.
First minted in 1967 by South Africa, Krugerrands are made from gold minted from South Africa’s gold mines and serve as a convenient and legal means for individuals to own and trade gold.
This gold coin doesn’t just represent a tangible asset, but also carries historical significance as it allowed for the expansion of the global gold market.
Its importance furthermore stems from the coin’s role in providing an accessible method for small-scale investors to participate in gold trading irrespective of the prevailing gold prices, making it a significant tool for portfolio diversification.
The name “Krugerrand” originated from Paul Kruger, a significant South African political figure, along with the South African currency unit, the rand.
Explanation
Krugerrands serve as a medium for private gold ownership. They were first minted in 1967 by the South African Mint with the objective to promote South African gold to global markets.
The distinct characteristic of a Krugerrand, which sets it apart from many other gold coins, is that it contains exactly one ounce of fine gold without any alloy, making it more resistant to wear and tear. It was the first gold coin in the world to contain precisely one ounce of fine gold, and its key purpose is to provide an easy and cost-effective means for individuals to invest in and own gold.
The primary use of Krugerrands is as an investment in gold, especially pertinent when economic indicators suggest potential decreases in paper money value and stock market instability. They are not typically used as currency because the value of their gold content far outstrips the face value of the coins.
Krugerrands are also popular among gold collectors and are often bought as a hedge against inflation, currency failure, and economic depression by those interested in gold investment. Overall, Krugerrands offer another avenue for investors to diversify their portfolio, hedge against economic uncertainty, and capitalize on the enduring value of gold.
Examples of Krugerrands
Personal Investments: An individual wants to diversify their financial portfolio and decides to invest in gold. As part of this investment, they purchase several Krugerrands. Having these gold coins not only provides an alternative to traditional securities but also serves as a hedge against inflation and currency risks.
Collectors and Dealers Market: A coin collector might buy Krugerrands for their numismatic value or historical significance. They’re not just investing in the metal content, but also the potential increase in value of the coins themselves over time due to their rareness or desirability among other collectors.
Emergency Currency: During periods of economic instability, paper money can lose its value rapidly, and banking systems may collapse. In such cases, Krugerrands, being gold coins, could be used as a form of emergency currency. During the economic crisis in Zimbabwe, for example, gold coins like Krugerrands were sometimes used for transactions when the local currency became worthless.
FAQ: Krugerrands
What are Krugerrands?
Krugerrands are gold bullion coins from South Africa. They were first minted and issued in 1967, and they have been a popular choice among investors who want to hold physical gold. Krugerrands are made from 22-karat gold, which is an alloy of 91.67% gold and 8.33% copper.
Why are Krugerrands popular among investors?
Krugerrands are popular due to a few factors; they are relatively easily bought and sold, they’re durable due to their copper content and they are globally recognized. This makes them an attractive decision for investors looking for an easy and secure way to invest in gold.
What sizes do Krugerrands come in?
Krugerrands are manufactured in four sizes: one ounce, half ounce, quarter ounce, and one-tenth ounce. One ounce coins are most popular, but the smaller denominations offer the same benefits in a more affordable package.
Where can I buy or sell Krugerrands?
Krugerrands can be bought or sold at most precious metal dealers, coin dealers, and some banks. Prices will vary, and it’s recommended that individuals perform some research or consult with a financial advisor before making a purchase or selling these coins.
Can Krugerrands be part of my retirement savings plan?
Yes, Krugerrands can be included in your self-directed IRA (Individual Retirement Account) in the United States. However, they must be stored in a depository approved by the Internal Revenue Service (IRS). It’s advisable to speak with a financial advisor to ensure compliance with all necessary regulations.
Related Entrepreneurship Terms
- Bullion Coins
- Gold Investment
- Precious Metals
- South African Mint
- Spot Price
Sources for More Information
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