A Krugerrand is a type of gold coin that is highly recognized and popular among bullion investors and collectors. It is one of the world's most widely traded gold coins and has historical and numismatic significance. It originated and is produced right here in SA and is considered by some to be South Africa's best-known export.

Origin: The Krugerrand was first introduced in 1967 by the South African government. It was developed as a way to promote South African gold and to make it accessible to the global market. The coin is named after Paul Kruger, a former president of the South African Republic, and the rand, the South African currency.

Purity: Krugerrands are made from an alloy of 91.67% pure gold (22 karats) and 8.33% copper. This alloy gives the coin its distinctive reddish or orange hue.

Denominations: Krugerrands are most widely available in four denominations: 1 ounce, 1/2 ounce, 1/4 ounce, and 1/10 ounce. The 1-ounce Krugerrand is the most common and widely traded. There are also limited proofs: In 2018 a 2oz gold proof Krugerrand was launched. In 2017 the the jubilee year of the Krugerrand the 1/20oz was launched and is only available as part of the 7, 6 and 5-coin sets. There is also a 1/50oz which is also only available in sets. We will just be focussing on the common ones.

Design: The obverse of the coin features the image of Paul Kruger, while the reverse displays a depiction of a springbok, a native South African antelope. The coin's weight and gold content are also indicated on the reverse.

Legal Tender: While Krugerrands have a face value in South African rand, their actual value is based on the gold content. The coins are not typically used as currency but rather as a form of investment and a store of value.

Global Recognition: Krugerrands are well recognized and accepted in the international bullion market. They are considered a reliable and liquid form of gold investment.

Collectibility: Krugerrands have numismatic value and are often sought after by collectors of gold coins. Older Krugerrands from the late 1960s and early 1970s, in particular, can be more collectible.

Availability: Krugerrands are widely available from dealers and can be purchased by investors and collectors. They are often sold at prices closely aligned with the current market price of gold.

Krugerrands are highly regarded for their quality, purity, and historical significance in the world of bullion coins. They are a common choice for investors seeking to buy gold and add it to their investment portfolio.

We look at the opportunities in trading, investing and because of its liquid nature using Krugerrands as lending security to get funding.

Trading

Premiums, spot price, buying price, selling price.
There are three prices you need to watch out of when trading Krugerrands:

The market price of gold aka the spot price,

The buying/bid price - the price at which a buyer is willing to purchase, it represents the maximum price a buyer is willing to pay. The buying price is typically lower than the spot price.

The selling/ask price, also known as the "offer price" or "selling price," is the price at which a seller is willing to sell. The selling price is typically higher than the spot price because sellers aim to receive the highest possible price.

Whether you trading virtual or physical gold the fundamentals do not change: you are buying in order to sell it at a higher price. Except we call the buying price the bid price and the sell price the ask price. But our focus is on physical trading.

Selling
Krugerrands sell at a premium to the gold price (the difference between the price of a gold coin and the value of the metal it contains). A premium or “premium over spot” is industry term for mark up. Premium over spot indicates what the mark up is for a particular bullion product over what the current market price per ounce is for that particular metal type. There is no set premium per item and depends a lot on overhead or what a particular dealer managed to negotiate during purchasing.

In simplistic terms (with made up numberS to keep the maths simple):

If gold is trading at R20 000 an ounce and a Krugerrand is selling for R20 500 then the premium is R500.

Buying
On the other side Krugerrands is usually bought by traders at a discount to the gold price. Again using the above example a trader may buy a Krugerrand for R19500 a discount of R500 to the made up ounce of gold price. So when he sells on this day he makes a profit of R1000.

Unfortunaletly its not that simple because like the coffee growers in Africa you are subject to a market price that is determined on the floor of a stock exchange thousands of kilometers away. You are also subject to the USD/ZAR exchange rate because the market price is in USD and you are trading in South Africa in ZAR (year-on-year this can fluctuate far more than the gold price). That price is constantly changing so that is why when traders set up shop they buy at spot minus x or sell at spot plus x. Every day the buying or selling price if different if the market price has moved from the previous day. So long as the premium is healthy you should be OK as the price won't move too much - barring a major event.

Real world example

On today 30 October 2023

The international gold price is around $1995. The rand is now R18,77 to the dollar giving us a spot price of around R37 446 per ounce of gold.

SA Bullion is selling a 1oz 2023 Krugerrand for R40,856.47 (metal value: R37,483.00 premium: R3,373.47) and a "mixed years" for R39,919.40 (metal value: R37,483.00 premium: R2,436.40). The "new" Krugerrand has a larger premium that the older ones which has been handled or traded before. When you trading physical you will almost always enounter the latter mixed years unless someone just bought one not long ago and is selling it again.

SA Bullion terms are as follows:
Prices are directly linked to the live spot gold price in Rand and are updated every 60 seconds. When you proceed to check-out then the price will be locked-in for a time period of 5 minutes to allow you to finalize your purchase.