Originally minted in South Africa in 1967, it was the first of its kind in the world. The Krugerrand was the first modern gold bullion coin - consisting of one troy ounce of fine gold, in a coin blended with a copper alloy for hardiness, to yield a 22-karat (91.67% purity) gold coin of which over 50 million ounces have been sold globally. This has made the Krugerrand the most widely traded and most liquid gold bullion coin in the world.
Many people out there are rightly worried about where they can hide from the volatility of the global financial system, the deteriorating value of fiat currency and inflationary concerns and are looking for the assurance of a reliable “store of value.” A store of value is an asset that can be stored and reliably retrieved later with its purchasing power intact.
Rael Demby, CEO of The South African Gold Coin Exchange & The Scoin Shop, says, “If you see an end to the global financial system as we know it, gold coins remain an option. As traditional gold bugs, we recognise the facts supporting the arguments for gold coins and the Krugerrand?
So what is the substantiation for gold coins?
Gold is tangible and moveable. As a precious metal, gold has unique properties due to its rarity, durability, fungibility, beauty, resistance to corrosion, divisibility, and malleability. In addition, gold is a highly liquid asset.
Gold’s supply is limited, supporting its role as a store of value—the worldwide supply of gold increases by about 1.5% each year. Gold’s unique properties, mentioned above, make gold a superior store of value. Gold has emerged as the clear winner store of value after thousands of years of competition against other commodity currencies.
History and Stability:
Gold has been used as a store of value for thousands of years. Since Roman times, the purchasing power of gold has been stable enough that people say an ounce of gold can always be used to purchase a good suit. While one might argue about the definition of what a “good suit” is, the idea behind this adage is that the purchasing power of gold has remained constant over a long period.
Central banks and governments across the world own gold as a reserve asset. Moreover, since the Financial Crisis, central banks and governments have been buying more gold to diversify their currency reserves and reduce their reliance upon the U.S. dollar as a reserve asset. If central banks buy gold because they believe gold can serve as a store of value, why should others act differently?
In 1967 The Krugerrand was revolutionary because it democratised gold ownership for retail investors – at the time, an ounce of gold only cost R25. People bought gold as insurance against economic shocks and as an inflation hedge in diversified investment portfolios.
“I can wrap up by saying that we live in a volatile world. Gold offers a safe haven asset that always maintains value,” says Demby.