A Guide to Buying and Selling Krugerrands in South Africa

by December 13, 2024 · Business / Money

Krugerrands are iconic gold coins that have become a popular investment option for South Africans. Their value is directly tied to the gold market, making them both a fascinating and potentially lucrative asset. If you’re considering adding Krugerrands to your portfolio, here’s everything you need to know—from how their prices are determined to the steps involved in buying, selling, and safeguarding these coins. Unlike other coins, Krugerrands don’t display a face value. Instead, their worth is directly linked to the price of gold, which fluctuates based on the global market. This means that when the price of gold rises, so does the value of your Krugerrand. Investors are advised to buy Krugerrands when gold prices are low or when the US dollar weakens against the South African rand. However, these conditions don’t always align with when funds are available. For medium to long-term investors, buying regularly can help smooth out price fluctuations. Historically, Krugerrands have shown consistent growth, doubling in value approximately every five years since their inception in 1967.

How to Buy Krugerrands

Purchasing Krugerrands involves more than just finding a dealer. Follow these steps to ensure a safe and sound investment:

1. Research Your Dealer

Not all dealers are created equal, so it’s crucial to vet your vendor. Look for dealers approved by the South African Association of Numismatic Dealers (SAAND) and the South African Mint. These bodies set quality and ethical standards to ensure you’re getting authentic coins.

2. Understand Pricing

The price of a Krugerrand is calculated based on the global gold price, which is quoted in US dollars. To determine the cost:

  • Convert the gold price from USD to ZAR using the current exchange rate.
  • Add a vendor commission, typically between 6% and 12%.

This final figure is often referred to as the “spot price” of gold plus commission. Be sure to compare rates among dealers to get the best deal.

3. Contact the Dealer

Krugerrands come in various sizes to suit different budgets:

  • 1/10-ounce
  • 1/4-ounce
  • 1/2-ounce
  • 1-ounce

Not all dealers carry stock on-site, so you may need to place an order. Payment can usually be made via cash or EFT (electronic funds transfer). Note that card payments are less common due to bank fees, and cash may carry handling fees.

4. Complete the Purchase

When collecting your coins, you’ll need to present valid identification, such as a South African ID or driver’s license. You’ll also receive a certificate of authentication detailing your coin’s specifics and value.

Safeguarding Your Krugerrands

Once you’ve purchased your Krugerrands, keeping them secure is vital. Losing them or having them stolen could mean losing a significant portion of your savings.

Safe Custody Options

  • Many dealers offer safety deposit services, which may be free or come with a fee.
  • Private safety deposit boxes provide privacy and reduce the risk of personal loss.

However, not all services are foolproof. For example, there have been cases of theft from bank safety deposit boxes, so it’s crucial to choose a trusted vendor with robust security measures.

Maintenance and Privacy

Proper storage ensures your coins maintain their quality and resale value. Additionally, select a bullion specialist who respects your privacy and has a strict code of ethics to safeguard your personal and financial information.

Selling Krugerrands

When the time comes to sell, the process is straightforward. The dealer will typically calculate the value based on the current gold spot price minus a small commission for resale. Ensure you have all documentation, including your certificate of authentication, to secure the best price.

Alternative Precious Metal Investments

Krugerrands may be the most well-known option, but they’re not the only way to invest in precious metals. Silver coins and bullion are also available and offer a more affordable entry point into the market.

Investing in Krugerrands is a time-tested way to preserve and grow wealth, especially for those looking to diversify their portfolios with tangible assets. By following these steps and staying informed about market trends, you can make the most of your investment in these iconic gold coins.

Image credit : https://www.pexels.com/photo/close-up-photo-of-gold-round-coins-8442423/

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