The Krugerrand

The Krugerrand is the world’s most successful gold bullion coin. Mass-produced since 1970, more than 58 million troy ounces (1,800 tonnes) have been issued.

In the 1960s, South Africa’s gold mines accounted for almost 80% of the Western world’s newly mined gold output.

Anticipating the final end of the Gold Standard (which occurred in 1971, when President Nixon ordered the Federal Reserve to close the “Gold Window”), the Chamber of Mines of South Africa considered it vital to encourage the “man-in-the-street” to invest in gold.

This led to the Chamber developing what became known as a ‘gold bullion coin’, a new concept incorporating two innovative and distinctive features.

Firstly, the coin would contain exactly one ounce of fine gold and carry no face value, so that its value would clearly reflect the prevailing price of gold per troy ounce. And secondly, to ensure the one-ounce coin could be traded close to the gold price, it would be sold to primary distributors at a low premium.

A limited number of proof and proof-like coins were minted in 1967-1969, followed by the issue of the standard one-ounce bullion coin for mass production in 1970. Smaller bullion coins, containing 1/2 ounce, 1/4 ounce and 1/10 ounce of fine gold, were issued in 1980.

Rand Refinery, an accredited manufacturer of London Good Delivery gold bars since 1921, produces the circular gold blanks for minting into Krugerrands by the South African Mint.

From 1973 until the mid-1980s, International Gold Corporation (Intergold), the gold marketing arm of the Chamber of Mines, was responsible for appointing primary distributors and undertaking promotional programmes around the world.

Over this period, the Krugerrand was a phenomenal success, assisted by favourable factors, including the liberalization of the gold market in many countries, a tumultuous global economic environment with high inflation and stock market volatility, and a rapidly rising gold price, which grew from $35 per ounce (1970) to peak at $850 per ounce (1980).

The mass-produced Krugerrand was also fortunate to have no competition from 1970 until the launch of the Canadian Maple Leaf gold bullion coin in 1979.

At that time, some individual investors bought hundreds, sometimes thousands, of one-ounce Krugerrands. In 1978 alone, 6,012,293 coins (187 tonnes) were issued to satisfy worldwide demand.

However, when sanctions were applied to South Africa in the mid-1980s (until the early 1990s), few Krugerrands were exported over the next two decades, and in some years, none. It was during this period that the United States (1986), Australia (1987), the UK (1987) and Austria (1989) launched and established their own ounce-denominated gold bullion coins.

After the 2007-2008 global financial crisis, there occurred a remarkable resurrection. The annual issue started to surge, with the Krugerrand regaining in 2018 its former status as the world’s best-selling gold bullion coin – 2.2 million ounces (69 tonnes) were issued in that year.

The revival was attributed to Rand Refinery and the South African Mint forming in 2013 a joint venture, Prestige Bullion, to take responsibility for the business and marketing of the Krugerrand in South Africa and worldwide.

For many years after its launch, the Krugerrand acted as the international symbol of gold investment. Notwithstanding the Krugerrand’s substantial sales worldwide, its major achievement since then has, arguably, been its impact on gold sentiment and the gold price.

Thanks to Nigel Desebrock, ex Grendon International Research (GIR), International Gold Corporation, and author of The Industry Catalogue of Gold Bullion Coins