NASTASSIA ARENDSE: We’re going to be looking at investing in Krugerrands as part of our Investment Unusual features on Tuesdays. The Krugerrand has actually been dubbed the world’s first successful and widely-traded golf bullion coin. It has this year celebrated 50 years since its minting.
To talk about investing in Krugerrands I’m joined on the line by Glenn Schoeman, who is director at the Gold Reef City Mint. Glenn, thank you so much for your time.
GLENN SCHOEMAN: Hello, Nastassia, and nice to be with you. Thank you.
NASTASSIA ARENDSE: All of us have seen one of these Krugerrands advertisements saying “Invest in Krugerrands”. When you go through a mall, you always see one of those stalls talking about Krugerrands. But my question is, how do I get involved in Krugerrand investments?
GLENN SCHOEMAN: Well, Krugerrands are one of the easiest ways to actually take your money and put it into something worthwhile. I was listening to David [Shapiro] earlier on, talking about the stock market, and not everyone can involved in the stock exchange and in shares and so on. However, when it comes to investing in Krugerrands, it’s relatively easy.
There are a number of coin dealers around the country. You can go through to them. It’s always a good idea to check prices and shop around a bit, and don’t just buy for the very first price that has been given to you. Shop around a bit. If you go on the internet you can see a lot of dealers as well. It’s almost like buying a loaf of bread – going into the shop, handing over your money and you have your Krugerrand.
NASTASSIA ARENDSE: Take me through the performance of the Krugerrand. Normally people see gold as a bellwether for the state of the world. Is there the same view on the Krugerrand? How has it performed over the past few years or so?
GLENN SCHOEMAN: Well, if we go back to the start of it in 1967, 50 years ago, it’s quite astounding to think that they sold at R26 a piece. It was something that they battled to sell. Today, 50 years later, they are trading at – the price during the course of the day today was R17 850. So it just gives you an indication of how this has changed over the years and how value has changed.
Also bear in mind it is subject to the gold price, which is generally based on the US dollar; of course our rand/dollar exchange rate also then comes into play. So you have to take that into account. What you find is that, as the gold price in dollars tends to increase, which it will, there is no question about that, you’ll find that the rand price, even though your rand might strengthen slightly, normally goes up a little as well.
Then of course the converse happens once the dollar price of the Krugerrand goes down slightly, and your rand will then weaken. You’ll probably find that your price in terms of rands will go up again. So if you have a look at a graph, particularly over the last five to six years, you have a graph that goes up at about a 45-degree angle. So when you find that that graph turns in terms of US dollars, and comes down slightly, the price in rands just carries on going up and up and up. People say to me, “Where will it be in ten years’ time?” Heaven alone knows, I just hope we’ve got enough paper on this raft to actually pick it up, because it’s going to go quite high, it’s going to go a lot higher.
NASTASSIA ARENDSE: What about the people who say “Why not buy a gold ETF? Why do I need to physically hold the actual coin?”
GLENN SCHOEMAN: Yes, again people say if you buy an ETF you are basically buying a piece of paper. Everybody is talking about the currencies worldwide – are they stable, is everything okay with that? And if there should be a banking failure, like people have been talking about for the last five or six years, there will be a crisis with paper Krugerrands, paper gold as it were. It’s merely a piece of paper and you actually never physically own that piece of gold.
However, if you buy the physical Krugerrand, you have that and no one can take that away from you, and you’ll always have that.
NASTASSIA ARENDSE: I’ve seen ads that say “Sell your Krugerrands for a particular amount, or sell it to us,” for instance. What’s the demand-supply of Krugerrands right now?
GLENN SCHOEMAN: Right now in the country there are about 6/7 000 ounces of Krugerrands made a day, and we are sold out every single day. If we don’t place our order with Treasury on the previous day, we just don’t get any that day. So we have to pre-book on, let’s say, a Monday to pick up coins on a Tuesday. If you then want to go and buy coins by 10 o’clock on Tuesday morning, forget it. Sold out for the day. So demand generally is increasing almost daily.
NASTASSIA ARENDSE: And because you don’t want to fall victim to some kind of scam, what are some of the features that we should be looking for if someone tries to sell us a Krugerrand, or we may have seen one. What should we be looking out for?
GLENN SCHOEMAN: There are forgeries around. There are a couple of forgeries that have been picked up recently coming from China. But I think it’s wise to know whom you are buying from. Make sure that when you buy from a dealer he is a dealer that’s been around, a dealer that’s got a reputation that is clean, so you can trust this person, because when buying stuff just from any old guy out there you never know what you are buying. You have to be careful because, yes, there are forgeries. There are not a lot, but there are forgeries – and the average man in the street will find it very difficult to pick out a forgery from a genuine Krugerrand.
NASTASSIA ARENDSE: Globally we are still dealing with Brexit or what’s going to happen there in terms of some bankers saying that they are not going to be based in London, they are looking at other options. Where are you seeing gold right now, especially if you want to link it to the demand for Krugerrands at this particular point?
GLENN SCHOEMAN: If you look at the sort of general currencies worldwide, everyone is talking about the dollar starting to crash, everyone is talking about Brexit, what’s going to happen, what’s going to happen? The euro is in trouble. There are so many factors that actually come into play. At the end of the day an ounce of gold is an ounce of gold and that is something worth hanging on to. People are talking about currencies and the big word of course is “fiat currency”. Fiat currencies are just pieces of paper, which they are. Most of them are no longer backed by the gold standard, so they are actually worth nothing – they are paper. However, we will carry on trading with currencies and paper for a long, long time But if you look, particularly in troubled times, what do we all go back to? We go back to something safe, a safe haven, and that’s gold.
NASTASSIA ARENDSE: All right, Glenn. Thank you so much for your time.