Krugerrands

Definition

Krugerrands are South African gold coins that were first minted in 1967. These coins contain one ounce of pure gold and were created to help market South African gold to international buyers. The value of a Krugerrand is primarily based on the gold content rather than any nominal currency value.

Phonetic

The phonetic pronunciation of “Krugerrands” is: “Kroo-guh-rands”.

Key Takeaways

1. The Krugerrand is a South African gold coin, which was first minted in 1967 to help market South African gold. It is considered the world’s first modern bullion gold coin.
2. The name of the coin is a combination of the name Paul Kruger, who was the president of the South African Republic, and ‘rand’ is the unit of the South African currency.
3. Unlike most gold bullion coins, the Krugerrand does not have a face value. Its value is purely based on the intrinsic value of its gold content.

Importance

Krugerrands are important in the realm of business and finance as they represent one of the oldest and most trusted forms of gold bullion coins in the world. Originating from South Africa in 1967, Krugerrands were an innovative means for individuals to invest in and own gold. They offer a direct method of investing in gold that negates the need for mining stocks or mutual funds. Additionally, due to their widespread recognition and high gold content, Krugerrands are highly liquid and can be bought or sold at most locations around the globe. Hence, they hold significant importance in global finance and investment markets.

Explanation

Krugerrands are gold bullion coins that were minted in South Africa. Introduced in 1967 by the South African Mint, Krugerrands served a pivotal role as an avenue for private ownership of gold. In contrast to other gold bullion coins, Krugerrands aren’t pure gold, but rather an alloy that is 91.67% gold and 8.33% copper. However, they still contain a full troy ounce of gold. The addition of copper gives the coins their distinctive, more resilient orange tinge, compared to coins made of pure gold. The purpose of Krugerrands is multiple fold. It allows investors to buy a physical asset that is universally recognized, easily stored, and which maintains intrinsic value. It serves as an alternative to investing in gold through futures contracts or exchange-traded funds, offering more direct ownership. Gold, in general, is considered a safe haven investment – a protection against uncertainties in the financial markets. Therefore, by investing in Krugerrands, individuals can hedge their portfolios against economic instabilities or inflations. Another significant feature of Krugerrands, and indeed any form of physical gold, is its liquidity. These coins can be sold virtually anywhere in the world, so they provide a source of immediate funds in case of an emergency.

Examples

1. Investment Portfolio: An individual looking to diversify their investment portfolio decides to purchase Krugerrands due to their high global recognition. The individual views the gold coins as an effective hedge against inflation and currency volatility, and believes that they could potentially increase in value over time. 2. Gold Coin Collection: A hobbyist coin collector with a particular interest in gold coins decides to add Krugerrands to their collection. They manage to acquire these coins from a local coin dealer, and over the years, the value of their Krugerrands appreciates due to the ongoing increase in the price of gold. 3. Wealth Preservation: A wealthy entrepreneur, wary of economic instability, decides to convert a substantial portion of their wealth into Krugerrands. This is because Krugerrands, being physical assets, are considered a safer store of value as compared to paper currency which can be affected by inflation, economic crises or governmental policies. The entrepreneur stores these coins in a secure deposit box for wealth preservation.

Frequently Asked Questions(FAQ)

Related Finance Terms

• Gold Bullion
• South African Mint
• Investment
• Precious Metals
• Gold Coinage

Sources for More Information

• WallStreetMojo
• Investopedia
• Wikipedia
• Corporate Finance Institute