The Krugerrand coin was specifically produced to offer an easy means for private investors to access the gold bullion market. For the purpose it was created, the Krugerrand exceeded expectations and was wildly successful. It quickly became the most popular gold bullion coin worldwide, and by the end of the 1970s, the term “Krugerrands” was largely synonymous with “gold coins.” If someone said they invested in Krugerrands, it was taken to mean they collected gold coins.
Krugerrands became especially popular with U.S. gold investors, as the commodities markets enjoyed a major bull market during the 1970s. The price of gold soared to over $2,200 an ounce by the end of the decade – a price level it would not approach again until 2011. U.S. investors bought tens of millions of Krugerrands. At that time, no U.S. bullion coins were being minted. The American Eagle gold and silver bullion coins did not arrive on the scene until 1986.
The Krugerrand’s Success
The Krugerrand’s success spawned the minting of gold bullion coins in several other countries as well. Canada began minting its gold “Maple Leaf” coins in 1979, and China’s one-ounce gold “Panda” followed in 1982.
The demand level for Krugerrands varied widely over the years. It rose steadily throughout the 1970s, declined through the late 1980s and into the 1990s, then began to increase again around 1999. Annual production levels reached as low as 24,000 and as high as six million.
By 2018, there were more than 50 million ounces of gold Krugerrands produced. In contrast, while gold American Eagle one-ounce bullion coins also became immensely popular, only about 20 million ounces of them were produced since their original 1986 minting. At one time, the South African Krugerrands made up roughly 90% of all the gold bullion coins in existence worldwide.
Originally, there was just the one-ounce gold Krugerrand coin. The mintings now to include the production of 1/2-ounce, 1/4-ounce, and 1/10-ounce coins.
In addition to the coins being sold outright, Krugerrands are also traded on the Johannesburg Stock Exchange (JSE).
Extract from: CORPORATE FINANCE INSTITUTE
