In South Africa, the ideal way of investing in gold bullion is Krugerrands. While there are a number of pros for owning gold in the form of Krugerrands (recognisability, history, ease of acquisition, legal tender status, and so on), the immediate and chief advantage is undoubtedly the price. Simply stated, it is the cheapest available gold bullion product on the South African market.
While price considerations are undoubtedly very important, there are other factors that should influence your decision pertaining to what form of gold bullion you should purchase. Stated in the form of a question; what are the advantages of purchasing international bullion coins instead of Krugerrands? There are three that I think are important to be aware of.
The first relates to the advantage of taking the gold out of the country in the case of a holiday or emigration. The current regulation, as per the South African Reserve Bank’s website, is as follows: Banks may allow the export of Krugerrand coins or the equivalent in fractional Krugerrand coins up to an amount of R30 000 as gifts by residents to non-residents (www.resbank.co.za).
However, currently, there is no legislation preventing owners from taking gold bullion coins issued by other countries (legal tender) out of South Africa. The only rule is that it would have to be below R1 million in value, or, part of the R1 million yearly allowance. So, in the case of leaving the country, therefore, it seems more practical to own international gold bullion that is easily transferrable and does not require long administrative procedures.
Secondly, international gold bullion coins are the cheapest way to own gold that is easily ‘exportable’. The cheapest gold coin that may be classified as a collectable/numismatic coin that is not considered to be part of the R30,000.00 export restriction, is the proof Krugerrand (minted by the South African Mint). The current price of a 1 oz proof Krugerrand is just over R43,000.00 (the 2022 price, not the 2023 pricing which is not yet determined). Other 1 oz gold coins are R47,000.00 Big 5 Series). Therefore, it seems that it is financially prudent to diversify into international gold bullion coins as well. This is the case at least from the perspective of paying the lowest premium per oz of gold that is not under the current export restriction.
Thirdly, VAT should not be seen as a deterrent, since both gold Krugerrands and international bullion coins have a market-related price within the South African bullion investment market. It is this market-related price that is important, not the pricing composition. A Krugerrand is bought VAT free, but when it is sold, VAT is not recovered. Inversely, if an international gold bullion coin is bought with VAT, it is then recovered when it is sold.
In conclusion, I wanted to state categorically that I am not advocating abandoning purchasing Krugerrands. Rather, it is my personal opinion that it makes a great deal of practical sense to diversify into international gold bullion coins, especially if emigrating or taking gold out of the country is within your future realm of possibilities.
Article courtesy of Silver-Sphere
