How to invest in KrugerRands

May 3, 2022 | Articles, Stock Market 101

Diversifying your investment exposure through Krugerrands

SAMUKELO ZWANE

THE GEOPOLITICAL tension between Russia and Ukraine has had a significant impact on financial markets and commodities across the globe, especially on oil.

This volatility created some uncertainty, but this was an opportune time for investors to think of strategic ways to diversify their investment exposure through gold and Krugerrands to help create a safe-haven in their investment journey.

Physical commodities are used by investors to spread portfolio risk, as certain commodities do not move in tandem with the equity market.

One such commodity is gold—which is an advisable diversification tool for investors to turn to in times of market uncertainty, as it helps protect their investments from unfavourable market movements

What is diversification?

Diversification means investing in assets whose returns do not move in the same direction or assets with returns that are negatively correlated.  Returns on gold do not move with the market—and at times of market stress usually moves in the opposite direction, making it a very useful tool when looking to spread risk in a portfolio.

There are several investment options available for an investor to obtain exposure to gold.  An investor can invest in shares of companies which mine gold, gold exchange-traded funds, and directly through Krugerrands.  The value of Krugerrands is directly linked to the value of gold—and in times of uncertainty or inflation, gold is seen a natural investment safe-haven and hedge against inflation.

We know and understand that investors are always looking for alternative ways to protect their investments from future market events.  One thing that comes to light in a market event is the role that diversification plays in sheltering investors from total losses.

However, with unexpected events like the ones experienced over the last two years, any weakness in a diversification strategy is magnified.

How to invest

Krugerrands can be purchased through FNB.  We offer investors the option of taking delivery or holding their Krugerrands in custody with FNB (in a secured storage facility at Rand Refinery).  For added safety and peace of mind, all de-liveries of Krugerrands are insured in transit.

If clients wish to hold their Krugerrands with FNB, they can buy, sell and manage their Krugerrands on our App or online banking.  Further to this, if your coins are stored at Rand Refinery, FNB guarantees to buy back your Krugerrands at any time, making this an extremely liquid asset that can easily be converted to cash.

Samukelo Zwane is the head of product at FNB Wealth and Investments.

What is a Krugerrand?

The Krugerrand is a South African gold coin, first minted on 3 July 1967 to help market South African gold and produced by Rand Refinery and the South African Mint.

The name is a compound of Paul Kruger, the former President of the Zuid-Afrikaansche Republiek (1852-1902) (depicted on the obverse), and rand, the South African unit of currency.

On the reverse side of the Krugerrand is a springbok, South Africa’s national animal.

By 1980 the Krugerrand accounted for more than 90% of the global gold coin market, and was the number one choice for investors buying gold. However, during the 1980s and 1990s, Krugerrands fell out of favor as some western countries forbade import of the Krugerrand because of its association with the apartheid government of South Africa.

Although gold Krugerrand coins have no face value, they are considered legal tender in South Africa by the South African Reserve Bank Act (SARBA) of 1989.

Source: Wikipedia (https://en.wikipedia.org/wiki/Krugerrand).  Accessed on 30 April 2022