South Africans rushing to buy Krugerrands 

FNB has seen strong demand from clients buying Krugerrands on its trading platforms as the price of gold hovers near record highs. 

Over the last year, the bank has assisted with facilitating the delivery of over 2,200 Krugerrands on its trading platforms.

“FNB currently holds over R1 billion worth of coins in its portfolio on behalf of its clients,” the head of share investing at FNB Wealth and Investments, Sebastian Pillay, said.

He explained that the bank’s customers diversify their investment portfolios to hedge against unfavourable market conditions.

The coins are still considered legal tender in South Africa, but their real value lies in their gold content. 

“Krugerrands are linked to the international value of gold, which means that the investment is protected from local currency volatility and devaluation.”

This makes it a unique asset class that is seen as a safe haven for investors to protect a portion of their wealth from inflation, volatility, and geopolitical tension. 

However, Pillay said some people still just buy Krugerrands for sentimental reasons. 

What makes Krugerrands particularly attractive is its liquidity. They give investors a safe haven of gold and the ability to trade it frequently. 

Many South Africans are selling their Krugerrands to take advantage of the record-high gold price. A coin containing one ounce of gold sells for R69,000.

South African Gold Coin Exchange and the Scoin Shop CEO Rael Demby said his company has experienced an increase in the physical trading of Krugerrands. 

He said family estates and individuals who have collected these over 20 to 30 years have finally decided to cash in on their investments due to the high gold price. 

Gold’s record run

Demand for Krugerrands has largely been driven by a wider interest in gold, as the precious metal has shot up to record highs in recent weeks. 

FNB’s Chantal Marx explained that when markets are stressed or uncertain, gold generally appreciates in value due to its safe-haven appeal.

This demand has certainly supported the bulls in the recent bull run against a backdrop of major geopolitical risks.

This is only one reason why the price of gold has reached all-time highs. Gold is also widely regarded as an inflation “hedge”, protecting its holders from an erosion in purchase power.

Asset managers are extremely active in the gold futures market as inflation is expected to remain higher for longer. 

This is exacerbated by geopolitical tension around the world, with wars in Africa, Europe, and the Middle East. Marx said this has also drawn in large speculators looking to capitalise on short-term bumps in the gold price. 

Another reason for its rally is that central banks heavily increased their gold reserves in 2023 and continued to build reserves in the first few months of 2024. 

This has been a function of rising geopolitical risk and an active effort by some to reduce their dependency on the US dollar following the freezing of Russian central bank assets in 2022.

Notably, China, India, and Singapore have been heavy buyers so far this year.

Finally, gold jewellery consumption, particularly in China post-Covid-19 restrictions, has been strong. 

The steady increase in the price of gold can be seen in the graph below.