Krugerrand: the bullion currency under embargo

Krugerrand: the bullion currency under embargo

By tyler rossi by CoinWeek …..

Whether consciously or not, money is an extremely effective tool for the government to spread a political message. Many examples can be found from modern and ancient history of coins that came to represent a foreign people. This was so true for him. vikings who hoarded silver from the Middle East as if it were for the british pound in the colonies. the south african krugerrand may be the best known today.

In the late 1960s, South Africa It produced approximately 70% of the total annual gold mined worldwide. High-purity gold bullion coins were not minted at that time, and Praetorship saw an opportunity. When the first Krugerrand was released to the public in 1967, these coins garnered instant attention from gold bullion speculators and the numismatic community. Minted from an alloy of 91.67% gold and 8.13% copper, the Krugerrand was the first modern gold coin to contain more than one troy ounce of 22 karat gold.

Furthermore, due to their unique composition, the Krugerrands could be guaranteed to withstand the rigors of circulation. Not only were they expected to last, but the government also decided to experiment with their value. By not giving the currency a fixed nominal face value, the legal tender value of the coins is linked to the market price of gold. In fact, anyone can return a Krugerrand to the South African government and is guaranteed to receive the bullion spot value of the coin in cash. This made sense as the coins were being sold at “5% above the spot price”, ensuring that the government makes a profit (Isikoff).

These coins quickly became synonymous with gold bullion, and by the late 1970s and early 1980s, the Krugerrand comprised 90% of the international bullion coin market. South Africa produced more than six million pieces in 1978 and in 1985 there were between 15 and 20 million Krugerrands in the United States (Isikoff, Laver and Preece).

An economic success that brought large amounts of much-needed cash into the national economy, the Krugerrand was also a symbol of racial segregation and the colonial history of the country. Without even looking at the clear economic inequalities perpetuated by the South African gold industry, where most of the workers were members of the oppressed black majority, the obverse of the coin shows a bust of paul kruger designed by Otto Schultz. As president of the ephemeral Boer Republic, which lasted from 1883 to 1900, Kruger also participated in many dispossession wars, during which he helped drive large numbers of black inhabitants from their land. Also featured on the obverse is the legend SOUTH AFRICA, in both English and Afrikaans. On the reverse is a gazelle running to the right, flanked by the date, with the legend 1 oz. fine gold in Afrikaans and English and with the denomination (Krugerrand) above.

As such, the Krugerrand inadvertently became a condemned international symbol of South Africa and the government’s brutal apartheid regime. Several countries began to ban the Krugerrand, both officially and unofficially. For example, in 1984, the Bank of Nova Scotia issued a statement announcing that it would no longer purchase Krugerrands from the South African Chamber of Mines due to “absolute repugnance to racism in any of its forms” (Laver and Preece).

The drop was so dramatic that the sale of Krugerrands in the first six months of 1985 totaled only $87.8 million. This is a massive decline from 1984, when over $484 million in sales were recorded in the US alone (Isikoff).

Things came to a head in the United States when President ronald reagan announced a package of sanctions imposed against the South African government in October 1985. Included in this package was a total ban on the importation of Krugerrand. While it would not be illegal to own coins that are already in the US, you would not be able to bring new pieces into the country. The idea was to prevent cash proceeds raised through the sale of new coins from being funneled back to Pretoria. The justification for this import ban was that the Krugerrand is “perceived in Congress as an important symbol of apartheid” (Isikoff 1985).

Immediately after the ban was announced, the US domestic market reacted violently, with “speculators…buying them in anticipation of future shortages” (Isikoff). However, the price soon began to fall. Shortly after the initial buying frenzy, the coin’s premium fell from 3% above the meltdown to about 1%. This was accompanied by a general market downturn, especially as investors and collectors were now able to buy canadian maple leaf Y chinese panda gold bullion coins. walter perschkePresident of Numisco Rare Coins Ltd. in chicagohe even claimed that his company was “getting to the point where it’s hard to find a buyer for Krugerrands” and that his “retail sales are [sic.] running nine to one in favor of Maple Leaf” (Laver and Preece).

This trend would only continue when President Reagan ordered the Treasury Secretary james baker to investigate the possibility of minting an American gold coin. A year later, in 1986, the American Eagle Gold Bullion Program It was presented. The ban not only affected the US coin market, despite claims to the contrary by the South African Chamber of Mines, but also forced a “stop production of Krugerrand” and the layoff of at least 10 workers. of the black majority (Boyle). Shortly thereafter, Krugerrand mintage totals plummeted from 2,685,466 in 1984 to 874,995 in 1985, and only 21,040 in 1986.

In the face of such sustained international opposition and intense internal protest, it became impossible for the South African government to maintain its racist policies, and apartheid ended six years later, in 1991. With the end of apartheid came the inauguration of a more representative government. led by anti-apartheid activist Nelson Mandela and the lifting of international sanctions, including the US ban on Krugerrands. Interestingly, the Krugerrand did not undergo a redesign to better fit the identity of the nation. Instead, Mandela declared that “the most popular gold coins [including the Krugerrand] in the world must be appreciated” (Globalbullion).

During the official six-year ban, investors were interested in the Krugerrand almost entirely as a bullion vehicle and not as a coin. This led to over two million Krugerrands being melted down in the United States (JOC). This large decrease in supply only added to the newfound interest in South African coins when the ban was lifted. In fact, during the three years after the ban was reversed, many dealers saw a skyrocketing increase in new sales and resales. Some dealers even reported increases “as much as 40 to 70 percent” (seattle times). The South African Chamber of Mines also launched a so-called “publicity blitz” in 1994 (seattle times). Taken together, these events caused the coin’s premium to return to 2% in 1994, the pre-ban premium level.

Today, gold remains strong in the face of economic uncertainty, South African mines are producing again post-COVID, and the Krugerrand remains one of the most famous and popular bullion coins in the world. richard collocottCEO of prestige bulliona joint venture between south african mint and the rand refineryannounced that the demand for Krugerrands has increased at a rate of approximately 50% per year since 2015.

While the same year of issue (the newer dated type) and the first year of issue (1967) carry a slightly higher premium, collectors can find reliable examples at 2.5% to 5% above the cast. When this article was published, gold cost $1,836, so a Kruggerand should cost between $1,881 and $1,927.

Interested investors can purchase Krugerrands in denominated 1, 1/2, 1/4 and 1/10 ounce pieces from any reputable dealer.

Happy collecting!

* * *

Sources

Boyle – https://www.upi.com/Archives/1985/11/13/South-Africa-stopped-production-of-its-Krugerrand-gold-coins/4363500706000/

Isikoff – https://www.washingtonpost.com/archive/politics/1985/10/03/krugerrand-ban-spurs-new-demand-for-coin/ca2c7a4f-17a2-4381-82f3-208840151e00/

JOC – https://www.joc.com/krugerrand-reaction-end-ban-slow-chicago-tribune_19910714.html

Laver and Preece – https://archive.macleans.ca/article/1985/8/19/a-treasured-coins-lost-lustre

https://www.baltimoresun.com/news/bs-xpm-1994-06-19-1994170109-story.html

Home

https://www.reaganlibrary.gov/archives/speech/message-congress-reporting-economic-sanctions-against-south-africa

https://www.chicagotribune.com/news/ct-xpm-1985-10-02-8503070020-story.html

https://www.mining-technology.com/analysis/history-of-mining-in-south-africa/

https://globalbullionsuppliers.com/blogs/blog/silver-krugerrand-historical-image-needs-remake

Demand for Krugerrands is through the roof

* * *

About the Author

tyler rossi He is currently a graduate student at Heller School of Management and Social Policy at Brandeis University and studies Sustainable International Development and Conflict Resolution. Before graduating from American University in Washington D.C.I work for save the children create and execute international development projects. Tyler recently returned to the US after living abroad in the Republic of North Macedoniawhere he served as Peace Corps Volunteer for three years. Tyler is an avid numismatist and for more than a decade has cultivated a deep interest in pre-modern and ancient coins from around the world. He is a member of the American Numismatic Association (ANA).

Leave a Comment