With fall of apartheid, Krugerrands regain luster

June 19, 1994|By Seattle Times

The South African Krugerrand, once the best-selling gold coin before imports to the United States were banned in 1985, is staging a comeback.

Craig Rhyne, owner of Rhyne Precious Metals & Jewelry in Seattle, credits an advertising blitz by the Chamber of Mines, an association of South African mining companies, along with renewed interest in gold in general and the change of government in South Africa.

"A lot of gold buyers who had a problem with apartheid are buying Krugs who wouldn't touch them before," said Mr. Rhyne, whose sales in new and secondary market Krugerrands have jumped 42 percent since the campaign began last month.

The U.S. government enacted a ban on the import of Krugerrands as part of sanctions against the former government in South Africa for its practice of apartheid, or racial separation. Although Krugerrands sold in the secondary market between collectors and dealers, no new coins were imported from 1985 until the ban was lifted in 1991.

The Chamber of Mines launched an ad campaign last month to promote the Krugerrand again to U.S. buyers. The campaign is aimed at raising the coin's premium and expanding the market for gold bullion coins.

The association placed ads in Kiplinger's Personal Finance, Worth, Smart Money and Money magazines. It also launched television and newspaper advertising in four key cities including Seattle, said Elizabeth Rech, marketing representative for the Krugerrand in the United States and Germany.

Since the ads started running, some dealers have reported increases in Krugerrand sales as high as 40 percent to 70 percent, Ms. Rech said.

Now that South Africa has a new government, buying the Krugerrand takes on more positive connotations than it once did.

Ms. Rech said, however, that her organization is not basing its marketing strategy on those who may buy Krugerrands to support South Africa's new leaders.

"The day Nelson Mandela was inaugurated was a one-day event," said Ms. Rech. "We would never tie a whole campaign to a single event in history. What if it didn't turn out right?"

The campaign, which began before the elections in South Africa and is expected to continue into next year, instead centers on the permanence and continuing value of gold and its appropriateness as a gift, especially for graduations.

The increased interest has driven the coin's premium to 2 percent, up 1.5 percentage points from the start of the campaign, said Mr. Rhyne. The premium is the price added to the flat cost of the gold, known as the "spot" price.

A 1-ounce Krugerrand currently sells for $398.50. The premiums for the Canadian Maple Leaf and American Eagle gold bullion coins are 3.1 percent, meaning both are selling for $405, or

$21.75 over the spot price, including a dealer commission.

The Chamber of Mines estimates more than 20 million Krugerrands are held by investors, coin dealers, banks and others in the United States. Some 53 million have been sold worldwide since the coin's first minting in 1967.

When the United States lifted the ban in 1991, the premium was almost nonexistent, said Mr. Rhyne. Premiums and sales of Krugerrands didn't pick up significantly in the following years, either. "Buying the Krugerrand still had political connotations," said Bill Emery, vice president of Fiscal & Monetary Services of Bridgewater, Mass.

The Krugerrand is named for Paul Kruger, a statesman of the South African Republic at the turn of the century. His picture appears on one side of the coin. The springbok, a South African gazelle and the national animal of South Africa, graces the flip side.

At its peak in 1978, 2.3 million ounces of Krugerrands were sold in the United States and twice that amount in the rest of the world, said Ms. Rech. By early 1985, the number of Krugerrand ounces sold in the United States had dropped to 260,000, the casualty of buyer fear about U.S. sanctions and increased competition.

Among the most popular coins today are the Maple Leaf, the Eagle, the Australian Kangaroo Nugget, the Austrian Vienna Philharmonic and the Krugerrand.

In 1993, the American Eagle was the top-selling bullion coin in the world, with sales of 514,000 ounces, according to the U.S. Mint.

People invest in gold coins for several reasons, said Rhyne. Gold is a hedge against inflation. Some investors speculate in gold, betting it will rise quickly in value. Others buy gold as gifts, for its beauty and value.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.