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Krugerrand: The Embargoed Bullion Coin

1978 South African Krugerrands. Image: Adobe Stock.
1978 South African Krugerrands. Image: Adobe Stock.

By Tyler Rossi for CoinWeek …..

Whether consciously or not, money is an extremely effective tool that government possesses to disseminate a political message. Many examples can be found from both modern and ancient history of coins coming to represent a foreign people. This was as true for the Vikings who hoarded Middle Eastern silver as it was for the British Pound in the colonies. The South African Krugerrand may be the most well-known today.

Back in the late 1960s, South Africa produced an estimated 70% of the annual total of gold mined globally. At that time there were no high-purity gold bullion coins being struck, and Pretoria saw an opportunity. When the first Krugerrand was released to the public in 1967, these coins drew instant attention from gold bullion speculators and the numismatic community. Struck from a 91.67% gold and 8.13% copper alloy, the Krugerrand was the first modern gold coin to contain over one troy ounce of 22 karat gold.

Additionally, due to their unique composition, it could be assured that Krugerrands would be able 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 coin a fixed denominated face value, the legal tender value of the coins is pegged to the market price of gold. In fact, anyone can return a Krugerrand to the South African government and they are guaranteed to receive the bullion spot value of the coin back in cash. This made sense since the coins were sold at “5% over the spot price,” ensuring that the government will make a profit (Isikoff).

These coins quickly became synonymous with gold bullion, and by the late 1970s and early ’80s the Krugerrand comprised 90% of the international bullion coin market. South Africa produced over six million pieces in 1978 and by 1985, there were an estimated 15 million to 20 million Krugerrands in the United States (Isikoff; Laver and Preece).

An economic success that brought large quantities of needed cash into the national economy, the Krugerrand was also a symbol of apartheid and the country’s colonial history. Not even looking into the clear economic inequalities perpetuated by the South African gold industry, where most workers were members of the oppressed Black majority, the obverse of the coin depicts a bust of Paul Kruger designed by Otto Schultz. As the president of the short-lived Boer Republic, which lasted from 1883 to 1900, Kruger also participated in many wars of dispossession, during which he helped force large numbers of Black inhabitants off of their land. Also included on the obverse is the legend SOUTH AFRICA, in both English and Afrikaans. On the reverse is a springbok 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. A number of countries began to ban the Krugerrand, both officially and unofficially. For example, in 1984, the Bank of Nova Scotia released a statement announcing that it would no longer purchase Krugerrands from the South African Chamber of Mines due to the “absolute repugnance of racism in any form” (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).

1986 American Gold Eagle Bullion Coin.
1986 American Gold Eagle Bullion Coin.

Things came to a tipping point in the United States when President Ronald Reagan announced a package of sanctions levied against the South African government in October 1985. Included in this package was a complete ban on the importation of the Krugerrand. While it would not be illegal to own coins already in the US, you could not bring new pieces into the country. The idea was to stop any cash proceeds raised through the sale of new coins from being funneled back to Pretoria. The rationale for this import ban was that the Krugerrand is “perceived in the Congress as an important symbol of apartheid” (Isikoff 1985).

Immediately after the ban was announced, the domestic US market reacted violently, with “speculators … buying them up in anticipation of future scarcity” (Isikoff). However, the price soon began to slip. Shortly after the initial buying frenzy, the coin’s premium dropped from 3% above melt to approximately 1%. This was accompanied by a general slowing of the market, especially since investors and collectors could now buy Canadian Maple Leaf and Chinese Panda gold bullion coins. Walter Perschke, President of Numisco Rare Coins Ltd. in Chicago, even claimed that his company was “getting to the point where it is hard to find a buyer for Krugerrands,” and that their “retail sales are [sic.] running nine-to-one in favor of the Maple Leaf” (Laver and Preece).

1980 Canada Maple Leaf Gold Coin.
1980 Canada Maple Leaf Gold Coin.

This trend would only continue when President Reagan ordered Treasury Secretary James Baker to investigate the possibility of minting a U.S. gold coin. A year later in 1986, the American Eagle Gold Bullion Program was introduced. Not only did the ban affect the US coin market, despite claims to the contrary by the South African Chamber of Mines, it also forced the “halting of Krugerrand production” and the firing of at least 10 Black majority workers (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 domestic protest, it became impossible for the South African government to maintain its racist policies, and apartheid was 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 nation’s identity. Instead, Mandela declared that “the most popular gold coins [including the Krugerrand] in the world should be cherished” (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 the South African coins when the ban was lifted. In fact, during the three years following the ban’s reversal, many dealers saw skyrocketing numbers of new sales and resales. Some dealers even reported increases “as high as 40 percent to 70 percent” (Seattle Times). The South African Chamber of Mines also released a so-called “advertising blitz” in 1994 (Seattle Times). All together, these events drove the coin’s premium back 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 after COVID, and the Krugerrand remains one of the world’s most famous and popular bullion coins. Richard Collocott, Managing Director of Prestige Bullion, a joint venture between the South African Mint and the Rand Refinery, announced that demand for Krugerrands has risen at a rate of approximately 50% per year since 2015.

While same-year-of-issue (the newest dated type) and the first-year-of-issue (1967) carry a slightly larger premium, collectors can reliably find examples for between 2.5% and 5% above melt. When this article was published, gold cost $1,836, so a Kruggerand should cost somewhere in the ballpark between $1,881 and $1,927.

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

Happy collecting!

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Boyle – https://www.upi.com/Archives/1985/11/13/South-Africa-halted-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








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Tyler Rossi
Tyler Rossi
Tyler Rossi is currently a graduate student at Brandeis University's Heller School of Social Policy and Management and studies sustainable international development and conflict resolution. Before graduating from American University in Washington, D.C., he worked for Save the Children, creating and running international development projects. Recently, Tyler returned to the U.S. from living abroad in the Republic of North Macedonia, where he served as a Peace Corps volunteer for three years. Tyler is an avid numismatist and for over a decade has cultivated a deep interest in pre-modern and ancient coinage from around the world. He is a member of the American Numismatic Association (ANA).

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