Premium on Krugerrand Sets the Stage for High Demand

June 16, 2010 - At the close of business on June 16, the average premium on the Krugerrand above spot gold prices was about five percent, as the most popular gold coin in the world continues to sell briskly. Gold Price Today noted on June 15 that Rand Refinery, the largest gold smelter in the world, has raised production of Krugerrands to a 25-year high. Not since 1985 has weekly production been this high, according to Debra Thompson, the company’s treasurer. The smelter’s output last week was 30,000 ounces of blank coins. The largest demand segment comes from Germany, as the EU’s sovereign debt crisis rages on.

Other popular gold coins from around the world are becoming increasingly scarce. The New York Times noted in a story last week that “the United States Mint is running short of gold coins,” as sales of American Gold Eagles tripled from April to May. Goldcore, the trading firm out of Dublin, Ireland, says that British gold sovereigns are also getting increasingly difficult to come by. Most gold coins are selling at about a 4.5 percent premium above the price of gold, including the Canadian Maple Leaf, the American Gold Eagle and the Austrian Philharmonic.

Nonetheless, Krugerrands dominate the world trade in gold coins. The coin, introduced in 1967, was the first gold coin in the world denominated by ounce instead of face value. Its value, therefore, is tied directly to the price of gold. Rand Refinery, the only smelter for the Krugerrand, estimates that there are 48 million ounces of gold held in the coin, more than in all other gold coins combined.

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Kevin Johnson

Senior Staff Writer - GoldCoin.net