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FNB selling Krugerrands online

By JGalt, on February 15th, 2011

FNB is, as of today, giving clients the ability to purchase krugerrands through its online share trading facility. See FNB website on it here.

MoneyVarious sizes are available for purchase and there will be no transaction fee.  Custody fee will be 0.86% per annum, which includes insurance.  The physical coin will be kept at the Rand Refinery, which is where SA Bullion also stores its bullion.

At face value, it looks like FNB wants to use this to lure more people into its online share trading facility that will draw a monthly fee, as you have to be a share trading account holder to be able to purchase krugerrands.

Clearly there is an underlying demand for gold money, a trend from which FNB wishes to profit.

FNB will compete with gold ETF’s at this stage. Gold ETF’s operate on a fractional reserve basis, which means they do not own all the physical underlying at all times. They take your money, but don’t buy your gold.  It is a ponzi-scheme and will be exposed when a large number of investors demand redemption of the physical metal.

We have as of yet not been able to establish whether FNB’s arrangement with the Rand Refinery and you is a bailment transaction, where you as the investor has see-through and owns the physical directly, so if FNB goes belly up or if you choose to take delivery of the physical immediately, they’ll be obligated to deliver the metal.

Does FNB know that promoting gold as money will ultimately lead to its own undoing?

Or is it aware that it can make money off this endeavour by tapping a cheap source of capital without immediately purchasing the underlying, or withholding the purchase indefinately?  FNB will be hoping that a small percentage of people take the option of taking delivery of the coins.

One thing is certain, this is part of a global trend toward using gold as money again.

Watch this space.

By JGalt, on February 15th, 2011 | Category: Gold, Monetary Economics

4 Responses to “FNB selling Krugerrands online”

  1. Simon Brown says:
    February 15, 2011 at 14:52

    The ABSA gold ETF (GLD) is fully backed by gold. Locally ETN’s are not backed by the underlying instrument and international it is typically fractional.

  2. Reader says:
    February 16, 2011 at 10:33

    The moneyweb article says “FNB is offering ownership of physical gold with safe custody”. I interpret that to mean you actually own a coin. From what i know about the ABSA ETF, each unit is a fraction of an ounce of gold without the option of ever taking delivery of the gold. You get exposure to the gold price, not possession of gold. The bullion is held in London, presumably in Barclays.

  3. Bullion Investor says:
    February 16, 2011 at 14:11

    I have just read the FNB FAQ, it would appear that FNB is paying 6-8% above the rand gold price to the refinery. I acquire my physical gold bullion Krugerrands via SA Bullion and pay a fixed 3% over the gold price. I also do not have to pay a monthly service charge as the BullionGold Facility they provide is free to operate. I own my gold outright, it is vaulted in my name, insured and perfectly liquid for cash redemption and available for delivery on instruction. I receive excellent reporting and service. http://www.facebook.com/sabullion

  4. Krugerrands says:
    March 8, 2011 at 14:00

    Thanks!I want to buy Krugerrands gold coin.But i have not any storage solution for this.I am searching a bank.Can FNB give me solution of this problem.