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If the only thing that has held you back from buying gold coins is the risk that no-one will want to buy them from you one day, review this passage from the SARB website:
“The Bank is obliged by the South African Reserve Bank Act, 1989 (Act No. 90 of 1989) to exchange legal-tender gold coins for South African rand at its branches at a market-related price. However, this activity is conducted as a service to the general public rather than as being part of the Bank’s reserves management policies.”
You don’t have to go looking for someone who wants to buy a Krugerrand from you at the moment you want to sell, you can just call at your nearest SARB branch and they have to, by law, buy it from you at a market rate.
You’ll get about R10,700 per fine ounce today. At the start of January 2011 you would have received R9,200. At this rate, the gold price will be around R13,000 by the end of the year. In January 2007 a fine ounce cost R4,500, and R1,700 in January 2000.
Oh ja, but sis, who’d want to own something so useless, that you can’t eat, and doesn’t pay interest?
Nice little post Galty. Just remember one thing though: All it takes to absolve the SARB of its ‘obligations’ is a short phone call from the SARB Governor to the Treasurer, a short phone call from the Treasurer to the ANC parliamentary committee, and quick amendment passed to the SARB Act in our we-can-change-laws-whenever-we-want political system.
My guess is that the surest way to sell Krugerrands during the great currency collapse on the way will be on the free market. If gold is that sought after at that time, selling it shouldn’t pose too many problems.
I’m also mindful that a “market-related price” is also subject to a huge amount of contamination by the central bank as it can arbitrarily decide on what constitutes ‘market related’.
Lastly, redeeming KRs for cash has never really been too onerous for the SARB so the law in the SARB Act has not posed any problems. But wait until the Bank wants to buy gold back from the public to retain monetary control. Then the law changes from “The Bank is obliged” to “All South African citizens are obliged…etc”
At this stage, the Bank will pay you what it wants, with printed cash, debasing your paper and acquiring gold…
But the point of the post is this: there is legislatively guaranteed, market-based liquidity in holding Krugerrands right now in SA, which does give one additional confidence that your KRs can work for you even in the flawed monetary system. It enables duel monetary functions until the collapse: gold as store of value, worthless paper as medium of exchange…
…it also underscores the point that if gold is so useless as all the investomuppets claim, why does the central bank confer on it monetary status, why does Reg 28 of the Pension Funds Act specifically permit and limit its acquisition to 10% of AUM, why is it non-VATable, and why does the state prohibit you and me from owning it in any other form apart from Krugerrands or VATable minted mini-bars?
Goldman
Goldman, get your own post-space, Microsoft Word says your comment was 336 words — my post (including the quote) was 203 words. But I do appreciate your input, and although it was something I thought about, I wanted to leave it for another day. Was trying to put a little more faith in the goodness of our ruling cronies, if you know what I mean?
Looks to me like an acute case of word-envy…
My post was so tight, now it’s grown a massive backside…
Doesn’t matter how big the backside is. All that matters is that gold is the way forward. Vryheid my friend, vryheid!!
You guys are nuts!
Messrs Galt and Goldman, (ok, just Galt since Goldman will apprently soon be hamming it up on his own dime ;-)
First off, I am emboldened in my decision to place my meagre savings in KR’s about a year ago. To my annoyance their value has only gone sideways in rand terms over the past year. All the steadily increasing and oft-trumpeted increase in the value of gold is measuring seems to be the collapse of the dollar’s value.
So when you guys talk about a coming “currency collapse”, what form do you surmise that would take? And will be ‘profit’ off it by holding rand-redeemable KR’s?
Bokkeman
Bokkeman, I’m looking at the price chart of gold in rand terms right now, if you bought a KR year ago (exactly), it has gained 17% in price. From the start of 2010, the price is up 33%. If you bought at the highest price in 2010, around December, your’re still up just over 11% as I write this. The JSE All Share is up 17% from the start of 2010. Cash on deposit with the bank would only have yielded you about 4% or so. Gold has outperformed from the start of 2010.
The collapse we see ahead will take the form of a substantial depreciation (i.e. collapse) in the value of major currencies, USD, GBP, EUR, etc. It’s nothing new, it’s been happening for over a decade now. Emerging market central banks such as the SARB own (give or take a few per cent) 75% of their assets in these currencies. When these currencies (USD, EUR) collapse, all other fiat (paper) currencies go down with them. This is where gold comes into its own, and governments will be forced to link currencies to gold to get stability back into the system. But they will only be able to do so at a (much) higher price. In rand, dollar, euro or pound sterling terms, you will win if you bought gold well before then.
Bokkeman, just remember my friend, gold and patience go well together… You’ll be rewarded, probably faster in dollar terms than rand terms, but rewarded nonetheless…
freeboet
Thanks JGalt, my concern with the “major currencies collapse” explanation is that they can only collapse RELATIVE to other currencies – presumably emerging markets currencies such as the rand. So if they tank relative to the rand then the rand gold price will likewise plummet, what with the rand being “stronger” relative to the dollar. Hence my predicament: I bought these hefty coins using rands and I’ll have to sell them again for rands, so any appreciation of my KR holdings in USD/GBP/EUR terms is really not very useful.
If I follow the rest of your scenario of presumably ALL currencies having to establish a gold standard, only then do I see major upside even in rand terms.
Freeman, I am encouraged by your words, if only because I hope you know more than you’re letting on ;) You’re not perhaps involved in the “freemen” movement and/or know anything about a talk on that topic to be presented in Slaapstad in a valley full of monkeys next week?
Bokkeman
Hahaaha. Kruger Rand$ are a joke. They are only 25% actual gold and 75% Tungston. They are made in China and don’t hold value. The only reason why Kruger Rand prices are rising is because people have been duped into the lie!!!!
Bokkeman, read the first half of my comment again. The. price. of. gold. is. rising. in. rand. terms. right. now. and will continue to rise in the foreseeable future as the collapse is already happening.
ALL fiat currencies will return to gold, like I said. Google “voltaire” and “paper money”
Refer to the Gold Action page (link above) for more of our past writings on gold.
Galty, why not do a post where you show the rand price of gold over the past 30-40 years in a chart. That might help Bokkedude put his concerns in context???