While the Krugerrand celebrates its 40th birthday, those who have shown confidence in the coin are celebrating its current all-time highs.

It can be argued, at least in a South African context, that the humble Krugerrand has been primarily responsible for coins being considered a respectable – indeed, important – asset class.

In spite thereof, a great many South Africans view the coin market with suspicion. It’s a scepticism rendered all the more remarkable on account of:

Tens of thousands of South African investors are accordingly allowing this investment opportunity to pass them by, perhaps because they are unaware of the attractive factors highlighted above, though few could be unaware of the headlong gains accruing to owners of Krugerrands in the past couple of years.

Possibly the most resounding endorsement I can offer for this investment class is that it is populated almost exclusively by successful self-employed individuals; people I term “the millionaires next door”; people who deliberately avoid extravagance, yet have access to sufficient disposable income to count coins among their investment portfolios.

This is where the smart money vests; money that goes about preserving and growing its capital systematically and professionally.

Right now – and I can attest to this because I am in the privileged position of being able to observe such activities first-hand – the smart money investors are constructing their investment portfolios such that the coin asset class comprises 10% to 20% of the total by value.

Within that class, their general rule of thumb is that 70% should consist of KrugerRands, with the balance comprising collectible coins.

I have frequently been asked why the smart money opts for a 70/30 split as between Krugerrands and collectible coins – especially since, being familiar with the coin market, they enjoy the expertise that ensures they buy the most promising of the collectibles.

The short answer is liquidity combined with the gold market cycle. Self-evidently, there is bound to be a preference for coins that are instantaneously convertible into cash anywhere in the world. Craftily selected rare coins, which, on the other hand, are much more stable, should only be sold at the right price, at the right time.

What generally tends to happen is that much buying attention is focused on Krugerrands when the gold price is low, whereas that attention gets re-focused on selling Krugerrands when the gold price is high. It is at that stage of the gold cycle, as well as during long periods of neglect, that the smart money turns its attention to collectibles.

In sharp contrast, the “sheep philosophy” money piles into Krugerrands when the gold price is at or nearing a peak, invariably piling out of them at close to the bottom. It goes without saying that this is the common approach to most markets.

What’s the smart money doing now?

Most SAGCE clients are holding on to their Krugerrands on the basis that in the past 40 years the value of a Krugerrand has appreciated from R27 to R5 500.

In addition, many are taking to heart insightful predictions that the gold price looks poised to climb to $1 200 an ounce in the near future.

That, clearly, has to count for something.