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On the 19th November 2007, Mr. A Demby, Executive Chairman of The South African Gold Coin Exchange, was interviewed by David Williams host of the "Business Q & A" program on the Intranews Summit station.
Click on hyperlink below to receive enlightening information on "Coins and Krugerrands"
Presenter: David Williams Guest: Alan Demby
The South African Gold Coin Exchange (SAGCE) and coin collectors are celebrating forty years of the Krugerrand as the gold price hovers around all-time record highs. Summit TV gets Alan Demby on the line from the SAGCE
DAVID WILLIAMS:
Welcome to Business Q&A. Today we’re talking to Alan Demby, chairman of the South African Gold Coin Exchange. Alan, it’s forty years that the famous Krugerrand gold coin has been in existence - so it’s a birthday in a way, but there’s still a bit of suspicion about the coins and Krugerrands asset class…
ALAN DEMBY:
I think so. I don’t know why - I suppose if you haven’t been brought up in difficult times you probably won’t appreciate the value of gold - but I think people who have seen difficult times, hyperinflation and political upheaval have a soft spot for gold. It always amazes me in fact that the Americans are so interested in gold coins - then I always take a step back and think to myself the people who live in America have come from Europe, and they were probably persecuted in their generation, and their parents and grandparents. Probably that’s the reason why there is such a strong market in collectables and coins in America in fact…
DAVID WILLIAMS:
A healthy scepticism about paper money and about other kinds of asset classes. What would the value have been of a Krugerrand say forty years ago when they started and now? What’s the growth been?
ALAN DEMBY:
In 1967 it was quite an interesting concept to bring out a one ounce bullion coin - there had never been one up until then. In those days it was trading at around R27.50 and in fact if you went to the Rand Show you could actually buy them there. Today they’re trading for R5,500 each. In fact if you had R10,000 in those days - I don’t know what that was worth, maybe a year’s salary - that would have probably bought you around 360 Krugerrands. That R10,000 today forty years later would be worth about R2million which is I think quite a nice little nest egg.
DAVID WILLIAMS:
There’s been times when they’ve gone in and out of fashion - where are they now?
ALAN DEMBY:
I think they’ve become fashionable again. Probably the biggest problem with Krugerrands is storage - there aren’t enough safe deposit boxes probably in South Africa, so people don’t know where to store them. The insurance premiums are not terribly high - but it’s just the hassle of getting a secure place to keep your coins. That’s probably one of the reasons that holds people back from buying and selling. Otherwise they’re very easy to buy, very easy to trade and sell. They’re probably one of the most liquid investments around - in fact bullion in the UK at the moment is probably trading billions of dollars every single day, so they’re probably one of the most liquid investments around at the moment.
DAVID WILLIAMS:
You’ve got a couple of examples here - take us through them…
ALAN DEMBY:
The most famous - that’s Nelson Mandela himself. In 1994 the SA Mint brought out a democracy coin, and they were issued at R4,400 then. Today these coins are trading around R20,000 to R25,000 so there’s a real interest in them for two reasons - one is the gold aspect, the other is their collectability. They only issued 5,000 so I suppose they’re very much like a rare painting - the rarity factor adds an aspect to it, and that’s the reason why certain of these coins trade at huge premiums. This medallion was minted by the Mint of Norway as part of their Nobel Laureate programme, and these medallions themselves are trading at R19,000. There’s a healthy demand for Mandela medallions - I think we have to take out hats off to Nelson Mandela because he seems to have created a renewed interest in buying and collecting coins perhaps where Paul Kruger has lost a little bit of his allure. Mr Mandela certainly helped put coin collecting back on the map…
DAVID WILLIAMS:
If you are collecting coins why go for Krugerrands as opposed to other coins? Is there still a substantial market in other kinds of coins including gold coins?
ALAN DEMBY:
I think the worldwide market in coins today is worth probably $30billion. You can put all your money into Krugerrands - bullion coins - or you could put it all into collectables. Our philosophy is that you should put about 70% into bullion coins in the form of Krugerrands, and the best bet in South Africa is in Krugerrands. The reason is that if you buy American coins $50 or American Maple Leafs or the Australian Nuggets it involves a VAT component - I think that makes it a little bit unappealing. So your best bet from the South African investor or collector’s perspective is to put money into Krugerrands. We like Krugerrands principally because it is a large market - it’s a fluid, liquid market - and it’s easy to buy and sell. We also say that you should put maybe a third of your money into collectable coins. What are collectable coins? There’s the complete range from the old numismatic coins from the Zuid Afrikaanse Republiek (ZAR) to the modern collectables we have in front of us today. So there’s the old numismatic coins such as the Veld Pond, the 99 or the Sammy Marks tickey - these coins had very low mintages, and today some of these coins sell for several hundred thousand rand and have proven to be a wonderful store of value and indeed a good investment.
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