How are Krugerrands different from American Gold Eagles?
If you are new to the world of gold investing, you might be wondering what the difference is between the South African Krugerrand and the American Gold Eagle gold coins. These two coins share a number of common characteristics, but there are a few differences between the two that affect how they are valued in the gold market. In particular, you may have noticed already that these two gold coins are often offered at slightly different prices. The reason for this price difference will be covered in a minute, but before we get there, let’s take a look at some of the characteristics of both coins.
In 1967, the South African Mint began producing their gold bullion coins. By doing so, South Africa became the first country to offer a gold coin that contained exactly one troy ounce of gold. In actuality, you should be aware that the total weight of a Krugerrand is 1.0909 troy ounces, but exactly one troy ounce of that is pure gold. The remainder is made of a copper alloy, which makes the coin more durable and scratch-resistant, and this also gives it a darker, reddish hue.
These coins became popular across the globe. Not surprisingly, other countries saw the coins’s popularity and rushed to follow suit by issuing their own one-ounce gold coins. Canada jumped into the game in 1979, and Austria soon followed in 1981. The United States didn’t join the party until 1986.
The American coin adopted many of the same aspects as the South African coin, with nearly identical physical properties such as thickness and diameter. Also, the American coin also weighs in at 1.0909 troy ounces in total, of which exactly one troy ounce is pure gold. The one primary difference is that the Gold Eagle uses a silver and copper alloy to make it more durable, which makes it seem shinier than the red-hued South African coin.
Now, let’s return to that price difference mentioned earlier. Some gold bullion coins, including these two coins, often trade at a premium to the regular spot price of gold. Oftentimes, this premium reflects the production costs that went into producing the coin, such as fabrication, distribution, and mining costs.
Following its 1967 introduction, Krugerrands often carried a premium over the spot gold price because of its popularity. But things quickly changed in 1985, when the United States and a number of other countries banned their importation in protest to the South African government and its apartheid policy. This prompted the coin’s popularity, and therefore its demand in the market, to fall off a cliff, so to speak. Reversing its previous trend, they actually traded for less than the spot gold price for a while.
Nowadays, they have recovered substantially in terms of market strength, but not to the extent before the import ban. So Krugerrands now carry a premium over the spot price of gold, but the premium carried by the Gold Eagle is still at a higher level.
In conclusion, these two coins are very similar in many ways, including the point that each contains one troy ounce exactly of pure gold. In spite of this, as a result of marketplace factors, the Gold Eagle is now bought and sold at a premium to the Krugerrand.
Gold coins are once again gaining in popularity, and two of the most popular coins are South African Krugerrands and American Gold Eagles. Learn how to protect your portfolio with gold coins.
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