Gold Coins Have Been South Africa's Best Investment For 50 Years

In the 50 years since the first Krugerrand was minted in South Africa, the gold coins have turned out to be one of the best investments in the country.



As Bloomberg reports, the Krugerrand originally sold for 27 rand (then worth $35) back in 1967. One ounce of gold is now worth 16,840 rand ($1,273), boosted by a combination of rising global gold prices and a depreciating local currency.

Since 2000, the rand value of the coin has outperformed local property, the stock market and gold priced in dollars...

Which is exactly what it should do as a preserver of wealth as faith in fiat dissolves.

However, there are further fundamental reasons to support gold gains from here...

Gold supply from mines has fallen "dramatically" this year, bolstering prices of the safe-haven asset in the face of geopolitical tensions, ANZ said in a note on Thursday.

"Growth in mine output is at its lowest point since the financial crisis, with risks only getting greater," wrote ANZ's senior commodity strategist, Daniel Hynes.

Gold production has fallen 2 percent in the first five months of 2017 from the same period a year ago, Hynes added, citing data from the World Bureau of Metal Statistics. Production in the month of May alone was down 3.1 percent from a year ago. Changing government policies in producing countries are creating uncertainties and hitting supply, said Hynes.

And as PiercePoints details, today’s prices (red dotted line below) are not much above production costs for a majority of mines. The average mine pays $1,083 to pump out an ounce of gold, leaving a couple hundred dollars of profit at current rates.

The chart above shows the global cost curve for gold mining — in terms of all-in costs. That includes operating costs, sustaining capital at mines, and development costs to bring new ounces of production online.

That equates to under a 20% profit margin. Not terrible, but not likely to spur a lot of new mine development.