17 Nov Comparison: Kruger’s vs Gold Bars
Recently, I have been over whelmed by customers and big investors looking to buy Krugerrand’s as well as silver Krugerrand’s. I also get asked quite often which is the better investment, Krugerrand’s or gold bars. The most obvious difference is that you pay VAT on gold bars and not on Krugerrand’s. You can get more detail on my VAT article. The simple fact is that you cannot buy Krugerrand’s in bulk in South Africa even if you have all the money in the world. Rand Refinery, who makes the Kruger’s, can simply not supply enough coins and this fact will not change any time soon. The silver Krugerrand’s are made overseas. The demand for safe heaven assets like gold bars and silver bars and coins are increasing every day.
There are two options to solve this problem
You can buy and store gold and silver Krugerrand’s in London, or you can buy pure gold bars and silver bars or silver coins in South Africa ( Buyback Guaranteed )
Krugerrand’s can be bought in London via Precious Metal Bars.
The prices are slightly cheaper than in South Africa. You can buy up to 200 Krugerrand’s a week. You have to use safe storage in Zurich or London at very reasonable fees. You can have it delivered anywhere in the world, except SA. The supplier is one of the oldest and most trusted bullion dealers in London. The procedure can be explained by requesting an email from me. South African citizens can take out R1 million without a tax clearance and R10 million with a tax clearance certificate
Gold bars, silver bars as well as silver coins can be bought in South Africa in the following sizes. 10 gram/50 gram and 100 gram and silver bars in 100 grams and 1 kilo bars. It is illegal to own a 1 kg gold bar in South Africa. You can actually buy a kilo of gold legally if you know how. Use the contact page to find out how. Bars are pure gold ( 24 karat ) as opposed to the 22 karat of Krugerrand’s. All Kruger sales gets reported to SARS by law. You are also only allowed to take out one Krugerrand per person per year. Bars have no such problems.
Krugerrand’s does not have VAT but gold bars carry VAT. And herein lies the problem! Many investors are scared off by the VAT on bars. The simple fact though is that the VAT gets paid back to you when you sell your bars in the future.
If the government increases the VAT you will earn more VAT back than what you paid.
Investors tend to forget that any investment has two sides. You buy an asset and then you sell that asset. You can only calculate your profit or loss once both transactions are completed. If you only consider the VAT when you buy gold or silver bars, you are doing yourself n disservice.
Let us do the maths and compare an actual turn around transaction between Krugerrand’s and gold bars.
We will assume a gold price of $1504 an oz. and a R/$ 14.75 on 5/11/2019.
If you bought a Krugerrand on 5/11/19 you would have paid R24,000.00. If you sell it in the afternoon you will get spot price of gold ( R22,184.00 ) That will be a loss of R1,816.00 ( -7.57% )
Gold bar ( 100 gram )
If you bought a 100 gram gold bar on 5/11/19 you would have paid R87,050.00 If you sell in the afternoon you would get spot minus 2% plus 15% VAT After all the calculations you would get R80,382.15 That will be a loss of R6,667.85 ( -7.66% )
But look what happens when you sell in a couple of years from now.
We will assume a gold price of $2,000 and a R/$ 14.75.
If you sell your Kruger now you will get spot price. $2,000 X 14.74 = R29,500.00 Your profit will be R5,500.00 ( +22.92% )
If you sell your 100 gram gold bar you will get spot minus 2% plus VAT @ 15% You will be paid R106,891.63. That is a profit of R19,841.63 ( +22.79% )
One can clearly see that the VAT does not make any difference to your profit!
Do not let the VAT issue prevent you from buying the bulk bullion that you cannot get in Krugerrand’s and lose out on the coming run on gold and silver prices. It is also very important to know that you can sell your bars any time you want GUARANTEED!
You can see the bullion prices here. Prices are updated daily at 09h15.