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 and silver bars as well as silver Krugerrand’s, but not on gold Krugerrand’s. The simple fact is that buying Krugerrand’s in bulk is very difficult and selling them in bulk is even more difficult as very few bullion dealers have that kind of cash available. 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 used to be made overseas, but are now being made by Rand Refinery in South Africa. The demand for safe heaven assets like gold bars and silver bars and coins are increasing every day.

Precious Metal Bars can actually provide bulk Krugerrand sales because we use multiple suppliers. ( Upto 400 Krugers per week )

The alternative is to buy pure gold bars.

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 100/500  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.

Case Study

Let us do the math’s 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. This case study will be valid into the future.

Krugerrand

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 less 2% ( R21,740.32 ) That will be a loss of R2,259.68 ( -9.42% )

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% ). Clearly, the loss on Kruger’s is more.

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 some time in the future.

Krugerrand

If you sell your Kruger now you will get spot price less 2%. $2,000 X 14.74 = R29,480.00 less 2% ( R589.60) You will get R28,890.40. Your profit will be R4,890.40 ( + 20.37% )

Gold Bar

If you sell your 100 gram gold bar you will get spot ( R94,791.00 ) minus 2% ( R1,895.82 ) plus VAT @ 15% ( R13,934.15 ) You will be paid R106,829.33. That is a profit of R19,779.33 ( +22.72% )

One can clearly see that the VAT on bars gives you an additional 2.4% profit! If the government increases the VAT, you will score even more!

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.