Anti-Apartheid Demonstrations, Low Price of Gold Cited : Krugerrand Sales Slump as Maple Leaf’s Soar
Sales of South African Krugerrands, long the most popular gold coin among American investors, have fallen dramatically this year, with the Canadian Maple Leaf threatening to replace it as the nation’s top-selling gold coin.
Some gold-coin dealers have stopped selling Krugerrands in response to slow sales and anti-apartheid protests at their stores. Dealers also report lower prices for Krugerrands and higher prices for Maple Leafs, as the Canadian coin is outselling the South African coin by four to one or more at some dealers.
The Krugerrand’s worldwide slump, caused by the growing furor over South Africa’s racial policies and lower world gold prices, could accelerate if Congress and President Reagan approve a ban on all imports of the coins, since U.S. sales account for about half of total sales, according to gold experts. Last year, the United States imported $685 million worth of Krugerrands.
Such a ban was agreed to by House and Senate conferees Wednesday as part of a bill that would impose sweeping economic sanctions against the Pretoria government. The measure would also create a U.S. gold bullion coin that could further threaten Krugerrand sales.
Jeffrey A. Nichols, president of American Precious Metals Advisors, an investment firm in White Plains, N.Y., estimated that worldwide sales of Krugerrands will fall to 1 million ounces this year, down from 2.67 million ounces last year and 3.49 million in 1983. By contrast, worldwide sales of Maple Leafs will rise to 1.5 million this year, up from 1.24 million last year and 1.25 million in 1983, he predicted.
“The world market for bullion coins . . . is today in a state of unprecedented uncertainty,” Nichols said.
To be sure, part of the reason for the sales slide is the lackluster price of gold, which at about $320 an ounce has dampened investor interest and slowed fabrication of coins.
“Sales of gold coins in general are nothing to write home about,” said Fred S. Bogart, senior vice president and head of precious metals at Republic National Bank, a leading gold trader.
Several U.S. financial institutions, including Merrill Lynch, Shearson Lehman Bros., Dean Witter Reynolds, First Chicago and Continental Illinois Bank, have decided over the past few years not to sell Krugerrands, Nichols said. The Los Angeles city government is considering a proposal to stop doing business with banks that sell the South African coin.
Krugerrand owners are beginning to ask dealers to swap their coins for Maple Leafs or other gold coins, Nichols said.
Dealers report that higher demand for Maple Leafs have forced them to pay higher wholesale premiums for these coins, sometimes as high as 3.5%, while wholesale premiums for Krugerrands have dropped to as low as 1% in some cases.
Normally, wholesale premiums for Krugerrands and Maple Leafs are equal at about 3%. Thus, one Los Angeles dealer said one-ounce Krugerrands were selling at retail for about $329 Thursday while one-ounce Maple Leafs were fetching about $337.
Premiums for Chinese panda gold coins, Mexican 50-peso coins and Austrian 100-corona coins also have risen, dealers say.
(Individual investors usually pay additional premiums, ranging as high as 10%, to buy coins at retail from dealers.)
Some coin wholesalers who import Krugerrands directly from South Africa say they have temporarily stopped importing.
“With a premium under 3%, it’s just not worth it,” said Ira Handler, vice president for trading at Mocatta Metals, a major precious-metals merchant.
Mark Goldberg, an owner of Superior Stamp & Coin, a major Los Angeles coin dealer, said his firm stopped selling Krugerrands a little over a week ago after anti-apartheid pickets appeared outside his store and sales all but collapsed.
Maple Leaf Sales Up
Goldberg said that, just before the Krugerrand ban, sales of the South African coin had plunged to less than 50 per week, compared to at least 1,000 in a typical week before. By contrast, sales of Maple Leafs had skyrocketed to about 1,000 a week, up from 50 to 60 before.
Experts said that, even if a ban on importation of Krugerrands is passed, the market in the United States would still be liquid because at least 44 million Krugerrands are believed to be in circulation in the world, with a good part of that total held by American investors.
In addition, they said, such a ban would have little negative effect on South Africa or on world gold prices and supply.
“To the extent they (South Africa) don’t sell coins, they’ll just sell an equivalent amount of bullion,” Republic Bank’s Bogart said.
He and other experts said other nations, such as Canada and Austria, will simply respond to the higher demand for their coins by buying South African bullion.
GOLD COINS: WORLDWIDE SALES OF THE LEADERS In millions of troy ounces
l979 ’80 ’81 ’82 ’83 ’84 ‘85* Krugerrands 4.94 2.84 3.56 2.41 3.49 2.67 1.0 Maple Leafs 1.00 1.22 .86 .95 1.25 1.24 1.5
*projected Source: American Precious Metals Advisors Inc.
