Gold Avenue Flags the Costly 91.67 Percent Krugerrand Error

Before they ever sit down with a buyer, plenty of Krugerrand owners have already undervalued their Krugerrands, and The Gold Avenue wants to put that right this October. The Illovo company, which buys gold, diamonds, luxury watches and Krugerrands, says the culprit is one common shortcut: taking 91.67 percent of the gold price as the value of the Krugerrand. Because a Krugerrand is 22 carat gold, the number seems reasonable. It is not. Anyone who uses it to value a full ounce Krugerrand ends up expecting about 8 percent less than the gold inside is really worth.

The company sees this as timely. Spring has arrived in Gauteng, and The Gold Avenue finds that selling follows the seasons, with summer reliably busier than winter. More people are now weighing up whether to cash in Krugerrands they bought years ago or inherited from family, and the company would like them to start from an accurate figure, not one they have quietly marked down at the kitchen table.

The source of the miscalculation

Krugerrands are struck in 22 carat gold, an alloy of 91.67 percent gold and 8.33 percent copper. On seeing that percentage, many owners conclude that a one ounce Krugerrand must contain 91.67 percent of an ounce of gold, so they multiply the gold price by 0.9167.

The Krugerrand was actually built the other way around. A one ounce Krugerrand contains a full troy ounce of fine gold. Rather than being blended into a fixed total weight, the copper is added on top of that ounce. This explains why the Krugerrand has a gross weight of 33.930 grams instead of the 31.103 grams of a troy ounce. The owner does not hold 91.67 percent of an ounce of gold. They hold a whole ounce of gold and a little copper as well.

For a full ounce Krugerrand, then, the right multiplier is 1.0 and not 0.9167. The smaller Krugerrands follow the same rule: a half ounce contains exactly half an ounce of fine gold, a quarter contains a quarter, and a tenth contains a tenth.

How 8 percent adds up

A shortfall of around 8 percent may not sound like much. At current rand gold prices, though, it is real money on even one full ounce Krugerrand. Across several Krugerrands the gap widens fast, and it can colour how a seller reacts to every offer put in front of them.

Underestimating is only part of what worries The Gold Avenue. A seller starting from the wrong figure cannot reliably tell whether an offer is fair. If they think their Krugerrand is worth less than it is, they may say yes to a number that looks generous next to their own calculation but falls well short of what the gold actually supports.

A quick check before approaching a buyer

Anyone thinking about whether to Sell Krugerrands is encouraged to do a simple sum on their phone before contacting any buyer, The Gold Avenue included. It takes just three numbers:

The first is the international gold price in US dollars per troy ounce. The second is that day's rand to dollar exchange rate. The third is the size of the Krugerrand: 1 for a full ounce, 0.5 for a half, 0.25 for a quarter and 0.1 for a tenth.

Gold price multiplied by exchange rate gives the rand value of one ounce of gold. Multiply that result by the Krugerrand size and you have the value of its gold content. This is a ceiling, not an offer, and no dealer will pay all of it. It does, however, give the seller a benchmark for measuring and discussing any offer.

On its website the company sets out in detail how the Krugerrand price in rands is put together, covering the history of the rand gold price since 1999 and the reasons the value shifts every trading day. It deliberately avoids publishing a fixed rand price for a Krugerrand, since the gold price and the rand both move all the time and a figure quoted today will not hold tomorrow.

The gap between gold value and offer

The Gold Avenue is upfront that no dealer pays the full value of the gold content. Its offers are based on what the trade will pay on the day, which already sits below spot. The gold price can also shift between the time a dealer buys and the time it sells, and carrying that risk has a cost. Verification, handling and compliance all take time and money, and the business has to earn a margin.

According to the company, sellers should not expect there to be no gap. They should expect a buyer who can account for it. When a buyer lays out the day's gold price, the exchange rate and the Krugerrand size, and shows how the offer follows from them, the seller can judge that buyer. A bare number with no working behind it leaves the seller nothing to check.

Smaller Krugerrands and proofs

Getting the ounce wrong is not the only way sellers lose value. The Gold Avenue often sees halves, quarters and tenths handled carelessly, whether bundled in with full ounces or rounded down in the buyer's favour. Every size should be priced according to its own fraction of an ounce, and at The Gold Avenue each Krugerrand is weighed and verified separately.

Proof Krugerrands fall into their own category. They carry a mirror like finish, typically arrive in presentation packaging with a certificate, and are assessed differently from ordinary bullion Krugerrands. Owners of proofs should say so before the assessment starts. The company also asks sellers never to clean or polish a Krugerrand, as polishing harms the surface and can only lower its value.

Selling at the Illovo office

Sellers can phone, WhatsApp, email or book online, and walk-ins are welcome in business hours. In a private booth, a Purchasing Consultant weighs each Krugerrand and verifies it on a Niton XRF analyser in full view of the seller. The offer is explained before the seller decides, the valuation costs nothing and there is no obligation to accept.

Once a seller agrees, their details are recorded on an iPad and they sign a one page Sale Agreement electronically. Payment is by immediate EFT with immediate clearance across participating South African banks, or in cash subject to identification, compliance and the cash held on the premises. Larger cash payouts require a few business days' notice. Most visits take ten to fifteen minutes, and returning clients are often done in less than five.

All purchases comply with FICA, so sellers must bring a South African ID, passport or South African driver's licence along with proof of banking details. Sellers outside Gauteng can arrange a secure courier, and home or office appraisals are offered within the province. Those who need cash now but may want their Krugerrands back later can ask about a Buyback Agreement: The Gold Avenue buys the Krugerrands, and the seller has the option to repurchase them on an agreed date at a price fixed upfront.

Sellers better prepared this season

Since opening in April 2022, The Gold Avenue has served over 3,000 clients and holds a 5.0 rating on Google. The company believes a seller who understands the gold content of their Krugerrands is easier to deal with, more sure of their decision and more likely to come back. Setting the 91.67 percent assumption straight is among the simplest ways to give sellers equal footing with any buyer ahead of the year's busier months.

Learn more at https://thegoldavenue.co.za/

About The Gold Avenue

The Gold Avenue buys gold jewellery, diamond jewellery, luxury watches and Krugerrands from its secure office on the 8th floor of Illovo Point, 68 Melville Road, Illovo, Sandton, 2196. Trent Saldsman, Founder and Managing Director, established the company in April 2022. It is a registered second hand goods dealer under the Second-Hand Goods Act, is registered with the National Credit Regulator and the Financial Intelligence Centre, and belongs to the Second-Hand Dealers and Pawn Board and the Jewellery Council of South Africa. It draws on an extensive local and international dealer network. Office hours are Monday to Thursday 08:00 to 17:00, Friday 08:00 to 16:00, and Saturday by pre-booked appointment only.