Gold Sovereigns or Krugerrands – Which are the Best to Buy?
10/04/2023Daniel Fisher
Introduction
Deciding between gold Sovereigns or gold Krugerrands is an important decision for potential UK investors interested in gold coins.
Both coins have unique features, histories, and values that make them attractive investment options.
But which one is right for you? We’ll explore that in detail throughout our guide.
History of the Coins
Gold sovereigns and gold Krugerrands have distinct histories that contribute to their appeal among investors.
Sovereigns have been an integral part of British coinage for over two centuries.
Issued by the Royal Mint since 1817, they feature the iconic design of St George and the Dragon by Benedetto Pistrucci. Gold sovereigns have been minted throughout the reigns of various British monarchs and ceased to be in circulation in 1932.
In contrast, gold Krugerrands are a more recent addition to the gold coin market.
First issued by the South African Mint in 1967, they were produced with gold provided by the Rand Refinery.
Named after former South African President Paul Kruger and the country’s currency Rand, the coin features a portrait of Kruger on the obverse and a springbok on the reverse.
By 1980, gold Krugerrands were the leading choice for investors looking to buy gold coins due to their simplicity of containing exactly 1oz of gold.
Key Takeaways
- Gold sovereigns are exempt from capital gains tax in the UK, making them a more tax-efficient investment option for UK investors.
- Both gold sovereigns and gold krugerrands have strong liquidity and global recognition, making them ideal options for gold investment.
- Gold sovereigns offer more variety and historical significance, while gold krugerrands are larger and more uniform in design.
- Gold Sovereigns are approximately a quarter the size of a 1oz Gold Krugerrand.
Sovereigns Or Krugerrands - At A Glance
Gold Sovereigns
Gold Krugerrands
Tax Implications
Exempt from Capital Gains Tax
Subject to Capital Gains Tax
Liquidity and Value
Excellent liquidity, historical value
Excellent liquidity, larger gold content
Availability and Rarity
Diverse variety, potential collectables
Uniform, consistent design
Divisibility and Flexibility
Small size provides high portfolio divisibility
1oz weight more suited to larger investments
Design and Aesthetics
Varied designs, polished finish
Consistent design, matte finish
1. Tax Implications
UK investors should be aware of the tax implications of investing in gold sovereigns and gold Krugerrands.
Gold Sovereigns
As legal tender in the UK, gold sovereigns are exempt from Capital Gains Tax (CGT), while gold Krugerrands are subject to CGT.
According to HM Revenue & Customs, the current CGT rates for individuals are 10% for basic-rate taxpayers and 20% for higher-rate taxpayers.
This difference in CGT treatment can have a significant impact on the overall return on investment, especially for investors who are planning to sell their gold coins in the future and realise a capital gain.
Gold Krugerrands
Gold Krugerrands, unlike gold sovereigns, are subject to CGT.
This means that UK investors may have to pay more tax on their investment gains when they sell their gold krugerrands.
Both coins are exempt from value-added tax (VAT) since they are classified as investment gold under UK Law, as defined by VAT Notice 701/21A.
This VAT exemption benefits investors by reducing the upfront cost of acquiring gold coins and increasing the net return on investment.
Inheritance tax (IHT) applies to both coins as they form part of the estate of the deceased. The current IHT rate in the UK is 40% on the value of the estate above the nil-rate band, which is £325,000 for individuals and £650,000 for married couples and civil partners.
Proper estate planning and the use of exemptions and reliefs, such as the spouse or civil partner exemption, the residence nil-rate band, and the annual exemption, can help minimise the IHT liability for both gold sovereigns and gold Krugerrands.
Winner - Gold Sovereign
Taking into account the tax implications, gold sovereigns have a clear advantage over gold krugerrands for UK investors.
The exemption from CGT on gold sovereigns can lead to significant savings, especially for higher-rate taxpayers, making them a more tax-efficient investment option.
What That Means For Investors
The tax implications of gold sovereigns and gold Krugerrands can significantly impact an investor’s buying decision.
Gold sovereigns offer a more tax-efficient investment for UK investors due to their exemption from CGT.
This advantage can translate into substantial savings when it comes time to sell the coins, particularly for higher-rate taxpayers. This consideration is becoming increasingly important as the tax-free CGT allowance halved in April 2023 and is set to half again in April 2024.
On the other hand, gold Krugerrands do not offer the same tax advantage and are subject to CGT.
However, if a UK investor’s primary goal is to invest in gold for its intrinsic value and not its legal tender status, the tax implications may be less critical in their decision-making process.
2. Liquidity and Value
Both gold sovereigns and gold Krugerrands are globally renowned and sell quickly. It could be argued that the two gold coins are the best-known coins globally.
They are easy to buy and sell through reputable dealers and online platforms and enjoy strong market demand and recognition.
Gold Sovereigns
Gold sovereigns have a long history and are an integral part of British coinage. As legal tender in the UK, they have a nominal face value of one pound sterling.
They feature 22-carat gold with a fineness of 91.7% and weigh 7.98 grams with a diameter of 22.05 mm.
The value of older sovereigns may be higher due to their historical significance, and some rare issues may command higher premiums. For example 150 year-old early Victorian Sovereigns will command a higher price than a more recent Elizabeth II iteration.
For those seeking to buy the cheapest possible Sovereign coins, the pre-owned ‘best value’ Sovereigns offer the lowest prices. Gold dealers will generally sell this category of Sovereign around a percent or two cheaper than brand new versions. Best value Sovereigns generally won’t be of historical value as most will be less than 50 years old.
In literal cost terms, the Sovereign offers a far lower entry point for investors with modest means due to its diminutive size.
Gold Krugerrands
Gold Krugerrands, in contrast, are more recent and do not have a face value.
They also feature 22-carat gold with a fineness of 91.7%, but they have a larger weight of 33.93 grams and a diameter of 32.77 mm. Being more than four times the size of a full Sovereign coin (0.2354oz), the Krugerrand can be bought at a slightly lower price per gram due to lower relative production costs for the amount of gold bought.
The price difference is not significant but may influence buyers whose primary goal is obtaining the lowest price per gram.
Due to their more recent introduction, gold Krugerrands generally do not command premiums based on rarity and age.
Winner - It's a draw!
When comparing liquidity and value, it’s difficult to determine a clear winner between gold sovereigns and gold krugerrands.
Gold sovereigns have the advantage of being legal tender in the UK and may hold higher value due to historical significance and rarity in some cases.
However, gold Krugerrands are larger, making them more suitable for investors looking for a larger quantity of gold in a single coin.
Both gold sovereigns and gold krugerrands have strong liquidity and are globally recognized, making them ideal options for gold investment.
What This Means For Investors
Both coins have excellent liquidity, as they are globally recognized and can be easily bought and sold through various platforms. Investors enjoy the peace of mind knowing that both coins are incredibly well recognised globally, expanding selling options.
It can be argued that the Krugerrand is slightly more sought in continental Europe while the Sovereign is better known in regions such as the US.
Gold sovereigns may be more appealing to investors who value the historical significance and potential rarity of certain issues.
On the other hand, gold Krugerrands may be more suitable for investors looking for a larger quantity of gold in a single coin due to their greater weight.
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3. Availability and Rarity
Availability and rarity also influence the decision between gold sovereigns and gold krugerrands.
Both coins can be found through various sources like dealers, mints, auctions, and online platforms. They are amongst the most accessible coins on the market due to their well-established second-hand market.
Gold Sovereigns
Gold sovereigns may be more readily available in the UK due to their local origin. Newly minted Sovereignscan be easily obtained in any quantity as the Royal Mint has no production cap on them.
Due to their long history, it’s also possible to obtain Sovereigns from the Elizabethan, Georgian, Edwardian and Victorian eras. It’s not uncommon for some of these historical coins to become unavailable when market conditions mean that demand far exceeds supply. Being historical,no more coins with previous monarchs are produced, so supply of the pre-owned coins depends on investors choosing to sell.
Rarity levels for sovereigns depend on factors like the year of issue, mint mark, condition, and design. Gold sovereigns have more variety and diversity because of their longer history and broader issue of coins.
A sought-after design change usually comes in years celebrating the monarch’s jubilee, whereby the George and Dragon image on the coin reverse is replaced by a beautiful shield of arms. Popular dates featuring ‘shield back’ Sovereigns are 2002, 2012 and 2022.
Some gold sovereigns are considered rare and collectible, commanding high premiums, such as the 1937 Edward VIII sovereign and the 1923 SA sovereign.
Gold Krugerrands
In contrast, gold Krugerrands are more uniform and standardised, lacking significant numismatic value. This is consistent with their objective of offering investors a simple and good value way of buying exactly 1-ounce of gold.
Rarity levels for Krugerrands also depend on factors like the year of issue, mint mark, and condition, but they do not possess the same historical significance as gold sovereigns.
The Krugerrand is famous for having one of the highest mintage levels of any bullion coin. Due to the huge production volume in the 1970s in particular, there remains a deep and liquid second-hand market.
Examples of rare and valuable gold Krugerrands include the 1967 proof Krugerrand and the 2017 50th-anniversary krugerrand.
Winner - Gold Sovereigns
When considering availability and rarity, gold sovereigns are the winner in this category due to their diverse variety, longer history, and potential for rare and collectible issues.
Gold Krugerrands, while highly recognizable and valuable, do not possess the same numismatic value or historical significance as gold sovereigns.
What This Means For Investors
If an investor is interested in coins with historical significance and the potential for increased numismatic value, gold sovereigns would be the better choice.
The diverse variety and the possibility of owning rare and collectible coin issues make them appealing to both investors and collectors.
However, if an investor is more focused on the gold content and doesn’t have a strong interest in numismatic value or historical significance, gold Krugerrands may be the more suitable option.
They are more uniform and standardised, allowing for easier price comparison and straightforward investment strategies.
4. Divisibility and Flexibility
Divisibility and flexibility are also important when investing in gold coins. Would you benefit from owning smaller coins so that you can sell smaller parts of your portfolio?
Or are bigger coins appealing due to cost and storage?
Both gold sovereigns and gold Krugerrands are also produced in fractional versions. The Sovereign is minted in half and quarter size coins. Meanwhile the Kruger is also made in half, quarter and tenth ounce varieties.
For the sake of comparison, we’re only considering the standard size coins as they represent a majority of the market due to value and availability. Fractional versions tend to come at a far higher premium than standard coins.
Gold Sovereigns
Gold sovereigns clearly offer fantastic divisibility for a gold portfolio due to their relatively small size. Owning a number of coins enables investors to sell small amounts of their portfolio, either when funds are needed or to cost average out of the investment.
In terms of flexibility in meeting objectives, gold sovereigns serve various purposes like hedging against inflation, diversifying a portfolio, preserving wealth, or collecting for pleasure.
They offer more flexibility due to their tax advantages, historical value, and legal tender status.
Gold Krugerrands
On the other hand, gold Krugerrands have fewer options and availability for fractional coins due to their recent introduction and limited production.
While they can also serve various purposes like gold sovereigns, gold Krugerrands may provide less flexibility because of tax liabilities, political stigma, and foreign coin status.
As a one ounce coin, investors of £2,000 or less will only be able to afford one Krugerrand. This limits selling options to ‘all or nothing’.
Not ideal if you need to raise £500 quickly but don’t wish to sell all your gold at once. For larger investors, the one ounce size may well provide sufficient divisibility to suit their needs.
Winner - Gold Sovereigns
Considering divisibility and flexibility, gold sovereigns emerge as the winner.
They offer more divisibility, tax advantages, and historical value, which contribute to their overall flexibility.
Investors who prioritise these attributes may find gold sovereigns more suitable for their investment needs.
What This Means For Investors
The obvious divisibility advantage of gold sovereigns for investors is their smaller size. They’re more affordable to buy monthly than the much larger Krugerrand, enabling accumulation options and the possibility of a ‘cost-averaging’ investment approach.’
The same benefit applies when choosing to sell gold gradually rather than in larger amounts.
Sovereigns can be bought for a wide range of investment objectives. Investors looking to hedge against inflation, diversify their portfolio, invest in collectables, or preserve their wealth may appreciate the additional flexibility that gold sovereigns offer.
However, those who prefer larger coins or are less concerned about tax implications and historical value may still find gold Krugerrands to be a suitable investment option.
5. Design and Aesthetics
Design and aesthetics play a role in the appeal of gold sovereigns and gold Krugerrands.
Both coins showcase iconic and recognisable designs that reflect their respective origins and cultures.
Gold Sovereigns
Gold sovereigns offer more variety and diversity in their designs due to multiple issues and mint marks.
Aesthetically, gold sovereigns have a distinctive and attractive appearance with a more polished and shiny finish because of their higher copper content.
The designs often feature the reigning monarch on one side and the iconic St.George and the Dragon on the reverse.
The consistency and recognition of this legend presents investors with reassurance, the 2005 edition being a notable exception whereby the Royal Mint modernised the famous depiction.
The occasional departure to celebrate the monarch’s jubilee years appeals to collectors as the shield design is far scarcer.
Gold Krugerrands
In contrast, gold Krugerrands have uniformity and consistency in their designs due to standardised production.
Gold krugerrands have a duller and matte finish due to their higher silver content.
They feature the effigy of Paul Kruger, the first President of the South African Republic, on one side, and a springbok antelope on the reverse.
While some alternative 1oz bullion coins such as the Chinese Panda and UK Britannia update their design regularly, the Rand Refinery has chosen to stick to the familiarity of keeping the same design year in, year out.
Winner - It's A Draw!
When it comes to design and aesthetics, there isn’t a clear winner between gold sovereigns and gold krugerrands.
While gold sovereigns offer more variety and diversity in their designs, gold krugerrands have a consistent and recognizable design.
The choice between the two ultimately depends on an investor’s personal preferences and the appeal of each coin’s design.
Looking To Add Gold Krugerrands To Your Portfolio?
What This Means For Investors
For some investors, the variety and historical significance of gold sovereign designs might be more appealing, while others might appreciate the consistency and simplicity of gold Krugerrand designs.
Why Buy Sovereigns Or Krugerrands From Physical Gold
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