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With the recent rise in gold prices and continued uncertainty in the market, the US Mint is considering increasing the prices of its coins for the twelfth time this year. This has caused many people to ask, how is the price of a gold coin and medallion calculated?
“The value of a bullion coin depends primarily on the value of the metal used to make it. If the price of gold increases, the price of gold coins and medallions also do. A medallion may have an additional rarity value. Because of the rarity value, medallions are generally worth more than bullion coins,” says Viv Govender, Senior Analyst at Lehumo Capital.
Take the Krugerrand for example, its price is directly linked to the international gold price. The Krugerrand price has steadily increased over the past couple of years. For example, if you had invested R10,000 in Krugerrands in 1970, your investment would currently be worth R5.5 million today.
Since 2012, the spot Krugerrand price has been extremely steady compared to global currencies. On 28 February 2012, the Spot Krugerrand price stood at R13,400. However, on 28 February 2015, the spot Krugerrand price rose to a steady R14,400, an increase of an incredible R1,000.
Diagram: gold medallions and coins
Apart from the physical gold value in a coin and medallion, there are various factors which determine the value of a gold coin or medallion. Rarity and age are two of the biggest factors in determining the price.
Due to their rarity and age, coins from the Zuid Afrikaansche Republiek (ZAR) are some of the most sought-after coins in the world today. The first ever ZAR coin, the Burgerspond, was minted in 1874 and had a very limited mintage of about 800 coins. Burgersponde have been known to fetch into the millions at auctions around the world.
The current sentiment in the market is a major factor which determines the price of a coin and medallion. Gold coins and medallions are excellent alternative assets which protects your wealth against uncertainty in the markets. Currently, there is a big demand for bullion coins due to the continued uncertainty from the Feds on whether they are going to raise or cut interest rates in the United States. The commemoration of an important event or person is also an attributor to the value of coins and medallions.