The Gold Bond has a term of five years and the first issue amounts to R2 billion. It requires investors to buy Krugerrands, which they then lend to FirstRand when purchasing the bond. At its expiry the value of the bond is determined by the current gold price, the Dollar/Rand exchange rate and the interest earned. This interest is calculated in terms of ounces of gold as represented by Krugerrands. Investors may take physical delivery of the Krugerrands on maturity or opt to get settled in cash.
Or they may end up with nothing if the bank is "suddenly" found to be insolvent. The marketing pitch is clear: have your gold and collect interest on it:
"The notes provide direct exposure to the rand gold price and a positive yield in the form of interest ounces payable on maturity.