Are Your Coins Gold?
Wednesday, December 23rd, 2009Remember the late 70s and 80s when it seemed as though every other best-seller (especially “business books) dealt with doomsday prophecy? Well, we’re not saying it won’t happen; with the collapse of the dollar, hyper inflation, mass unemployment, etc, but it DIDN’T. And it won’t this time either. Still, our regular readers are well versed in our theories about gold, especially under current circumstances of global government distrust reaching new levels as directly reflected through their central banks, just like our Fed.
Anyway, we’ll cut to the chase. You want to own gold but you don’t know how to buy and hold, and in what format. Right? Join the club! We are not suggesting one form of gold over another, all forms from mining stocks to ETFs to mutual funds, futures contracts, bullion bars (the list goes one) are okay with us. With gold reaching new highs, even moderate gold bugs asking the question, “do I own gold the right way…how can I actually possess gold in an affordable manner while minimizing the premium or buying and selling costs?”
For most average Americans; owning actual gold coins is a great option. Not only are the coins themselves internationally recognized for exactly the same value at any time, they’re FUN to play with. Problem? Cost. Many folks hopping on the gold bandwagon are overpaying for their precious metal fixes. A classic case of great and sound financial planning (right decision making) colliding with overzealous coin dealers, mints and sellers of all kinds.
With gold prices up over 56% in the past year alone ($1,190 at the time of this writing), the average Joe/Jane consumer demand for gold coins has soared; up 142% at Stacks a, NY coin retailer, in one year according to Tip of the Week’s Jeff D. Opdyke. Here’s the problem. Practically everyone who can make a buck by minting, auctioning, selling, trading is doing so.
The worst at “leveraging” this hype offender? You guessed it; your/our very own Uncle Sam; the U.S. Mint (usmint.gov), who currently sells one ounce Double Eagle gold coins for $1,540 direct, but according to reports, some people are paying up to $3,000 per coin! In fact, virtually all forms of numismatic value are way overpriced in our book; even the $20 gold pieces which are commanding 50% premiums over their pure gold content value.
Keep in mind that to fully exploit the awesome hedging and protection (currency- inflation) power of gold, you must buy as close to the spot market price as possible; the bullion price. Your not buying birthday gifts for your office palls, you’re buying retirement investment power. So while Double Eagles, Kruggerands, Maple Leaves, Coronas, and the like are inflating above pure bullion pricing, deals can be had, especially for the less known gold coins (still pure and still 1 oz. or just shy). Even better might be the lower quality $20 coins “bought as close to bullion prices as possible” according to another New York coin dealer, Scott Travers. He suggests smaller denomination told coins which do not demand the same premiums. If/when gold prices do fall, these lesser popular coins will not fall as much in value; although we believe in a strict buy and hold posture for at least 36 months.
One last closing point about storage. Get your own safe; hide it, or even better yet cement it into your floor. Store your own goodies. Why trust anyone with this? Finally never borrow money to buy a non-income producing investment asset, including gold. Cash only, no credit!