Investing in Gold Coins – Better Way To Own Gold
For over 6,000 Years, the most sought-after form of wealth storage and asset protection in the world has been gold. Kings, Rulers, Presidents and Dictators alike have stockpiled the yellow metal, while entire civilizations have risen and fallen in its quest.
Today, Gold is still sought after as the most durable and desirable asset in the world. While it can take many forms: bullion, coins, jewelry, even artifacts, only gold coins are considered to be the most liquid financial asset in the world. By choosing to own gold coins, you gain all the advantages of gold ownership, as well as some additional benefits unique to coin investors.
Gold coins inherently provide a unique and lucrative added advantage to investors:
- Highly portable – Gold coins are recognized throughout the world and can be carried across distances and borders. It can be carried on your person and easily exchanged for goods and services in an emergency.
- Easily stored for privacy – Small caches can be kept at your home for ultimate privacy and liquidity in an emergency. Investing in gold coins represents financial privacy and independence. Gold frustrates the attempts of governments to completely control the finances and lives of their citizens.
- Gold is the only durable and reliable currency. Tyrants and dictators can’t undermine its value nor can politicians who print paper money at will, making their currencies worth less and less each year. Unlike paper money, gold holds its value over the long run.
Back in 1933, you could buy a first class, tailor-made suit of clothes with a U.S. $20 gold coin or a $20 bill. Today, that $20 gold coin, will still buy a nice suit of clothes. The $20 bill, however cannot even buy a decent necktie. During the great depression, cash was king because cash was backed by gold. In truth, gold was king. While most assets plunged like a stone in the 1930’s, the price of gold shot up dramatically.
In a depression, economic crisis, inflation or war, people seek financial security. They invest in assets that represent more than just a paper promise to pay. For many, that means owning gold coins.
- No Dealer Reporting Requirements – Virtually every asset or investment which we own is highly visible, traceable, reportable and under the watchful, scrutinizing eyes of the government. With the new cash and metals transaction reporting laws and regulations, even cash, cashier’s checks, money orders and most forms of gold transactions are reportable. In effect, personal privacy, which was guaranteed by the Constitution’s 4th Amendment, has for the most part disappeared in the area of investments.
For example, if you sell bullion coins to a coin dealer, the dealer is required by law to report that sale to the IRS on Form 1099. However, coins with a premium above 15% do not have to be reported by a coin dealer when you sell them. For example, the semi-numismatic $20 Liberty and $20 St. Gaudens have premiums above 15% and are, therefore, gold numismatic coins which do not have dealer reporting requirements.
Everyone should own an asset that no one else knows about- a low profile, bearer type investment that leaves no tracks when bought or sold. Semi-numismatic gold coins fit the bill perfectly.
- Greater Upside Potential – Numismatic and Semi-numismatic coins have historically carried a greater upside potential, giving them an extra advantage over strictly bullion investments.
Why? Unlike bullion coins, which are freshly minted by the millions each year, most semi-numismatic coins are nearly 100 years old and in very limited supply. If the price of gold moved up $100 an ounce, a bullion coin would move up a corresponding $100. However, semi-numismatic coins have historically doubled that movement.
For example: The semi-numismatic $20 Liberty and $20 St. Gaudens gold coins currently have a 40-90% premium over bullion. (Numismatic coins have 500-5,000% premiums over their bullion content.) The premium on the $20 gold coins have expanded to 100% in recent years, and under certain bullish gold market conditions, could rise even higher. In a rising gold market, the semi-numismatic $20 Liberty and $20 St. Gaudens coins have a substantially greater upside potential than a normal gold bullion coin.
- Protected from potential future confiscation – Unfortunately, many governments, including the U.S., have a history of confiscating gold bullion coins. In 1933, by Executive Order, the Roosevelt Administration declared it illegal for American citizens to own gold. Practically overnight, a law went into effect that forced Americans to turn over their gold or face up to ten years in prison. Gold was confiscated and replaced with freshly printed-paper dollars. The following is an excerpt from Roosevelt’s Executive Order (dated April 5, 1933):
All persons are hereby required to deliver on or before May 1, 1933, to Federal Reserve System all gold coin, gold bullion and gold certificates now owned by them or coming into their ownership on or before April 28, 1933.
However, there was one type of gold that was exempt from this draconian law – namely, “gold coins having a recognized special value to collectors of rare and unusual coins.” In other words, numismatic and semi-numismatic gold coins.
Since 1975, Americans have been allowed to own gold bullion. During some future crisis, power-hungry politicians, eager to squeeze out the last drop of your civil liberties, could again make gold illegal and confiscate gold bullion bars and coins.
Could the current “war on terrorism” give the government the excuse to call in gold bullion once again? In the event of another “government gold grab,” collectible gold coins have always been excluded from such a confiscation.
GOLD PROVIDES INSURANCE AND PEACE OF MIND
The past few years have not been kind to investors in the traditional markets. Investors and savers have lost over $8 trillion in market declines. Increasing political and economic unrest and instability throughout the world will lead to a greater need for financial security. Will we see the kind of double-digit inflation that has plagued the U.S. in the past? And never forget the power of the Federal Reserve’s printing press. Due to the Fed’s recent record expansion of the U.S. monetary supply, it is likely that the U.S. dollar will continue to weaken.
A spastic economy, with elements of both inflation and deflation, will make more traditional investment strategies obsolete. Gold coins provide the only true safe harbor for your investments and should be a major part of every investor’s portfolio over the next turbulent years.
A recent quote by Paul Volker, ex-Fed Chairman, certainly causes one to stop and think, he said “The fate of the world economy is now totally dependent on the growth of the US economy, which is dependent on the stock market, whose growth is dependent on about 50 stocks, half of which have never reported any earnings.”
Prudent investors are beginning to diversify out of financial institutions and paper promises and into tangible assets. Gold is recovering from twenty year lows, and today gold provides an opportunity to take a low risk position a midst volatile world financial markets. At the very least, gold provides insurance and peace of mind. In our opinion, placing a third of your money into gold is easy, it’s what to do with the other two thirds that is so hard.
WHY GOLD PRICES WILL CONTINUE TO RISE
The fundamentals for gold have never been stronger. Global demand for gold exceeds supply by over 1,000 tons per year. Central banks have made up the shortfall- and have helped suppress the price of gold- by selling or loaning thousands of tons of their gold reserves. Nevertheless, all that is about to come to a screeching halt.
The bull market in the U.S. dollar is now over. As the dollar goes into a long-term downtrend, millions of foreigners will start re-directing their money out of the paper financial markets and into Gold, the world’s other proven reserve currency.
All it would take to spark an explosion in the price of gold is one major event- an escalation of terrorism in the U.S., an expansion of the war in the Middle East, another stock market meltdown or a major bank failure.
Once the price takes off, panic buying could easily set in. If you are not in position before the price explosion starts, your opportunity for profits will be substantially reduced. To safeguard your financial portfolio, we recommend that you place up to 1/3 of your investments in precious metals.
However, a shortage of gold coins is already developing. U.S. $20 double eagles are in very short supply. Sophisticated investors are quietly acquiring millions of dollars’ worth of non-reportable gold coins. When the crowd comes rushing in, supplies of these coins will evaporate and prices will skyrocket as they did in 1979-80.