The Cheapest Way to Buy Gold

In 2006, the U.S. Mint issued the first pure gold coin in America’s monetary history. It’s called the 2006 Buffalo.

The obverse features the profile of a Native American. The reverse features an American buffalo (also known as a bison). It’s called the “Buffalo” because the design is based on the 1913 Buffalo nickel. They come straight from the mint. “First strikes,” they call them. They are in perfect condition. Only 300,000 exist.

These coins are so beautiful, they define the word “mint.”

Before 2006, it had been difficult to find gold coins in “Buffalo-mint” condition. The Mint hadn’t produced a new gold coin since 1933. They say only 1% of these gold coins still exist today. Most of these were banged up anyway. Even if you could find a trustworthy dealer, you’d still be looking at tens of thousands of dollars per coin.

With so many orders coming in, the Mint was forced to limit sales to 10 coins per household.The 2006 Buffalo was a totally new concept. You could buy them right off the U.S. Mint’s website. They were beautiful, unique, and they only cost $800 per coin. It was the first time in a generation that collectors had been offered a chance like this. In the first few days, they inundated the Mint’s website and phone lines. Dealers and professional collectors bought all the coins they could.

A coin should always be worth more than its “melt value.” A gold coin you can trust. You know what it weighs and you know what it’s worth. Plus, it’s convenient. A gold ingot doesn’t have the same benefits. Because of these benefits, gold coins will always trade at a premium to spot gold, no matter how common they are. With spot gold above $700, $800 was probably a fair price for a limited-edition coin in mint condition like the Buffalo.

Thing is, spot gold fell down to $500 right after the Buffalo came out. So the coins were no longer worth $800. Right now, mint Buffalos sell for $700 on eBay. As for the mint, they’ve increased the limit to 5,000 coins per household, and according to the site, there’s still plenty of unsold inventory.

Anyway, at $700, I think Buffalos are a solid way to play gold’s bull market. Thing is, we have a better opportunity here...

Last week, I called up my coin dealer, Van Simmons, and asked him about pre-1933, mint-condition gold coins. Thanks to the massive supply of Buffalos, Van told me these mint-condition “vintage” coins are a real bargain at the moment. Here’s what he means:

As the table shows, the new supply of Buffalos flooded the market for rare gold coins, and prices have plunged since May. So even though the price of gold held up fine, the price of coins has slipped. After I spoke with Van, I asked him to get some of the coins on the list for me. He told me he’d need two weeks to source all of them. So despite the big fall in price, these coins are still incredibly rare.

This makes vintage gold coins the absolute cheapest way to invest in gold right now.

Buffalos will track the spot price with a 5%-10% premium over the next few years, even if the Mint’s supply runs out. If you’re interested in buying some Buffalos, go to www.usmint.gov.

Vintage gold coins, on the other hand, could rise even if the gold price stays flat. But if gold goes up... I expect to trade my hoard of vintage gold coins for an airy beach house on the Florida coast, complete with rose garden and membership to the local country club.