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How to Buy Gold, Part I: Famous Dealer ExplainsBy
Wednesday, May 19, 2010
I spoke with Van Simmons today...
Van is a legend when it comes to gold and gold coins – and he's one of my good friends.
(A few things from his resume... In 1986, Van was a founder of PCGS – the Professional Coin Grading Service – which revolutionized the gold coin industry. As a dealer he's possibly bought and sold more dollars' worth of rare coins than anyone on the planet.)
And he doesn't stop with gold. I've written to you about Van's other investment secrets before.
Van is a mentor of mine. I give him a call and ask him his opinion when I'm considering buying an alternative investment (even beyond gold and coins). Having collected and bought and sold so many different things over decades, his experience is priceless.
Today, we kept it simple... I asked him:
What's the best way for the typical American to own gold?
"Bullion is where you start – which usually means modern gold coins. The most widely traded gold coin is the U.S. Gold Eagle," Van said. "If you're new to gold, and you want to physically own gold bullion, the U.S. Gold Eagles are the way to go."
(It's easy to buy Gold Eagles. I'll show you where and how at the end of this essay.)
I asked Van why we should want these in particular... For example, my parents owned Kruggerands (which are gold coins from South Africa). I asked Van why we shouldn't own Kruggerands or Canadian Maple Leafs.
"Well, you can own those you mentioned... But when a customer sells a Kruggerand or a Maple Leaf, a dealer has to fill out a 1099 Form about who bought and sold and mail it to the government. We don't have to do that for Gold Eagles."
All things being equal... the less reporting requirements, the better. (You can also hold these coins in IRA accounts.)
"Also, importantly, they're the most liquid coins... so while you might not find a full-price buyer for a Mexican Peso gold coin, there's always a buyer for an American Gold Eagle – you can always get a good price."
How much should people hold in gold bullion like Gold Eagles, versus, stocks, or rare coins?
"Right now, personally, I'm about equally split between those three... I might have a bit more in gold stocks. For customers, it's their decision. If you want to have a speculative element to it, you should have gold stocks and rare coins. Some people don't want rare coins. And some people just want bullion. It's your call."
How should people store the stuff?
"Once again, it's your call... You can put it in a safety deposit box, in a home safe, or bury it in the back yard. One thing, I do not recommend having a dealer store or hold it for you."
What about shipping? Any concerns?
"It's no big deal. We typically send coins by registered mail, insured. We also use FedEx. The only complaint we hear is when registered mail takes more time to deliver than the customer expects and they start to get antsy. But buying coins is as easy as when you order a book on Amazon.com and it shows up at your house."
As for how much to pay, expect it to cost around 5% to 6% over the current gold price, plus shipping (which is typically around $25).
For where to buy... In my 13 years writing investment letters, I've dealt with a handful of dealers that have handled thousands of our readers and have proven to treat them right. These dealers include:
- Camino Coins in the San Francisco area (www.caminocompany.com).
- Asset Strategies in the D.C. area (www.assetstrategies.com). - American Gold Exchange in Texas (www.amergold.com). - And of course, Van Simmons in Southern California (www.davidhall.com). I don't receive any compensation for mentioning these guys. And you're welcome to call around or buy locally. I'm just letting you know these dealers have handled thousands of orders – each – from my readers over the years. And I've had few complaints about them (and never anything serious). They each have decades of experience.
To wrap up, the message today is simple...
If you want to get started owning gold bullion, the best starting point is U.S. Gold Eagles.
Don't worry if you've never bought gold before. If you buy from one of the dealers above, it's as easy as ordering a book on Amazon and having it show up on your doorstep!
Good investing,
Steve
Further Reading:
As Steve mentions in today's essay, Van Simmons collects all kinds of unique things. For a classic DailyWealth essay on one of the oddest collectibles around, make sure to read Van Simmons' Investment Secret.
Market NotesCOPPER IS NOW ON THE CRASH LIST
After a stunning decline of 60 cents in just a few weeks, we are placing copper on "crash alert."
Long-time readers know we monitor the price of copper for a "real time" reading of global economic health. Copper is a major ingredient in cars, power lines, electronics, and housing… so its price tends to rise and fall with economic activity. In late April, we highlighted the "bear case" for copper. Several mining insiders are worried about a huge supply overhang… and if the brilliant Jim Chanos is right about a China slowdown, copper will crash. As you can see from today's chart, copper has suffered an incredible drop in the past month. This decline from $3.60 per pound to $3 per pound has taken the metal close to its February low around $2.90. If this area gives way, one has to be worried about China, the global economy, and just about every asset on earth. One would also expect our bearish note on copper producer Freeport-McMoRan to be hugely profitable. Our "bonus chart" (the second chart below) shows this large miner is plunging. |
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