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The Most Ridiculously Good Deal in Gold Right NowBy
Wednesday, January 26, 2011
I couldn't believe what my good friend Van Simmons told me last week...
It's the best deal in gold right now. And the best deal in most of our lifetimes in this particular asset.
Van Simmons, as you may know, is a mentor of mine... I love spending time with him. He's absolutely straight up. And he's probably bought and sold more "real" assets than anyone on the planet. By "real assets," I mean collectibles, like rare coins, stamps, guns, and whatever else you can think of...
Van has been generous with me in sharing what he knows. And he's taught me more about successfully trading real assets than I could learn from any other source.
Last week, Van said to me, "Steve, did you know when I got started in coins, gold was $35, and uncirculated pre-1933 Saint-Gaudens gold coins were selling for $60? These days the premium is only 11%."
I couldn't believe it. Forty years ago, the premium over the gold price was dramatically higher than it is today. It amazes me that the most desirable gold-coin style in U.S. history has fallen so much in value relative to gold. It can hardly fall any farther! Van continued:
People have totally forgotten about rare coins. They aren't on anyone's radar. Current prices are a joke. Everyone wants Gold Eagles minted yesterday, which typically sell for 5% to 6% over the price of gold. But for a couple percent more, you can get an uncirculated pre-1933 Saint Gaudens.
At current gold prices (around $1,350), Gold Eagles sell for around $1,420. But pre-1933 uncirculated Saints (which would grade between MS60-MS62) are around $1,500.
Remember... in the late 1960s, these coins sold for $60 when gold was $35. That was a 70%-plus premium. Today, these coins sell for a premium of just 11% over the price of gold.
You are welcome, of course, to buy the Gold Eagles minted yesterday. But don't miss Van's point: Nobody is interested in rare coins anymore.
And the rarer they are, the more the premiums over melt value have crashed...
Saints graded a little bit higher quality at MS65 are easily the cheapest I've ever seen... They should trade for two to three times the price of gold. Nobody is interested, and that makes me very interested.
Van believes the current setup is great for the MS65 Saint Gaudens. They are the most beautiful pre-1933 gold coin the U.S. ever minted... So there's always demand. And they are trading at the smallest premium to their melt value in history.
In the October issue of my True Wealth newsletter, I recommended buying these particular rare gold coins.
Back then, gold was about $1,275, and the MS65 Saints were around $2,300. At the time, it was the second cheapest they had ever been.
Today is an even better deal... Gold is up to $1,350. But the MS65 Saints currently trade about $2,170, for a premium of just 61% over the price of gold. This is now the cheapest these coins have ever been.
This chart tells the story. It shows the MS65 Saints premium over the price of gold. This is the lowest premium in their history.
 To me, rare coins like these MS65 Saints are the best deal in gold. The coins contain just under an ounce of gold, so your downside is limited to the price of gold. But judging by this chart, your upside is hundreds of percent...
Owning these MS65 Saints is like owning a small-cap mining company. In a gold bull market, both could take off by hundreds of percent. But a small-cap mining company has the risk of going out of business. Your gold coin has no such risk... Your downside value is limited to the value of the gold in the coin.
These coins appear to be fairly valued at two to three times the price of gold. If gold stays flat, MS65s have to increase 25% to reach twice the price of gold. And they have to increase 87% to get to three times the price of gold.
If gold continues to rise... these coins could deliver huge gains. It's happened in all previous gold bull markets.
If you haven't bought yet, I recommend buying MS65 Saint Gaudens at current prices – the best deal in history.
Good investing,
Steve
Further Reading:
Van Simmons has been collecting rare coins since childhood. Now, he's made it his life. "He's too humble to say it," Tom Dyson writes, "but he's one of the most important people in the collectibles business." See what he's recommending in silver here: How to Get an 83% Discount on a Rare Silver Coin.
Market NotesTHE GOLD CORRECTION IS FINALLY HERE The gold correction we've been warning about is finally here...
Gold spent last summer trading in a choppy fashion around $1,200 per ounce. It then staged a huge upside breakout, gaining $200 per ounce in just four months. This gain helped gold close higher for the 10th straight year. As our friend Chris Weber noted, this was an incredible occurrence.
This amazing rally took on plenty of "Johnny-come-lately" short-term gold buyers. It even brought lots of "gold is in a bubble" talk to financial television. (The talk was ignorant. Read here for why.)
As you can see from today's chart, gold "bumped its head" twice on the $1,425 level in December. And in the past few weeks, the metal sunk to its lowest point in three months. Like we warned last week, the gold run is due for a short-term breather... and it could fall all the way down to $1,100 an ounce and remain within the confines of a bull market. At that price, we'd be buying more.
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