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This Soars in a Gold Bull Market, But You Haven't Missed It Yet

By Dr. Steve Sjuggerud
Friday, June 10, 2011

In every gold bull market since we went off the gold standard 40 years ago, this particular asset has soared by hundreds of percent.
 
But so far in this current bull market, this asset hasn't done a darn thing.
 
If this asset does what it's done in every other gold bull market, hundreds of percent gains lie ahead...
 
 
In the 1972-1974 gold bull market, this asset soared 348%.
 
In the 1976-1980 gold bull market, this asset soared 1,195%.
 
And in the much smaller 1986-1989 gold bull market, this asset still soared hundreds of percent.
 
Now we're in the greatest gold bull market since the 1970s. Gold is up 477% over the last 10 years. But this particular asset is only up about 25%.
 
The asset is rare coins of all kinds. (All the gains above are from the PCGS 3000 Index, which tracks 3,000 rare coins.)
 
In this gold bull market, rare gold coins in particular (as measured by the PCGS Generic Gold rare coin index) haven't done much better than rare coins in general...
 
Graded gold coins have barely doubled over the last 10 years, while gold's up nearly 500%. Barely doubling is a downright terrible performance, compared to what they did the last couple times around: 800% in 1976-1980 and 300%-plus in 1982-1989.
 
In my True Wealth newsletter, we took profits on these coins years ago because they weren't doing what they were supposed to in a gold bull market (though we pocketed gains as high as 250% on our Saint-Gaudens gold coins graded MS-63).
 
But we've since bought back in. Prices are just comically cheap.
 
You can buy mint state, uncirculated, pre-1933 Saint-Gaudens U.S. gold coins for less than $1,700 – at a time when gold is around $1,550. (These coins have just under an ounce of gold in them.)
 
In True Wealth, I recommend a slightly higher-quality coin: a pre-1933 Saint-Gaudens that's been graded as just about perfect (a grade of MS-65 by one of the two major grading companies) and is sealed in a tamper-proof container. These coins are much rarer than the raw coins... yet they sell for about $2,300 – the smallest premium in history relative to their melt value.
 
To give you an idea, at the peak of the last bull market in gold, these particular coins sold for nearly 10 times the price of gold. Ten times the price of gold today would be over $15,000 for these coins. But you haven't missed a thing... You can buy them for $2,300 today.
 
After a decade-long bull run in gold, you have to question if it'll even happen... if this time will be different... if rare gold coins will do what they've done in every previous gold bull market.
 
It sure hasn't happened yet. But I believe it will...
 
I see the lack of interest in rare gold coins (just like the lack of interest in gold stocks) as a sign this bull market in gold has a lot longer to run. The world is not scrambling to buy up every conceivable gold asset... yet.
 
I think it won't be different this time. Before this bull market in gold is over, I believe pre-1933 gold coins (graded MS-65) will soar hundreds of percent.
 
I could be wrong, of course. But the premiums over their melt value are so low right now, your downside risk is limited... Yet your upside potential is hundreds of percent.
 
That's the way I like to invest.
 
Good investing,
 
Steve




Further Reading:

"Gold stocks have been cheap by this measure a few times in history," Steve says. "And those were all great times to buy gold stocks. Today, they're still cheap..." Read more here: My Favorite Way to Buy Gold Today.
 
Coin dealer Van Simmons shows Steve the most ridiculously good deal in gold right now. "If gold continues to rise," Steve says, "these coins could deliver huge gains. It's happened in all previous gold bull markets."

Market Notes


OUR HIGH-HORSEPOWER INDICATOR RAISES A RED FLAG

Like China bellwether Baidu and fad shoe play Skechers, our "high horsepower" economic indicator stock is getting laid low right now...
 
Regular DailyWealth readers know we monitor shares of Cummins (CMI) for an "instant read" on the global economy. Cummins is the world's largest independent maker of high-horsepower diesel engines... the kind that power bulldozers, cranes, heavy trucks, mining shovels, and electrical generators. This makes its share price rise and fall with the pace of economic and infrastructure activity.
 
For example, we noted the stock's big breakdown in January 2008, which came well before the economic crisis. Post-crisis, though, Cummins has soared... And as long as this bellwether was soaring, we had to say things couldn't be "all that bad." But lately, Cummins hasn't been soaring... It just staged a downside breakout and struck a six-month low.
 
It's too early to say this weakness is signaling an impending economic bust. But consider our "trend antennae" raised. As the world economy goes, so go the profits and share price of Cummins. And right now, Cummins is going down.

Cummins stages a six-month downside breakout

In The Daily Crux



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