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My Favorite Way To Own Gold Bullion TodayBy
Saturday, July 9, 2011
This is not an essay about gold.
If you do not already understand why gold is in a bull market and why every American should own physical gold bullion, please do me a favor: Go back and read this essay and this essay before you proceed any further.
Now... if you're familiar with why it's vital to own gold right now, I'm going to tell you about the best way to own gold bullion.
You have many choices when it comes to buying gold bullion. You can buy gold jewelry, like these purpose-made one ounce gold necklaces. You can buy gold bars. They sell them in one-ounce, 10-ounce, or even 400-ounce bars. Or you can buy gold coins. There are thousands to choose from, from ancient Roman coins to coins issued by the U.S. Mint this year.
When I buy gold bullion, I need to know I can trade my gold anywhere in the world, whenever I want. I need to know I'll get full value for my gold when I sell it. And I don't want to the government knowing about my transactions.
The $20 Saint meets these three requirements better than any other gold bullion investment I know.
America became the largest economy on earth in the early 20th century. America's $20 gold piece became the world's most important coin. You might say it was the early 20th century equivalent of the $100 bill today.
The U.S. Mint produced 70 million of these $20 gold coins between 1907 and 1933. The proper name for this coin is a $20 Double Eagle gold coin. But coin experts call them "$20 Saints" because Augustus Saint Gaudens designed them.
For the last 100 years, collectors have spread the $20 Saint all over the world. There are hundreds of thousands of these coins in North America, Asia, South America, and Europe. Everyone recognizes them. Everyone will trade them with you at a fair price.
I like the $20 Saint in "brilliant uncirculated" condition.
To give you some history, in the late 19th century, people used gold coins as currency. They bought steamboat tickets with them. They purchased houses with them. They even paid bills with them. The vast majority of the gold coins from this era that exist today are in "junk" condition, like most of the coins in your pocket. Few "uncirculated" gold coins exist from this era.
By the early 20th century, people used paper money for day-to-day transactions. Gold coins became a savings instrument. Savers kept these coins in sock drawers, safety deposit boxes, and bank vaults.
There are hundreds of thousands of uncirculated gold coins still in existence from this era, especially the Saint Gaudens $20 piece.
A few of these uncirculated $20 Saints are so beautiful and rare, collectors pay tens of thousands of dollars for them. These are called "graded mint condition" coins. I am NOT talking about mint-condition collectible coins here.
Brilliant uncirculated (BU) coins are neither "mint condition" nor "junk" coins. They are simply coins that look shiny and new, but they're still common enough that they don't have any rarity or collectible value.
BU Saint Gaudens are free of any government reporting requirements... and the government is unlikely to confiscate them.
In 1933, the U.S. government outlawed gold ownership. It demanded Americans turn in their holdings of gold coins. But it made an exception of collectible coins.
If the government decided to confiscate gold again – something we consider unlikely – you would have to turn in your holdings of Krugerrands and American Eagles. But your pre-1933 Double Eagles in BU condition would likely receive an exemption as "collectibles."
Finally, BU Double Eagles have more upside potential than any other gold bullion investment.
Over the last 40 years, these coins have commanded a significant premium over gold bullion coins.
For example, during the 1960s when gold was trading at $32 per ounce, BU $20 Saints sold for almost $65 per coin... a 100% premium over gold.
Ten years ago, when gold was trading at $300 an ounce, BU $20 Saints traded for $710-$750 each... as much as a 150% premium.
With the run-up in gold prices this year, investors are buying up modern gold bullion coins like the American Buffalo and Eagle, and even one-ounce gold bars. And so inventories of these BU vintage gold bullion coins have built up. The premiums have fallen to all-time lows.
Today, with gold at $1,500 per ounce, you can buy a pre-1933 brilliant uncirculated Saint Gaudens for as little as $1,695... only $80 more than a Krugerrand or an Eagle costs today.
In sum, BU $20 Saints offer three practical advantages over common gold bullion coins: better liquidity, insurance against confiscation, and more upside potential – but they only cost 5% more. This is the bargain of all bargains. Take advantage of it while gold investors concentrate on modern bullion products.
Good investing,
Tom Dyson
Further Reading:
Tom got the scoop on a way to get an 83% discount on a rare silver coin. "In 1985, Van Simmons paid $1,000 for one of these," Tom writes. "Now, you can buy at an 83% discount to that price."
"Gold is up 477% over the last 10 years," Steve writes. "But this particular asset is only up about 25%." Learn what opportunity he's talking about here: This Soars in a Gold Bull Market, But You Haven't Missed It Yet.
Market NotesCHARTS OF THE WEEK: "HOGS AND HOME" EDITION We're running a special two-part edition of Chart of the Week. We call it "Hogs and Home."
Regular readers know we monitor a handful of "brand name" stocks to get an instant read on the U.S. economy. You can learn a great deal about what the market thinks of a given sector of the economy by just looking at the general price trend of our brand name stocks.
Two companies that fall into this category are Harley-Davidson (NYSE: HOG) and Home Depot (NYSE: HD). Motorcycle firm Harley-Davidson is one of the premier "toymakers" in the U.S. Few brands are more American than "Harley." Its price action allows us to gauge America's ability to buy expensive motorcycles, nicknamed "hogs."
Home Depot is America's largest home-improvement chain. If folks aren't spending money on the "American dream" with new lawns, refurbished kitchens, patio furniture, and updated bathrooms, it's a bad sign for the economy... And it shows up in Home Depot's stock.
Earlier this summer, both Harley-Davidson and Home Depot reached six-month lows. But as you can see from this week's charts, the surge of buying interest that has lifted Apple has also lifted Harley-Davidson and Home Depot. Both have rebounded to reach or approach fresh 52-week highs. The trend in America continues up...
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Stat of the week
103%
Gain in the price of silver in the past 12 months. In The Daily Crux
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