When to Buy $20 Liberties and $20 Saint Gaudens?
The old adage says that timing is everything. Or that one should always buy low and sell high. With rarer issues of $20 Liberties and $20 Saint Gaudens, timing isn’t necessarily everything. Now, you can always buy rare gold coins in the dips in the market which will always produce better results over the long-term, but rare gold coins have ...
Is Gold Bullion a Good Investment?
Gold bullion is a great investment. It has averaged a rate of return of 17.1% over the last 9 years. It has fulfilled its role as a financial insurance for those that have owned it during the 9/11 crisis, banking failures and stock market correction during that same time frame. So not only did gold bullion appreciate dramatically (over 340%) ...
What are Numismatic Gold Coins?
First let’s define numismatic in two ways, the academic definition and the government’s definition. The academic definition is how Webster’s Dictionary defines it, and that is, of or relating to currency. Wikipedia defines it as the study or collection of currency, including coins, tokens, paper money, and related objects. So numismatic is the study of coins and paper money. It ...
Performance of Bullion and Numismatic Coins
No one can deny that we are currently experiencing a gold bull market. The spot price of gold has been increasing for the past nine years. It came off a low of $272 per ounce in 2001 to where it sits today at $1,158 per ounce. The following graph depicts the percentage increases per year for the last nine years ...
Sight-Seen vs. Sight-Unseen
When acquiring rare gold coins it is important to understand the difference between sight-seen and sight-unseen coins. If a dealer attends a coin auction and fifty 1903P $20 Liberties in MS63 are up for sale, a dealer may make a bid on those coins sight-unseen. This bid will typically be much lower per coin than if that same dealer were ...
Physical Gold or US Dollars?
You have a personal choice to make everyday as to how you keep your savings. Do you keep it in cash? Stocks or bonds? Do you keep it in a CD or in a savings account at the bank? Or do you keep it in physical gold? When you keep it in physical gold, in your possession, you have essentially removed your money from the system; a system in which you have no control, a system that is manipulated by central bankers and the federal government.
There is a fundamental difference between physical gold and paper assets (or digits on a screen). One is a physical piece of gold that has intrinsic value, and has had value for over 5,000 years. On the other end of the spectrum is wealth that is stored as digits in an electronic account in a computer system. If the dollar collapses only one of these is safe.
The way our government is treating the economy today is massively irresponsible. The more money the government prints, the more the value of the dollar is eroded. It has become obvious over the past few years that the irresponsibility has run rampant. From the dealings of Bear Sterns and Lehman Brothers to the failure of BP to buy a part that could have prevented the mess in the gulf. In the world we live in it has clearly become all about the money. Do you trust these types of people to have your best interest in mind? I think not.
If you own physical gold you are saying I don’t trust the government and the Federal Reserve. If you have money in the system you are supporting that system. Now I am not suggesting that you pull everything out and live off the grid, but I am saying that everyone should own some physical gold for financial insurance. Sure you will probably see great gains by many experts’ expectations, but it is more about protecting what you already have, and building wealth as secondary.
He who controls the assets has the power. Gold coins in your hand or numbers in your bank account, which one is safer? Which one will you choose? Weigh your options, do your research and decide for yourself what makes most sense.
New Gold-Backed Currency Could be in Use Next Month
It looks as though a northern state in Malaysia called Kelantan will be using a new gold-backed currency as early as mid-August. They won’t be the first state/country to be using a gold-backed currency; Indonesia has already minted a minimal number of pieces (25,000) to be used in Australia, Malaysia, and Singapore.
According to the Guardian, the states Islamist government is kick starting the currency by paying its government employees 25% of their paychecks with the gold dinar and silver dirham. To further strengthen the cause all state companies will be accepting the currency and over 600 businesses will be doing the same.
Gold-backed currencies are touted as the only way to thwart the central bankers around the world, stop inflation and stabilize the world’s economies. Many well respected financial analysts here in the US are calling for a gold backed dollar in order to do just that. A gold-backed US dollar could work if gold bullion was confiscated and the price was again locked in at a much higher price to be equal with the money supply. Some experts say that price would be anywhere between $3,000 and $11,000 per ounce, though I have heard some pretty extreme predictions as high as $47,000 per ounce.
The US was on the gold standard for many years until the Federal Reserve was allowed into our system in 1913. They have systematically eroded the purchasing power of the dollar through a series of events. First they removed us from the gold standard domestically in 1933 by confiscating all gold bullion and making it illegal to own gold. Then under President Nixon they removed us from the gold standard internationally in 1971 by closing the gold window, making it impossible for foreign countries to convert their excess US dollars to gold.
A new gold standard in the US would thwart the ability of the government to print money at will, thus impeding inflation and the erosion of private wealth. Inflation is merely a tax. The more something costs you the less money you have to spend on other things. Inflation shifts wealth from your pocket to the government’s pocket. Physical gold and silver bullion have proven to keep up with inflation over the years. Therefore everyone should have some in their portfolio.
Interview with Jim Rickards on ITM Trading Website
In this 11 minute interview with Jim Rickards, Senior Managing Director for Market Intelligence at Omnis, Inc. and President of ITM Trading Inc a precious metals dealer in Arizona, Mr. Rickards reveals how he comes up with his prediction of gold pricing reaching as high $11,000 per ounce.
Mr. Rickards answers the first question by saying that he prefers a strong dollar with gold backing but to him it is clear that the government is going in the opposite direction by cheapening the value of the dollar through money printing. Therefore it makes sense to look for alternatives to the dollar, but when you begin to look around for an alternative nothing looks good except for gold. Would you want Euros or other fiat currencies? With everything that is going on in the world economic picture I think not.
When you look at supply and demand fundamentals on gold and then look at gold from the perspective of macroeconomic view, gold becomes the only real option, thus Mr. Rickards believes at one point gold will become the only acceptable form of money.
When people say to Mr. Rickards that there isn’t enough gold in US to back the dollar, he simply states that it is not a function of supply, but at what price. If gold was set at $1,200 per ounce that would create deflation, so you have to come up with a price that creates balance.
Mr. Rickards says that he believes gold will go to $3,000 to $7,000 per ounce using his calculations. He says “it is a simple 8th grade math equation” using the amount of gold in the US hoard and the amount of money in the system and you can come up with the price. He did note that the current range represents today’s money supply, further stimulus (money printing) will increase the gold price range. The reason for the range is this: it depends on which money supply figure that you use (M0, M1, M3). Mr. Rickards says that if you include the global gold and money supplies that the figure can get as high as $11,000 per ounce.
Jim Rickards is a very well respected economist/analyst who appears on CNBC on a regular basis. I highly recommend that you watch this interview at www.itmtrading.com, you will find it in the right-hand navigation panel.
Gold Price Correction
Gold is down for the second day in a row. As of this writing the gold spot price on the Comex is $1,181.10. That is down from an all-time intra-day high of $1,265 posted a month ago. Gold is trading in a range of $1,185 to $1,250. The price action has been pretty volatile inside of this range, closing up one day and down the next. This is typical action in any bull market, but is characteristic of a second phase. Traders are capitalizing on profits before the next big move in gold.
The price of gold has fallen for four straight weeks, over concerns of deflation. The CPI has declined for three consecutive months and has not dropped four months in a row since the Great Depression. Look for Unemployment to increase, retail sales to remain weak and consumer confidence to wane further. These factors have contributed to temporary deflation giving many gold traders an excuse to liquidate gold investments tied to the gold price.
With the entire stimulus the US government has put into the system, these deflationary pressures will begin to turn into extreme inflationary pressures. This is the main reason why many experts believe that the gold price has a long way to go before reaching an ultimate record price, before suffering a major correction. Some experts are calling for $7,000 to $15,000 gold prices before it’s all over.
July and August are typically softer months for gold followed by a rise in prices during the fourth quarter, signaling a good time to buy in. This has been true in eight out of the last nine years. Further analysis of the gold market is showing that right now is a great time to buy rare gold coins. Prices are down across many areas of the asset class and are creating great opportunity and extreme values. In fact some coins are estimated to be undervalued as much as $1,400 per coin. These prices are down from December when gold broke the $1,200 mark. Values are best in the MS63 & 64 $20 Liberties.
Why do Investors Prefer Semi-Numismatic Gold and Silver Coins?
To answer this question we must first define numismatic. Numismatic is defined by Wikipedia as the study or collection of currency, including coins, tokens, paper money, and related objects. The government defines numismatics as gold coins having a recognized special value to collectors. This is the definition that is important when acquiring gold coins for your portfolio. This definition tells you what is and what isn’t subject to confiscation, which brings us to the question in the title of this blog.
People in the industry sell certain coins under the name of semi-numismatic. They claim that these coins have some recognized collectable value (even though they are quite common) and therefore would be excluded from confiscation should it occur. It should be noted that no one knows for sure if they would actually be excluded if the American people are subjected to confiscation again. On the other hand, many would agree that graded rare coins again would be excluded. Semi-numismatic coins have high bullion content and are older coins. These types of coins are typically gold Swiss francs, British sovereigns and French francs. The gold content is close to a fifth of an ounce.
The reason that people prefer them is that they are more affordable than graded rare coins and they are smaller in size. You can pick up a gold Swiss franc for around $275-$300 today depending on the dealer. I personally don’t think that investors prefer them; they are just more affordable than an ounce of gold or a rare coin. They have not performed as well as graded $20 Liberties and $20 Saint Gaudens over the long-term, so to say that investors prefer them would be a false statement (if you agree that investors always want the best rate of return). These coins are more approachable to new investors in the gold market and therefore are sold as such.
I personally feel that it is important to establish your goals and objectives and acquire the right coins for your portfolio. If that means gold Swiss francs are a right fit then so be it. But don’t just buy them because they are more affordable or the sales person tells you to. These coins are very easy to check prices on so do your research. Some companies sell these coins for far more than what they are worth in order to make huge profits. As with everything do your research and make sure you acquire gold for your portfolio that supports your goals.
What is the Value of a 1904 Liberty $20 Gold Coin?
The $20 Liberty Head was the largest denomination ever minted when it was released to the public in 1850. It was designed by James B. Longacre and it contains 90% gold and 10% copper and contains .9675 ounces of gold. These coins were minted from 1850 to 1907 when the design changed to the $20 Saint Gaudens (there was one coin minted in 1849 for design proofing). The $20 Liberty is one of the most popular rare gold coins to investors and collectors alike.
The 1904 $20 Liberty coin was minted in Philadelphia and it is the most common Liberty coin minted. The original mintage was 6,256,699 and there are many in existence in mint state grade available for purchase. Compare that to the 1882 $20 Liberty of which only 571 were minted and there are very few in existence. The 1904P in the rare coin industry is considered a “common date” coin. If you call a broker/dealer and ask to buy a common date Liberty this is what they will sell you.
Its value tends to fluctuate more so with the spot price of gold than other coins because rarity plays a minute role in its value, although the higher the grade the higher the value. For example (approximate pricing):
MS61= $1,530
MS62= $1,600
MS63= $2,100
MS64= $2,600
MS65= $4,400
The lower you go on the grading scale the closer to the spot price the coin will be and vice versa. This coin will be the lowest valued coin of all liberty head $20 coins. Thus all other coins will go up in value from these prices. For example, a 1903 $20 Liberty in MS65 condition sells for around $5,100. The original mintage on this coin was 287,270. The rarity factor for this coin is higher than the common date coin and therefore it is worth more money. If a coin is in mint state 65 grade and only one is known to exist it will be far more valuable than $4,400 and will probably only be found at auction.
Liberty head $20 gold coins are great for investing and collecting. Whether you are looking for asset protection, growth or historical significance and beauty there is a coin out there for everyone.
Everything You Need to Know about Gold in Three Sentences
Richard Russell, a prominent financial writer, on July 8th wrote this:
“Fed Chief Bernanke will absolutely not accept deflation… Shrewd gold-accumulators are well aware of this. As the deflationary and deleveraging forces press on the US economy, the Bernanke Fed is ready to devalue the US dollar in its (whatever it takes) battle to hold back deflation.”
Russell sums it up in three sentences:
1. The Fed will not tolerate the growing forces of deflation
2. To combat the deflationary forces, the Fed will devalue the dollar by printing trillions more of Federal fiat money.
3. Once it is realized that the Fed is on the path to devalue the dollar, there will be panic to buy and own gold.
The key to what he has said is “once it is realized that the Fed is on the path to devalue the dollar.” Most of the general public does not realize that this is going on with intention. They don’t realize that every time the Fed prints dollars it devalues all dollars in the system through monetary inflation. It only takes 4% inflation for 17 years to cut the value of the dollar in half! When the general public realizes that the Fed won’t stop printing there will be a mass exodus into gold and the prices will go through the roof; simple supply and demand.
It should be obvious that the Fed hates deflation; they have been inflating the dollar since their inception in 1913. They do this by printing money. This process has been accelerated by the removal of the gold standard in 1971. The Fed can now print money without limitation, thus the reason the monetary supply has increased 2.5 times in 18 months. The deficits are increasing by an average of $4.7 billion per day. But people have become accustom to the inflation tax, so it is just normal.
The new pace with which the Fed is printing money will have massive inflation implications in the long-run and it will be impossible for people to ignore. Own gold now before everyone does. By the time everyone wants in there won’t be enough physical gold for everyone to own in order to protect what they have.
Which Gold Numismatic Coins are the Best to Invest In?
First read the getting started blog posted on July 2, 2010, and if you follow the steps your account rep should be able to help you decide what are going to be the best coins to acquire for your portfolio. The reason you want help with this process is because every coin will perform differently in your portfolio. So you want to make sure that you are applying the right tool for the right job.
For example, if your investment horizon is short-term that should rule out any form of numismatic coins. In that case you will want gold bullion, which is a pure asset inflation hedge. Gold bullion provides the most amount of liquidity, because it is real money and it is accepted anywhere in the world. Gold bullion is used more as a safety net than it is as a growth mechanism in any portfolio. It is first and foremost a hedge against fiat currencies.
If you are interested in a long-term play then you can begin to focus on numismatics. In my opinion the $20 Liberties and $20 Saint Gaudens are the best option in this arena. They are the most affordable, liquid, popular and readily available option at this point in the trend cycle. Some issues have tens of thousands known to exist in a particular grade and some have only a few known to exist. The rarer the issue the more expensive the coin, but it will also have the most opportunity for growth. This is where strategy comes into play. If you are looking for asset protection you will want to focus more on common issue coins and lower grades, if you are looking for more growth you will want to focus more on rarer issues in higher grades (generally speaking).
A general disclaimer, I typically will only acquire coins in the mint state range, and always graded by PCGS or NGC. Grading by these two companies will add a layer of confidence knowing that you have coins that are guaranteed for their authenticity and level of preservation. As far as acquiring mint state range coins is concerned, if you look at performance charts on PCGS.com you will find that the mint state range has performed the best over time. If you have never purchased rare gold coins before I would not try to do it on your own, you need someone you can trust to lead you down the right path. Good luck!
How to get Started Investing in Gold Bullion and Numismatic Coins
Choose a Broker Dealer:
Once you know that you want to own gold getting started is a very simple process. The first step is to pick a broker/dealer that you feel comfortable with. Typically this is done via radio and television talk show hosts that endorse various gold companies, or through an internet search. Check out how long they have been in business and how strong their track record is. Once you feel comfortable, call them and get assigned to an account representative.
Education:
The next step is to get educated. Have your account rep explain to you the different gold and silver options and how they can be applied to a portfolio. There are different tools for every job, understanding how to match them up is important. There are two primary types of gold and silver, which are bullion and numismatic/rare gold coins. To learn more click on the two types.
Goal and Objectives:
Once you are educated and you are starting to feel comfortable about your options, the next step is covering your goals and objectives with your account rep. This entails going over your holding periods, your concerns with the economy, whether asset protection or growth is more important to you, etc. Once the account rep has a good understanding of what your goals are then a strategy can be laid out. This will help you to determine what mix of precious metals is right for your portfolio.
Taking Possession:
The next step in the process is taking possession of your gold and silver. Most companies will ship through USPS, UPS or Fed Ex so that your package will have a tracking number, it will be insured and you will need to sign for it. This provides another layer of protection. Once you have taken delivery you will need to decide where to store your gold, whether that is in a safe deposit box, home safe or hidden somewhere. That decision will be based on what you feel most comfortable with.
Portfolio Reviews:
After you have owned your gold for a while you will want to get updates on its performance and educate yourself with market intelligence. This will help you determine when the best time to buy, sell and trade is. Physical precious metals are a long-term hold and therefore you should not concern yourself with the day-to-day action, but you should be concerned with the trends.
Does the Gold Price affect the Value of Rare Coins?
The spot price of gold that is reported everyday on the Comex does affect the value of rare gold coins-because they are made of gold. But each coin is affected differently depending on its rarity and quality. Generally speaking, the lower the quality or lower the rarity of a particular coin, the closer it will be to the spot price of gold. Vice versa the higher the quality or rarer the particular coin the further away it will be from the spot price.
Rare coins are graded on a scale from 1-70. This is called the Sheldon scale (quality scale). Each level in grade represents a higher level of quality. Investors and collectors alike generally try to achieve high levels of quality for their purchases. If a coin is a low grade and is a common issue its value will be more affected by the price of gold rising and falling. If a coin is a high grade and is a rarer issue its value will be less affected by the price of gold. There are many combinations of quality and rarity, so you can see there are many variables in how the value of a coin can be affected by the spot price of gold.
The most valuable US rare gold coin is the 1933 $20 Saint Gaudens. It sold for over $7.5 million in 2002. This gold coin contains one ounce of gold, and at the time of its sale at auction the value of the gold content was around $400. This specimen at the time was thought to be the only 1933 $20 Saint Gaudens in existence, thus it was extremely rare. Because of this coins rarity, the value of the gold content is negligible. On the other hand a very fine graded 1924P $20 Saint Gaudens with a population in the tens of thousands, sells for around $1,600 which is only a few hundred dollars more than an American Eagle gold bullion coin. You can see that the value of its gold content dominates the value of this coin.
Typically, individuals looking for a combination of growth and affordably look to acquire coins in the mint state range with rarity numbers between 1,000 and 15,000 specimens known to exist in a particular grade. Again, quality levels mixed with rarity will determine value, as well as how fluctuations in the spot price of gold will affect a coins value. To understand more on how this works speak with a reputable dealer.