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- India to Buy More Gold from IMF (5.00 out of 5)
- Is this Gold Bull Market Over? (5.00 out of 5)
- When to Buy $20 Liberties and $20 Saint Gaudens? (5.00 out of 5)
- Gold Price Gains and Losses over the Last 3 Months (5.00 out of 5)
Archive for the ‘Gold Misc.’ Category
When to Buy $20 Liberties and $20 Saint Gaudens?
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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 proven over time to have performed very well, consistently. It should be noted that if you picked up some of these coins in 1989, which was the peak of the last bull market you would not have recovered yet. But if you look at a chart of mint state rare gold coins from 1970 to present, you can see that if you bought at any other time you would be doing fairly well.
Incidentally, we are currently experiencing what I believe to be a temporary low in these coins, which I presume will be a great buying opportunity. But where we are in the trend cycle I feel that we have many years to go before this market tops out.
Because of the high gold content of these coins, each Liberty and Saint-Gaudens Double Eagle contains .9675 ounces of gold, they will never be worth zero. Gold has never been worthless. This gives their owners an added layer of protection.
In addition, these types of coins are scarce. For example, millions of 1 ounce American Eagle coins are minted each year. Whereas PCGS and NGC estimate that somewhere around 1.5 million 1 ounce Liberties and Saints in a 62 to 66 grade exist today. This adds yet another layer of protection for their owners.
These coins have been excluded from gold confiscation in the past, and with the dollars extreme weakness, it is thought by many that another gold confiscation is looming. Many experts believe that the numismatics will again be excluded from confiscation if it were to occur. This is another layer of protection.
Due to these factors I believe that anytime is the right time to buy Liberties and Saints. They have proven time and time again, that they are a safe and private way to accumulate wealth over time.
Gold as a Store of Value
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Gold has been around for over 5,000 years. It has been treasured by individuals, kings and civilizations for its beauty and intrinsic value. It has been used for trade and as a currency for many years throughout history by many different countries. Gold has always been used in jewelry and for artistic purposes. But the main point is, it has always been a store of value and always will be.
Gold’s value comes from its rarity. Anything that is sought after that is rare is valuable. In fact, some estimate the world pours more steel in an hour than it has poured gold since time began. All the gold in the world could be compressed into a 20-yard cube, which is about 1/9th the mass of the Washington Monument.
This financial storm has created a lot of demand for gold, just like many other financial crises have. As demand heats up the values rise. This is a simple rule of economics. However, because gold is of limited supply, its values will rise faster than that of something that can be massed produced. It should be noted that more gold is added to the market every year through mining, but peak gold production has been achieved. A mining company used to be able to extract 12 grams of gold from 1 ton of ore. Now the average is 3 grams per ton of ore.
People always wonder if gold will ever be worthless. It has never been worthless, and I do not believe it ever will be. It is the first true money. It cannot be printed into oblivion and it cannot be destroyed. Thousands of currencies have failed over history, but gold has stood the test of time. It is truly the choice for a store of value.
Bullion Bars & Ingots
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Gold is the hot topic right now. You can see ads for gold all over the web, radio, print and TV media. This increased awareness is due to a bull market that is in the middle of the second phase of three phase bull market. Gold has gone for $252 per ounce in 1999 to $1,063 per ounce where it sits today. That is over a 300% rise in value.
When people think about gold their minds usually go to jewelry. Most Americans own some form of gold jewelry, however very few people own gold as a financial asset. Some estimates put this figure somewhere around 3%. This will change as the market continues to heat up. As we enter the third phase gold could go up even more dramatically. Some experts are calling for $5,000 per ounce before the bull market is over.
Once someone begins to think about gold as a financial asset, they typically think about pure gold in the bar form. Sometimes people think about bullion coins, like American Eagles but pure gold is where the novice goes, even though bullion bars and coins are for the most part the same thing.
One confusion is the difference between bars and ingots. Bullion bars are virtually the same thing as bullion ingots. The only difference is that ingots are formed by pouring molten gold into a mold and chilled until solid, whereas bars are minted from blanks that have been hand cut into the proper dimensions. Markings are almost always applied by whoever formed them.
Which is better to buy? That depends on which one is the cheapest. Gold is gold when it is in the pure form. Typically the larger the quantity bar or ingot you buy the lower the premium you will pay per ounce. Therefore don’t get hung up on bar vs. ingots. When it comes to pure gold for inflation protection or price speculation buy the cheapest bar or ingot you can.
Gold Coins with Motto and without Motto?
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The motto on our gold coins is “In God We Trust.” This motto was added during the civil war and appeared on most of our “Liberty Head” coins from 1867 to 1907. In 1907 Theodore Roosevelt decided to have our gold coins redesigned in order to create a more beautiful coin, like those of the ancient Greek and Roman cultures. This coin is called the Saint Gaudens coin, after its designer Augustus Saint Gauden.
During the design process, Roosevelt asked that the motto be excluded. He knew that the men who used them in the West, were using them in brothels, saloons and gambling and thus he felt that the Lord’s name should not be associated with these activities. He expressed this feeling to reverend Roland C. Dryer in a letter dated November 11, 1907.
“My own feeling in the matter is due to my very firm conviction that to put such a motto [In God We Trust] on coins, or to use it in any kindred manner, not only does no good but does positive harm, and is in effect irreverence which comes dangerously close to sacrilege. A beautiful and solemn sentence such as the one in question should be treated and uttered only with that fine reverence which necessarily implies a certain exaltation of spirit. Any use which tends to cheapen it, and above all, any use which tends to secure it being treated in a spirit of levity, is from every standpoint profoundly to be regretted.”
Teddy Roosevelt’s wishes were granted and from 1907 to mid-way through 1908 and the coins were minted without the motto. It wasn’t until Congress got together and decided that they wanted the motto on our coins. They felt that it should be known that our nation believed in God and that it should be clearly stated on our currency. In 1908 the motto was put back on, therefore there are St. Gaudens coins that are minted both ways. There exists today a 1907 no motto, a 1908 no motto and a 1908 with motto. From 1908 to 1933 the coins continued to be minted with the motto.
Only roughly 5.2 million Saint Gaudens were minted without the motto, compared to over 65 million that were minted with the motto. This makes the no motto a rarer gold coin in relationship to mintages; however these coins are still fairly easy to acquire. There are rarer issues that exist, for example, there are roughly 10 1933 Saints know to exist.
Can Gold Ride out the Financial Storm
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Gold bullion and rare gold coins is the perfect instrument for riding out any financial storm. Global debt crisis, banking failures, over printing of money/collapse of the dollar, inflation/hyperinflation, turmoil in stock markets are a few examples of when gold shines. Gold has been valuable to human being for over 5,000 years. Currencies have come and gone, civilizations have fallen and technology has advanced and throughout all of it gold has proven to retain its worth.
The main reason people buy gold is to diversify their portfolio against downturns in paper assets. For example, when the collapse of many big banks in the U.S. occurred at the end of 2008, gold went from around $725 per ounce to close to $925 per ounce, a 27% increase. In 1987 when the stock market crashed, the infamous Black Monday, gold shot up to $500 per ounce, which was the highest level since 1983.
Gold bullion is primarily a hedge against inflation. In 1910 one ounce of gold could buy roughly 222 loaves of bread. Today that same one ounce of gold can buy roughly 275 loaves of bread. The dollar however has lost 95% of its purchasing power. If you owned $100 worth of gold in 1910 (5 oz) it would be worth roughly $5,500 today. In comparison, if you had $100 dollars in 1910 it would be worth roughly $5 today. That is a pretty big difference.
There have been many financial and global crises over history, and yet gold has always survived as a safe haven. Therefore don’t you think that as we continue to go through this global financial crisis gold will continue to be a safe haven for your dollars?
On a side note, look at the chart below, for the last 10 years gold has been in a positive trend cycle. Does this look like a bubble formation? Absolutely not! It has accumulated approximately 17% per year, building support and resistance all along the way.
Gold Bullion Coins
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Gold Bullion Coins come in many shapes and sizes, from as small as 1/25oz to as large as 220 pounds. The 220 pound coin was minted in Canada and is worth millions of dollars, however most gold coins that people buy are 1oz or smaller. Many countries have a mint at which they produce their own gold bullion coins. Here is a rough list of gold bullion coins:
American Eagle
Australia Kangaroo
Austria Koronas
Austria Ducats
Austria Vienna Philharmonic
Canada Maple Leaf
Chile Peso
Chinese Panda
Colombia Peso
England Britannia
French Franc
Holland guilders
Hungary Koronas
Isle of Man Angel
Isle of Man Persian Cats
Italy Lire
Mexico Pesos
South Africa Krugerrand
Swiss Franc
These coins range in gold purity. For example, the American Eagle is 22 carats which is 90% gold and 10% of another metal for durability. The coin still contains 1 ounce of pure gold. The Canadian Maple Leaf on the other hand is 24 carats. It is still 1 ounce of pure gold therefore it is a smaller sized coin than the Eagle because it does not contain any other metal. The sizes of gold bullion coins vary for this reason.
As you can imagine, every coin has a different design and some are more beautiful than others, but for the most part this makes no difference on the value. A gold bullion coins value is determined by how much gold it contains. Therefore any common issue coins do not carry any collector premium. If you own a 1oz American Eagle then it is worth the spot price of gold plus a premium depending on supply and demand, and the particular broker/dealer you are working with.
Bullion coins can be acquired in a self-directed Gold IRA. In certain instances they are reportable to the IRS upon the sale of them and they are considered to be subject to confiscation by the government. With all of the upward predictions for 2010 that are coming out these coins could be worth much more in the future.
The Elusive Proof Gold Coins
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Proof gold coins are among the rarest numismatic coins available on the market today. They offer a unique combination of beauty and extreme rarity. Because of their rarity they command attention and demand from well established collectors worldwide. This not only makes proof coins hard to come by, but also makes them very expensive. Some rare gold coins can easily run into the six figure range. Although there are some pleasing issues that exist for a few thousand dollars.
Proof gold coins were struck in the United States between 1820 and 1915 and promoted to collectors starting in 1858. Because they were not marketed to collectors until 1858 mintages prior to that year are very small and hard to find.
Proof gold coins are set apart from business strike coins by the care taken to mint each coin. Each coin is struck multiple times on high polished planchets, compared to only one time with business strike coins. This may not sound like a big deal, but it is an attempt by the most skilled engravers and pressmen to create a flawless coin of perfection. Gold is one of the softest metals further complicating the minting process. This factor in combination with extremely low mintages, sometimes only 50, makes finding pristine examples very difficult.
Because of this difficulty to locate proof gold coins, collectors sometimes wait years to find the coin they are looking for. Unlike business strike coins, proof coins were rare the day they were minted. With original mintages of around 50 examples, and typical survival rates of around 50%, a slight increase in demand can create dramatic run-ups in value. If you are enthralled with owning a significant piece of history, and admire beauty and craftsmanship, then owning proof gold coins might be the right fit for you.
1913 Liberty Head Nickel Sells for $3.7 Million
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Earlier this year a very rare nickel sold at a Florida public auction to an east coast coin collector. The 1913 Liberty Head Nickel sold for $3.7 million! It is one of only five known to exist in that particular date and design. The coin was minted in Philadelphia with the Miss Liberty design.
The coin was once owned by an Egyptian King named King Farouk. It was also featured in a Hawaii Five-O episode in 1973.
The value of the rare coin didn’t breach the $1 million mark until 2003. This is an extreme example of how rare coins can perform over a long period time. Rare coins have been regarded for a long time for their performance, privacy and their historic immunity from confiscation. Check out this chart showing the performance of the Liberty Head Nickel over the past 67 years. What an amazing journey!
Who Buys Gold?
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Many people participate in acquiring physical gold worldwide. Some want capital appreciation and others are looking for preservation of principle. It should be noted that gold is foremost a form of financial insurance for the paper assets in your portfolio. This is because gold and paper assets generally have an inverse relationship. Meaning when stocks go down gold goes up. However there have been periods when stocks and gold have risen together.
The types of buyers of gold are diverse. From foreign central banks and governments, to large institutional buyers and individuals looking to protect the money they have. Most buyers of gold today are concerned with the current economic situation worldwide. The main concern in the United States is the erosion of the U.S. dollar. On a side note, as the dollar becomes weaker the value of gold rises so everyday that the dollar weakens a portion of the rise in gold is attributed to gold being priced in dollars. Another portion of the rise in price is supply and demand.
Anyone who is concerned with the weakness in the U.S. dollar is your main buyers of physical gold today. India recently purchased 200 metric tones of gold from the IMF, and sited their concern with the U.S. dollar. There are those that are buying gold for growth in their portfolio as well. Those institutions and individuals that want to capitalize on the appreciation potential that we see ahead.
There are other reasons why people acquire gold:
1. High inflation, or the fear of high inflation
2. Turmoil in stock markets
3. Spiking interest rates
4. Oil and other commodity price shocks
5. Banking crises
6. International loan defaults and other debt crises
7. Geopolitical crisis
Gold generally performs well in all of these circumstances. Those that own gold in their portfolios have to decide how much to own. This is the trickiest part because you have to determine what your goals, objectives and concerns are. If the dollar was to be devalued by 50% one would need to own 33% of their portfolio in gold to offset the losses in their paper assets (this is obviously grossly overstated, but meant to give general understanding). Many governments and individuals own gold, and as the trend with the dollar continues more people will buy into the gold market, driving values higher.
Are Gold Stocks Better than the Physical Metal Itself
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Are Gold Stocks Better than the Physical Metal Itself? I personally do not believe so, but there is a tool for every job inside of any portfolio. But let’s look at some interesting points:
1. There is no one between you and physical gold (unless you have a company store it for you)
2. It cannot disappear due to creative accounting
3. Company’s cannot mismanage it
4. Gold cannot go bankrupt like a company
He who controls the asset has the power. Consider that if you have an asset in your possession, that no one has more control than you. For that very reason alone, physical gold is better than paper. But let’s look at gold stock performance in the past compared to the Dow and physical gold.
Gold stocks do not follow the physical metal exactly. “The performance of gold stocks at the end of 1987 should serve as a reminder to investors that these issues are still stocks and vulnerable like other equities during bouts of market weakness,” said gold fund portfolio manager at United Services in San Antonio, in the Investor’s Business Daily.In October of 1987 following Black Monday the Dow lost 41%, falling from 2,746 to 1,616. During that same period gold stocks (XAU), lost 46%, falling from 157 to 84. During that same period physical gold rose over 18%.
Following these initial losses in the Dow and gold stocks, gold stocks stayed down longer than the Dow. In fact the XAU finished 1988, over one year later, virtually unchanged while the Dow recouped close to half of what it lost. Over a 26 year period the Dow fell by 10% or more over 25 times, while gold stocks fell by a larger percentage and more often.
Performance isn’t the only consideration. Gold mining companies can go bankrupt for a variety of reasons, rendering their stock worthless.
If the paper dollar fails you have something in your possession that can be bartered with or exchanged for any other currency on the planet.
Finally, physical gold is portable, therefore can go with you anywhere you want. For these reasons I like the physical metal in my portfolio over any other form of gold.
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