Investing In Rare Gold Coins - Don't Hold Gold Buy This Instead

Don't Hold Gold... Buy This Instead
By Dr. Steve Sjuggerud
June 20, 2008

If you want to own gold, this is how you should do it...

Quite frankly, it's unbelievable... Rare gold coins are selling as close to melt value as they possibly can.

Take one of the real "blue chips" of the rare-coin world... the $20 Liberty, made over 100 years ago. It has just under an ounce of gold in it.

Back in 1989, the wholesale cost to dealers on this coin (graded "mint state 63," or MS63) hit $1,600. The price of gold on that day was $366 per ounce. So in late May 1989, a dealer had to pay 4.4 times the price of gold to buy this coin.

Today – nearly 20 years later – the wholesale price on this coin is a hair above the price of gold. There is practically no "collector's premium" over the price of gold. It is ridiculous.

This is even more ridiculous: Some investors are buying South African gold Krugerrands and U.S. gold coins minted yesterday. These coins have no chance of trading at a premium to their melt value – they're in near-infinite supply. The mints can simply make more of them to meet demand.

But if you're buying MS63 graded $20 Liberties, you're pretty much just paying the cost of getting it graded and the dealer markup. You're paying nearly the same price as you are for modern gold coins.

At that price, sell your Krugerrands. They'll never go up in value. They'll always be worth the price of gold. Take those proceeds and buy some rare coins!

As I said, I think the $20 Liberties and similar coins are an incredible bargain right now. But when a bull market finally takes hold in rare coins (we're overdue... it's been 20 years!), these "low end" rare coins aren't what take off. The rare stuff is what really zooms.

The last three rare-coin bull markets have seen gains of 348%, 1,195%, and 665%. When they do take off... prices go nuts.

Right now, the rare-coin market can't get any lower... Dealers are hardly making anything on these coins as it is. And the price of gold has sneaked above $900 again. In my newsletter, I'm returning our gold coins to a "buy."

If you're completely new to coins, then I suggest you read the new brochure that coin legend David Hall has posted on his website (www.davidhall.com) called "Long Term Wealth Builders."

David works with coin dealer Van Simmons. Van has taught me more about making money in coins and collectibles than anyone. He's more than a coin dealer... he's a mentor of mine.

You can't pick up the phone and call Warren Buffett for investment advice on stocks... or Bill Gross for advice on bonds. But the rare coins and collectibles world is small enough that you can pick up the phone and chat with the most knowledgeable man I know in collectibles. (You can reach Van at 800-759-7575 or info@davidhall.com.)

I am absolutely flabbergasted at how cheap rare coins are right now, trading closer to "melt value" than ever. You can make money in two ways here... If the price of gold goes up... or if the "collector's premium" goes up (heck, it can't go down from here).

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My suggestion is to stick with a dealer you're certain you can trust (Van is who I do business with)... and for the most potential for profit, buy a few exceptional coins instead of a large handful close to melt value.

It's not often you can buy an asset when it's the cheapest in its recorded history. But that is the case, right now, in rare gold coins. Whether you buy or not, you're doing yourself a disservice if you don't at least consider the idea.

Good investing,

Steve

Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.

Sign up today to read more investment ideas from Steve Sjuggerud.

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A LITTLE PERSPECTIVE ON THE OIL MARKET

It's hard to believe now, but crude oil was under $20 a barrel back in 2002. The U.S. economy was weak, and Chinese demand hadn't entered overdrive yet.

Since then, the bull market in oil has behaved like every other one since the beginning of time: Run higher, then correct. Run higher, then correct. Occasionally, run way higher, then correct.

As you can see from today's chart, oil ran all the way from $55 to $135 in the past 18 months – a 145% run for those of you scoring at home.

Moves like this almost always precede sharp corrections. The market doesn't "like" to carry a lot of people onto easy money for long. You can see how a decline down to $105 would be totally reasonable in the context of the rally. Even a decline down to $70 would leave oil in the realm of its long-term trend.

So... for the oil investors out there: Expect a decline. A $40 haircut isn't unreasonable in this wild market. But chances are, it would be a healthy correction in the midst of a long-term bull market.

Oil - Light Crude - Continuous Contract (EOD)

Shares of Gannett Co. fell to levels last seen in 1994 as the newspaper publisher disclosed increased declines in print-advertising revenue for May, further highlighting the pressures facing the industry.

Gannett shares fell 4.5% to $24.42 in 4 p.m. New York Stock Exchange composite trading.

Gannett, which publishes more than 80 U.S. newspapers, including USA Today, said publishing ad revenue fell 14.3% in May.

Earlier this week smaller rival McClatchy Co. reported a 15% drop in newspaper-ad revenue for the first five months of the year and announced a 10% cut of its work force. Gannett's first-quarter ad revenue in the print segment dropped 10%.

– Wall Street Journal

Slow growth in oil supplies, at a time of soaring demand, has been a major factor in the spike in oil and gasoline prices. In recent years, a global shortage of drill ships has created a critical bottleneck, frustrating energy company executives and constraining their ability to exploit known reserves or find new ones.

As oil trades at more than $135 a barrel – up from $68 a year ago – drill ships around the world are booked solid for the next five years. Some oil companies have been forced to postpone exploration while waiting for a drilling rig, executives and analysts said.

Demand is so high that shipbuilders, the biggest of which are in Asia, have raised prices since last year by as much as $100 million per vessel to about half a billion dollars.

As a result, drilling costs for some of the newest deep-water rigs in the Gulf of Mexico, for example, have reached about $600,000 a day, compared with $150,000 a day in 2002.

– New York Times

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