If You Want Cheap Gold Coins, Canada Has Them
By Tom Dyson
November 25, 2008
I don't trust my bank. And I don't trust the dollar.
As far as my savings are concerned, I'd rather keep them in gold. And I don't mean gold futures or gold certificates or gold mining shares. I'm talking about physical gold bullion in a safety deposit box.
My family thinks I'm taking a big risk. But as I see it, they're the ones taking the risk. I'm the one storing my money in the world's safest asset... the asset that's been used as money for 5,000 years... and the only money that's no one else's liability.
Besides, what have I got to lose? My bank pays less than 3% on its savings accounts.
I'd advise you to own at least a couple of ounces of gold, too... if nothing else, for insurance purposes.
Coins are the best way for individuals to buy gold. They come in small denominations, they're portable, and you can exchange them for cash anywhere in the world at gold's international spot price.
Here's the thing: Right now, gold coins are hard to find. Even if you can find them, they're more expensive than usual.
In normal markets, you can buy silver coins below the spot price and gold at a 1% or 2% premium to the spot price. I've spoken to at least six gold coin dealers in the last week. Three of them were out of stock. Of the dealers still in stock, the cheapest gold coins I found were selling for a 5% premium to the gold price.
In other words, with gold at $800, you'd have to spend at least $840 on a one-ounce coin. The scarcity of silver coins is even worse. One dealer told me he was paying $16 for one-ounce silver coins, purchased in bulk. Right now, the spot price of silver is $9 an ounce. So the premium's almost 80%.
The financial crisis is the reason for this mispricing. Demand for coins, one-ounce bars, and other "retail" denominations of gold has outpaced the ability of fabricators to make them.
There is no shortage of physical gold. If you wanted to buy a kilo or a 100-ounce bar, you'd have no problem.
The shortage is just a short-term supply problem at the retail level. Gold producers will take advantage of the premium and ramp up production. So in a few months, the big mark-ups will disappear.
That said, if you want to buy small quantities of gold right now, go to Canada.
The Bank of Nova Scotia is one of the world's largest precious-metals dealers. If you go to the Hollis Street branch in Halifax, Nova Scotia, or the King Street West branch in Toronto, they'll sell you Canadian Maple Leaf coins at a 3.7% premium to spot and one-ounce wafers at a 2.6% premium to spot.
Good investing,
Tom
P.S. Gold doesn't show up in airport security metal detectors. I've tested this with gold coins before. But if you're traveling across the border with more than $10,000 worth of gold or currency, you must declare it at the border. They'll run your name and make sure you're not a money launderer. That's it.
Editor's note: Tom Dyson 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.
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GOLD IS SOARING, YOU JUST DON'T REALIZE IT
This is "gold week" in Market Notes. We're devoting an entire week to showing you some amazing gold charts...
You might have watched gold fall from a high around $1,000 to below $725 and wondered what the heck was going on. Gold is known as a "crisis hedge"... an asset that soars when stocks, bonds, and the economy are performing terribly. The confusing thing is, investors have had a lifetime of crisis thrown their way in 2008, but gold has actually declined in price, right?
Actually, wrong. Yes, gold is down more than $170 an ounce from its summer highs. But that's when you measure it in U.S. dollars. Problem is, many folks around the world measure gold in different terms. Take the 300 million Europeans who use the euro as their currency.
Today's chart is the price of gold measured in euros. As you can see, gold is strong in the eyes of a European. Currencies tend to fall when their home economies weaken... when there aren't enough jobs or when folks get into too much debt. This is what's happening in Europe. The bull market in gold is alive and well... and we'll show you why this week.
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Billionaire investor George Soros, Citadel Investment Group LLC and T. Rowe Price Group Inc. are snapping up coal mining shares, taking advantage of the cheapest valuations in five years as demand for electricity rises.
Soros bought 2.9 million Arch Coal Inc. shares last quarter for a 2 percent stake in the second-largest U.S. coal producer, filings with the Securities and Exchange Commission show.
While coal, the cheapest fuel for power, is up 88 percent in Pennsylvania, shares of the companies that mine the mineral have slumped along with the rest of the commodities industry. Now, investors are betting that Peabody, which traded at 3.7 times projected 2009 earnings as of Nov. 21, and Arch at 2.5 times are cheap because coal use will increase. The valuations were at more than a 54 percent discount to the MSCI World/Energy Index.
"Coal is the best commodity to get into right now," said Daniel Rice, manager of BlackRock Advisors Inc.'s $1.5 billion Global Resources Fund in Boston, which is among the largest holders of Peabody and Arch. "It's a lot less sensitive to downturns because it's needed for basic power generation, and demand is growing."
Crude oil in New York has dropped 45 percent this year compared with a 6.1 percent decline in Australian coal prices.
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The auto companies in the United States are scrambling to come up with a plan. This week Ford unveiled a new hybrid, the Ford Fusion, which will get almost 40 miles to the gallon. When asked how much it would cost, a spokesman for Ford said, "$25 billion." |
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