How To Make a Fortune
In the 2008 Gold Boom

As I write this, gold is above $750 an ounce, near quarter-century highs.

With these new highs, an interesting thing is happening...

A few years ago, I couldn’t convince anyone to buy gold. Now folks are asking me how to get in. For example:

In June 2002, the cover story of my newsletter True Wealth was how to buy gold for $250 an ounce. Today, that investment has more than quadrupled... but nobody cared back then. Nobody was asking me about gold. Instead, I probably lost subscribers for daring to write about it.

Now, with gold hovering around $800 per ounce, people are finally asking me about it.

The fact that people are showing interest for the first time in two decades tells me this bull market is building steam and getting ready to move even higher.

With this report, you’ll learn about two very good gold opportunities.

So let’s get to it – two great ways to profit on gold right now...

A word of warning before we get started: No one said speculating was easy. Violent shakeouts may make you doubt your position on gold – this is what happened in 2006r when the price went from over $700 to under $600. Learn to appreciate these shakeouts. They’re the market’s way of taking money from the weak hands and giving it to the strong.

History provides us with a good blueprint, as I explained in a recent issue of True Wealth:

Most people think gold went straight up from $35 an ounce in 1971 to $800 in 1980. That wasn't the case at all...

Gold absolutely soared until mid-1973. (I think the move today is like the move that ended in 1973, the first major move up in a long-term gold bull market.) Then, in mid-1973, gold quickly lost a quarter of its value, shaking out nearly everyone. Gold had gone up hundreds of percent by then, so everyone thought the move was done.

But it wasn't. Gold soon hit new highs in 1974. Then it got obliterated again... falling from about $200 an ounce at the beginning of 1975 to about $100 an ounce by mid-1976. Those that weren't shaken out before were shaken out this time around.

Gold started coming back, and the third time was the charm. Everyone had seen gold jump twice... and they finally believed in it by the third time. The general public started clamoring to get in. That's when gold rose above $800 by January 1980...

The point is, it won't be a straight shot up. Each successive move higher will bring in more believers, until everyone believes.

Then in 10 years or so, when everybody loves gold, we’ll sell our gold holdings and we’ll probably buy regular old stocks once again.

Money Flows Where It’s Treated Best

Gold pays no interest. It’s just a lump of yellow metal.

If the bank is paying you 7% interest on your cash, chances are you’d rather have your money in the bank. It makes sense in this case, thanks to compound interest – in 10 years you’d have doubled your money. Hold gold for 10 years and you still have the same lump of yellow metal.

Now consider this... Imagine the bank was paying zero percent interest... then which is more attractive, paper dollars or gold? In this case, a rational investor would choose gold.

Gold is beautiful, rare, and easy to exchange, no matter where you are in the world. Paper money, on the other hand, is just paper. Governments can print as much of it as they like.

As a rule, money flows where it’s treated best. If interest rates are high, then gold performs poorly relative to money. If interest rates are low, money flows toward gold.

When interest rates are zero, gold becomes a no-brainer.

"But wait," you say. "Interest rates soared in the 70s... how did gold manage to run from $100 to $800 during that time?"

The "Real" Deal... Considering Inflation

The "nominal" interest rates you might see advertised at your bank or in the newspaper don’t give the full picture. We need to consider inflation.

Here’s why: if the prices of the items you buy on a regular basis, like food, gas and accommodations, are rising at 5% and - at the same time - the bank is paying you 5% interest on your savings, the bank is not compensating you for holding your wealth in cash instead of gold.

In this case, economists would say your "real" interest rate – the interest rate AFTER inflation – is actually zero.

Back in 1979, short-term interest rates were 8%, but inflation was 13%, so "real" interest rates were negative 5% a year.

Is it any wonder the people rushed into gold and away from paper money?

By 1981, Fed Chairman Paul Volker had driven short-term interest rates to 15% and inflation to 6%, so the real interest rate was almost 10%.

By 1982, gold was back below $400.

Today, we see nominal interest rates advertised at around 5%. At the same time, inflation is 4%-5%...

Real interest rates are close to negative... the smart money has already shifted from cash and into gold.

It’s time you did too.

6 Reasons to Own Gold and Gold Investments

1. It’s super cheap. Gold is cheap, while stocks are expensive. In January of 1980, both the Dow Industrials and the price of gold were at the same level: 800. Now, nearly 27 years later, the Dow is above 13,000, and gold is above $750.

2. Governments will make our money worth less to pay off their record debts. Governments can print money to pay off their debts. But they can’t create gold. The supply of paper money can be infinite. But the supply of gold is extremely limited (they say that the entire gold production in the history of the world could fit on the basketball court at Madison Square Garden). And it’s difficult to extract.

3. Precious metals do well in major international conflicts. The price of gold was fixed during World War I and World War II. But silver, for example, rose by over 100% in both world wars. Gold has risen for the duration of the War on Terrorism. It all comes back to No. 2, above... governments ultimately print money to pay for wars.

4. Gold should do well in extreme bear markets. Silver more than doubled in value from 1932 to 1936 during the Great Depression (the price of gold was fixed by the government). The next long bear market was 1968-1980. Silver rose from around $2 in 1968 to a peak near $50 in 1980.

5. Gold will rise during inflation... and during deflation. Gold is good inflation protection... gold rises as the value of the dollar falls. But what many people don’t understand is that gold will do even better during deflation, as the government lowers interest rates and wildly prints money (creating inflation) to offset that deflation... leading to substantially higher gold prices.

6. Gold lowers risk in your investment portfolio. In the past, gold has tended to do the opposite of stocks: It skyrocketed in the 1970s, when stocks did horribly. Then in the 1980s and 1990s, when stocks soared, gold lost over half its value. Now, in the new millennium, gold has soared while stocks are still near their year 2000 highs. Holding a portion of your portfolio in gold will smooth out your portfolio fluctuations.

You should own some gold, even if it is purely to lower some of the risk in your investment portfolio, as gold and stocks often move in opposite directions. If you’re not there right now, it’s time make the move.

Here’s the first outstanding way to do it:

Gold Investment No. 1: The Easiest Way to Own Gold

There are several ways to own gold through the stock market. You can either buy stocks of companies involved in the production of gold, shares in a gold fund, or exposure to the metal itself, in share form.

Of these three gold instruments, the third option offers the least risk: owning gold bullion in share-form.

The instrument I'm talking about is the streetTRACKS gold shares ETF. The symbol is GLD. Each share of GLD is worth exactly one-tenth of an ounce of gold. Buy ten shares of GLD and you own one ounce of gold. It's that simple.

When you buy the stock of mining companies, you take on all sorts of additional risks... like working in politically unstable countries, higher energy costs, labor shortages, and bad management decisions.

With this ETF, you own gold without all the baggage.

Recommendation: Buy the streetTRACKS gold shares ETF (NYSE: GLD)

Gold Investment No. 2: The Last Cheap Asset Class

Over the last two years, I haven't been buying much when it comes to stocks, bonds, cash, or real estate.

Instead, I've been buying in the collectibles world – and I've been buying many different things... I've been buying everything from "out there" stuff (like vintage guitars and surfboards) right down to the collectibles with the deepest markets, like stamps and coins.

I'm not alone. The world's biggest investor, Bill Gross – who manages more than a half-trillion dollars (that's trillion with a "T") – has done the same with his own money. Around the year 2000, Gross quietly invested tens of millions of dollars of his own money in stamps... and then made four times his money when he sold a fraction of his collection in 2007.

I realize it sounds crazy to most people. But if you want to be able to make four times your money on an investment, you can't simply buy what's popular... When it becomes mainstream, you're too late. The easy money has already been made. And that's the story with most assets right now.

Instead of thinking Bill Gross and I are crazy, think of it this way... You know the old saying "actions speak louder than words"? This is what the world's biggest investor and I are doing with our own money. Doesn't that say something? Shouldn't you at least consider doing the same, too? I sure think so...

In the last two coin bull markets, we saw prices rise 665% in 1987-89 and a whopping 1,195% in 1976-80. (Those are the returns of the PCGS 3000 rare-coin index.)

The opportunity is better now than it was back then. Our upside potential here is many hundreds of percent in return. But before I get to that, let's cover the basics…

How to Find the Real Value of Gold Coins

Most people are not familiar with coin terms, like "PCGS" and "MS65." But they should be, especially if they want to be one of the investors who score triple-digit gains.

So I'd like to explain the basics of the coin industry's lingo... specifically how to size up the real value of a gold coin.

It really comes down to intrinsic value (gold content) and collector's premium.

Intrinsic Value: If you melted a gold coin down, this is the value of the gold content.

Before 1933, when gold coins were in circulation, the price of gold was set at $20.67 an ounce. So if you think about it, a gold coin from that time, called a "$20 gold piece," contained nearly an ounce of gold. A $10 gold piece contained nearly half an ounce of gold, a $5 gold piece contained nearly a quarter ounce of gold... and so on.

So today, as a rough rule of thumb, if gold is about $800 an ounce, then you can talk about the intrinsic value of a gold coin like this:

A $20 gold piece has about $800 in intrinsic value.
A $5 gold piece has about $200 in intrinsic value.
A $1 gold piece has about $40 in intrinsic value.

So let's take a random U.S. gold coin – a $5 Liberty from the late 1800s and early 1900s. If it sells for $400 right now, how much of that is real gold value, and how much of that is something else?

Well, at current gold prices (around $800), and according to the table above, a $5 gold coin has about $200 of intrinsic or real gold value. That leaves about $200 in another type of value. That's what's known as the collector's premium.

Collector's Premium: This is the value of the coin's quality.

At $400, our hypothetical $5 Liberty is a good quality coin. By that I mean that it has been graded by one of the two major coin-grading agencies – Professional Coin Grading Service (PCGS) or Numismatic Guaranty Corporation (NGC) – and it has been sealed in a clear plastic case (so you can't hold this coin in your hand).

If this particular coin was a "raw" coin and hadn't been graded for quality and sealed, it might cost you $300 or so.

At a price of $400, this particular $5 Liberty gold piece graded at "MS61" on the grading scale. "MS" simply means "Mint State," and a range of "60" to "65" is assigned, with 65 being the top or pristine quality. So, MS61 denotes that it that particular coin was a lower-quality, mint state coin.

To give you an idea of how prices can differ, if that $5 Liberty graded at MS63, it could fetch $1,200. An MS64 quality coin could fetch $2,000. And a pristine quality (MS65) coin could go for over $5,000.

Why the big price differences? It comes down to rarity and popularity...

Rarity and Popularity: Rarity pertains to how many of each coin (in a specific condition) exist. Popularity refers to how a particular coin is viewed by collectors.

To give you an idea what constitutes rarity in the coin world, NGC and PCGS have only graded 3,800 of these $5 Liberty gold coins at the highest-quality grade (MS65), while they've graded more than 60,000 at MS62. So the highest quality $5 Liberty coins are somewhat rare.

But this is a tough category to call. As a rough rule, the rarer the gold coin, the more it is probably worth. However, popularity among collectors plays a part as well, and these fads can change. We can't mathematically track beauty. But we can track the population of a coin... how rare it is in a certain quality...

Both grading services, PCGS and NGC, offer "Population Reports" or "Census Reports" to tell us how many coins they've graded of each type in a particular grade. NGC's census report is free at www.ngccoin.com. So it is relatively easy to check on the popularity of a coin.

Many sources also list the quantity of a coin minted, including the popular "Red Book" (A Guide Book of United States Coins by R.S. Yeoman), which is cheap on Amazon.

Cheaper than Stocks, Bonds, and Real Estate

When I say these coins are the "cheapest they've been in their recorded history," I'm talking about in terms of their premium over their meltdown value. Let me explain...

To me, rare coins were too risky to even consider... until the Professional Coin Grading Service (PCGS) came along in 1986. In my mind, "recorded history" starts with this date, because I wouldn't have invested before the invention of PCGS.

PCGS, if you don't know, grades rare coins and puts them in sealed containers. So the grade is no longer subject to a dealer's opinion. The invention of PCGS was a revolution. It "democratized" the coin market. Nonexperts, like you and me, can now buy great coins without worrying about authenticity or quality, because PCGS assures both.

The creation of PCGS was partly responsible for the big run-up in rare-coin prices in the late 1980s, as you can see in the chart:

Rare Gold Coins: Cheapest Ever Compared to Gold

Coins soared in the late 1980s... And then experienced a crushing bear market that lasted until 2001. Since that time, rare gold coins slowly tracked the gold price higher, until summer 2006 came along...

After gold peaked in May and started to fall, rare coin prices started to dive. Then the U.S. Mint issued the first 100% pure gold coin in its history (most gold coins are just under 100% pure). This coin, called the "Buffalo," was a huge hit and siphoned business away from rare coins.

Coin prices fell by 30%, even as the price of gold started rising. Now the price of gold has risen to the point where it is around $800 an ounce. Coin prices have moved up, but are still down significantly.

In my newsletter True Wealth, I recommend paying up to 200% over the price of gold for these MS65 Saints. While prices are just starting to recover, I believe that right now, these coins are a ridiculous bargain.

Here's a chart I put together showing the premium over the price of gold for these coins.

Not Much Downside From Here

This chart, which I don't believe you'll find anywhere else, shows the extraordinary bargain these coins are. The price of these coins could double from here, and they'd still be cheap.

Two of my recommended dealers regularly deal in high-end stuff like this: Van Simmons, who's one of the founders of PCGS, and Dana Samuelson. You can reach Van at 800-759-7575 or van@davidhall.com. You can reach Dana's firm, American Gold Exchange, at 800-613-9323 or info@amergold.com.

Recommendation: Buy high-quality graded gold coins, particularly the Saint Gaudens at MS65 grade or higher. Don't pay more than 200% over the intrinsic value for the MS65... You can buy them for about 100% over the intrinsic value right now.

I think collectibles in general, and rare gold coins in particular, are extremely attractively priced right now. Look, I'm not your typical gold coin buyer... I'm not a gold bug... I'm not an end-of-the-world type of guy.

I simply see extraordinary value and quality. You can buy coins at their lowest premium to their melt value in history. That's attractive.

Sincerely,

Steve Sjuggerud

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