How To Invest in Gold and Other Hard Assets

A new investor needs to look at both benefits of  modern Gold Bullion and United States Gold Coins struck prior to the year 1933 (known as Pre-1933 Gold), two segments of the Gold Market that form a powerful combination. Modern Gold Bullion (like American Eagles) provides an excellent foundation for our clients. Bullion offers a simple acquisition that will accomplish many of the standard goals of those acquiring Gold for the first time.

Expanding Beyond the Limits of Gold Bullion
I’m obviously bullish on gold. I’m very confident that it will provide the economic hedge, financial security, and profit center our clients seek. We agree with the projections of many analysts that gold can easily double in value. If that occurs, all modern bullion will rise accordingly making all of our bullion clients quite successful in their Gold endeavor.

However, for all the pros in owning Bullion, this report will address how diversification can counter its one flaw – Bullion profits are anchored and limited to the percentage increase of the Gold spot price. They offer no opportunity for leveraged gains over and above the core Gold Bullion Market. However, there is a segment of the Gold Market that offers the solution.

“I Just Want To Buy Gold”
It’s normal for modern Gold Bullion to be the primary interest of new clients. At this early stage in their understanding of the Gold Market, Bullion makes perfect sense. It’s the foundation of your portfolio. You need to own Bullion.

However, we’d be short-changing clients if we didn’t teach them how to maximize their long-term potential, so I pose a common question we hear from clients after building their Gold Bullion foundation, “is there a way for me to diversify and increase my upside potential without a lot of extra risk?” The answer is yes and the key market segment is “Common-Date Pre-1933 U.S. Gold Coins”.

But Aren’t Rare Coins Extremely Expensive?
This is often the next question we hear from a client we’re teaching. The answer is yes. Rare Coins can easily demand four, five, and even six figures. HOWEVER, we’re not discussing Classic Rare-Date Coins, but instead their Common-Date counterparts. The difference between these two sub-segments of the Pre-1933 U.S. Gold Market is self-explanatory.

Both segments include coins from the same era with the same designs. The difference is that coins from some years prior to 1933 are very scarce, which are called “Rare-Dates”. Conversley, there are also years from which more coins are still available today, thus “Common-Dates”. With a price range between $1,600 and $2,500 per coin, this market offers an excellent bridge between the low-cost of Gold Bullion and the extra profit potential of Rare-Date Coins.

Why Do They Offer Better Profit Potential?
The answer is due to their fixed and limited supply. Here’s where 1933 becomes an important year. Starting in the late 1700’s, our ancestors used Government issued gold coins as currency. After some time being circulated in the money supply, just like today’s pocket-change, these gold coins wore down and banks would send them in to be melted and made into new coins. This normal process of attrition greatly reduced the supply of gold coins to a fraction of their original mintage figures.

In 1933, at the height of the Great Depression, the U.S. Government stopped minting gold coins for currency and recalled all outstanding coins in circulation. Once confiscated, most of these coins were melted into gold bars to pay off foreign debts.

Fixed and Limited Supply
We refer to the supply as “fixed” because no more Gold Coins were ever minted for use as money again after 1933. The supply of Pre-1933 Gold Coins is “limited’ in comparison to the supply of millions of modern bullion coins which increases every year. Simple supply and demand fundamentals illustrate how increasing demand from investors and enthusiasts can easily overwhelm this limited supply and create a powerful profit surge over and above the long-term return of the large and increasing supply of gold bullion.

But I’m Not a Coin Collector
Our clientele definitely crosses the spectrum. On one end, we have clients who own gold strictly for hedge and investment. On the other end, we have experienced enthusiasts with whom we build modest to multi-million dollar collections that range from common Modern

Bullion coins to the most impressive Rare-Date Coins. Most clients eventually find themselves with a combination of the interests generally attributed to investors or collectors which leads to an important lesson. When we hear “I don’t want to be a coin collector” we realize a client is making a simple misconception that “coin collecting” is a negative.

A Perfect Relationship
In reality, it’s quite the opposite. In Precious Metals, investors and collectors actually form a mutually beneficial symbiotic relationship. It’s often overlooked that the interest of enthusiasts is as varied as the collectors themselves. There are thousands of collectors that focus on Gold Eagles.

Does this mean that a Bullion investor should avoid Gold Eagles? Absolutely not – the Gold Eagle is one of the best options in Bullion. We understand that many of our investors aren’t interested in collecting old nickels and dimes.

In return, we urge them to understand that collectors are their ally because they act as a strong, consistent second source of demand. Therefore, as the bull market in gold continues, Common-Date Coins will rise due to their gold content as well as increasing demand from investors AND collectors. Such a surge in demand can create very aggressive upward moves in Pre-1933 Common-Date Gold as the fixed and limited supply is overwhelmed.

How do I Know What I’m Doing?
That’s what I’m here for. To educate, advise, and guide your acquisitions. We want to talk to you so we can further discuss the specifics, but here’s what you need to know to start that conversation:

• Denomination:  Common-Date Gold Coins are available in the four main denominations: $20, $10, $5, $2.5 with Gold content from about an ounce to about a tenth of an ounce.
• Design Type:  1907 is the key year separating the two major design types in U.S. History. Prior to 1907, the Liberty design was employed with the head of Lady Liberty in profile on all four coins. In 1907 the switch was made to the $20 St. Gaudens, featuring the famous Walking Lady Liberty, and the $10, $5, and $2.5 Indian Coins with Native American Motifs.
• Independent Grading Services:  PCGS and NGC set the standard for the authentication and grading of Pre-1933 U.S. Coins. These third party firms assign a “grade” to each coin designating its state of preservation with a 70 being a perfect coin. For this report, it’s important to know that any coin grading a Mint State (MS)-60 and higher is in uncirculated condition. Furthermore, we only recommend Common-Date Gold coins in the Investment Grade range from MS-63 to MS-66 for the best upside potential.
• Packaging:   All PCGS and NGC graded coins are sonically sealed in plastic “slabs”. The only way to remove the coin is by shattering the slab which prevents any tampering with the coin. (See Anatomy of a Certified Coin, on the below).
• Certificate of Grading and Authenticity:  The “cert” is sealed in the slab above the coin and displays all of its biographical information – what year and at which mint it was made, denomination, type, grade, plus a bar code that registers it with the grading service.

The grading services, grading scale, slab, and certificates are all critical components of the system developed over 20 years ago that helped standardize the Pre-1933 U.S. Gold Coin Market.

With the universal process and standards in place, these coins are extremely liquid and heavily traded daily worldwide. The system has created a healthy exchange market that facilitates the relationship between dealers and clients, protects the coins and, most importantly, protects the owners of the coins.

What Coin Offers the Best Value?
We’re always watching the Common-Date Gold Market and re-evaluating our top recommendations based on their current value and long-term potential. Again, we’re here to discuss the specifics with you, but we’ve created this excellent chart above to illustrate the best Common-Date options.

For example, look at the minimal downside compared to the amazing upside potential of the $5 Liberty MS-64. With Modern Bullion trading above the high value of the previous gold bull market, the strong opportunity in Common-Date Gold is clear as they trade well below their All-Time Highs. Excellent Fundamentals

We’ve found this education to be highly successful in helping clients understand the opportunity in adding Common-Date Pre-1933 U.S. Gold to their Gold Bullion. In summary, here’s why we believe this is a fundamentally sound move.

• Diversification: A critical strategy for most investors, it always makes sense to spread your exposure across market segments to reduce risks and increase the strength of your portfolio as well as the profit potential.
• Fixed and Limited Supply: For example, only 23,000 MS-64 $5 Liberty Coins have been graded by PCGS and NGC compared to over 11 million 1-oz. Gold Eagles made by the U.S. Mint since 1986.
• Twice the Demand: Pre-1933 U.S. Gold Coins are in demand by both collectors and investors with new buyers from both categories consistently entering the market.
• A Younger Bull Market: As in the past, the Modern Bullion market is leading all metals segments in this long-term bull trend with many successful years ahead. Common-Date Gold is riding the same bull wave, but we’re convinced it’s at a younger stage in the cycle behind Bullion, thus our conviction that our top recommendations are excellent opportunities for diversification and profit. The way we see it, this segment offers a way to “buy gold at yesterday’s prices” and profit as the gap closes in the future.
• Undervalued – Short-Term and Long-Term: No one is certain what the future holds, but, as with stocks, a critical strategy in acquiring Common-Date Gold is value. We only recommend coins that we’re convinced offer not only excellent long-term upside potential to their previous All-Time Highs, but also look undervalued in today’s marketplace.

A strategy for the Long Haul

This “Barbell Strategy” is simple. Begin observing the relationship between bullion and Pre-1933 gold (or let me inform you of it). Let’s stick with this example in the 10z. coins. Everytime a MS61St. Gauden and MS61Liberty is 10%-15% over bullion, buy these coins. Actually the smart thing would be to put 100% of your gold portfolio into the pre-1933 gold. When the premium of a St. Gauden or Liberty starts moving to a 35% to 50% premium over spot, then buy all bullion. Not only is gold appreciating in your portfolio, but your making some good money in the premium relationship.

Raw Pre-1933 U.S. Gold

This creates an ideal variety of characteristics that make them a combination between Gold Bullion and Investment Grade Pre-1933 U.S. Gold.

• The larger coins ($20 and $10) offer similar gold content and exposure to rising gold prices as modern Gold Eagles.
• Their price-point falls between that of modern bullion and their Investment-Grade, Certified Pre-1933 counterparts.
• While they can’t compete with the Investment Grade pieces for profit potential, their fixed and limited supply still means better prospective profits than modern Gold Bullion.
• As Pre-1933 Coins, they offer far greater safety from potential(if you believe) Government confiscation.

This interesting mix of attributes makes Raw Gold an ideal sub-segment for further diversification within the Pre-1933 U.S. Gold Market. It’s important to understand this strategy and take advantage of this when the opportunity arises.