By Fred Goldstein
Sr. Broker, Swiss America
Oct 10, 2008 (charts updated 11.12.08)
Many years ago I called attention to the classic U.S. silver proof type coin market, calling them "little treasures". Today there's another area of the coin market which I believe is undiscovered by the general public and undervalued. I say this from a macroeconomic standpoint, not a salesperson’s viewpoint. While Swiss America clients have acquired these treasures over the years, many new investors are just learning about them.
For years we at Swiss America have written that increased debt and deficits would lead to a weaker US dollar and a higher cost of living. We advocated the purchase of physical gold as a hedge against inflation. Although this philosophical argument was practical, the vast majority of investors did not participate. Despite the gold price rising over the last seven years, investors were more comfortable in financial assets. Recent events have changed investors' mind set which has now created an excellent opportunity for these little treasures.
Background before the big secret
On September 17, 2008, gold had its biggest one day price rise. While this did not come as a surprise to those of us at Swiss America, it shocked most financial journalists. The equivalent would be a twelve hundred point rise in the Dow Jones in one day. This sudden dramatic rise of gold along with the turmoil in the stock market as well as the recent government bailout has changed the gold market forever.
The current demand for gold and silver has overwhelmed the physical cash market. Most local coin shops and larger national companies have not been able to deliver one hundred ounce silver bars and silver eagles and they are charging more than $100 over the paper price for a one ounce gold eagle bullion coin, if even available. The US mint recently announced suspension of production of the gold buffalo bullion coin. .At the same time the paper, or COMEX, price of gold and silver has dropped. This disconnect has been widely reported by both Bill Murphy at lemetropolecafe and by Dan Norcini at jsmineset.
Commodity future contracts are generally settled in paper dollars rather than the metal itself. So in essence average investors are purchasing the physical metal while a cartel of banks and commercial entities are selling the metal short on the exchanges.
After the bailout bill was signed into law this past Friday, the stock market swooned. In the short term we do not know if this was the public's reaction to an unpopular law or a serious underlying problem. A certain amount of uncertainty should plague the markets well into the new year. This leads me to believe demand for gold and silver will increase and put additional pressure on the thinly capitalized coin market. Based on these assumptions I believe these treasures will no longer be a secret!
The big secret is out, take action!
I am referring to the $20 Double Eagle Liberty and Saint Gaudens gold pieces. These coins were minted by the US government from 1850 to 1933. Each coin has .9675 troy ounces of gold and in uncirculated, or mint condition, have an extrinsic, or collectible, premium above its intrinsic, or metal, value. Since September 16, 2008 the paper gold price has risen approximately 7% while the price of MS-63 and MS-64 Saint Gaudens have jumped about 25%! This in itself is significant but not reflective of what I believe we will see over the next several years.
Recently I was able to visit and speak to some of our Valley's dealers. One dealer commented that the general public is still not aware of these gold pieces. We have been fortunate in that we at Swiss America have been and are still able to deliver hundreds of these little treasures to our clients during this volatile environment. I believe the gold price will continue to rise over the next several years and we will see increased demand for all physical gold coins.
Now that I have exposed the secret of these little treasures I cannot predict how long these coins will be available at affordable prices. Despite the most recent weakness in the paper gold price; supplies of these coins are diminishing while premiums are rising. Call your Swiss America representative if you have not taken action or want to add to your present position. (We have additional free information to help educate first time buyers). Act quickly as price and availability are subject to change due to unusual market conditions. Email Dr. Goldstein
EDITOR'S NOTE: Enclosed charts illustrate that while gold bullion is now down 15% year-over year, Mint-State 63 $20 Saint Gaudens gold coins are up 20% over the same time period and Mint-State 63 $20 Liberty gold coins are up 35%. So in addition to offering safety, liquidity and growth potential equal to bullion, historic Mint-State $20 gold pieces also offer 100% privacy of ownership and above average growth over the last year. Past performance is no guarantee of future performance. All investments have risk.
The $64 Billion, Trillion Question - Dr. Goldstein (9-24-08)
2008: Your Golden Opportunity -Dr. Goldstein (1-15-08)