GOLDEN ADVICE
All that glitters is gold as the metal nears $2,000
All That Glitters IS Gold As the Metal Nears $2,000
Gold appeals to investors who recognize it not as a commodity, but as a universal currency in a dangerous world and a chaotic United States. This appeal has been enhanced over the last year as the glamorous yellow metal’s spot price has increased to $1,773 per troy ounce as of June 2020. This appeal isn’t new. Gold has always held a tremendous fascination for humanity. Its beauty, rarity and durability combine to give it timeless appeal and great value. Coin collectors appreciate this combination of attributes even more than most, for they share special insights into the glorious history of the metal itself and the time-honored coins produced from gold. Gold coins, like all coins, are hand-held pieces of history. They outshine virtually all other coins, however, because their main component is so coveted, so admired and so prized. Many U.S. gold coins rank high on collectors’ wish lists and want lists, especially since gold is now glittering brightly, almost like never before. I say “almost like never” because the last time gold was $1,790 per troy ounce seems like an eternity—over eight years ago. The modern high for gold was in September 2011, when gold hit $1,923 per troy ounce in overseas trading. Some analysts are exhorting us to climb aboard and strap ourselves in for a rocket ride to the Moon. Before we get too comfortable on the launching pad, we ought to reexamine the events of recent years, especially within the gold coins market. It will soon become apparent instead of embarking on a non-stop rocket trip, those who buy gold coins today will likely be in for a roller-coaster ride. This is a real possibility even if the ultimate destinations are high, higher, and highest as multi-trillion-dollar deficits and record low interest rates ultimately push the metal to $10,000 or more per troy ounce. Some of my fellow gold analysts are forecasting $9,000 per troy ounce gold by 2030. And I have been telling attendees at my seminars held at coin conventions until the global pandemic hit that I expect $3,000 gold by 2025. There’s no way of knowing with complete certainty how high this hopeful boom will carry the yellow metal. We are currently experiencing a tug of war between inflationary forces (money printing and anticipated velocity of the currency) and deflationary forces (high unemployment and money hoarding). But the fear of domestic monetary inflating, an eroding dollar, civil unrest in American cities, a high deficit and the potential for financial chaos combine to make gold more attractive than ever before.
MINDFUL OF GOLD PRICE PATTERNS
The fact of the matter is that the history of gold—even in roaring bull markets—is to rise in price dramatically, and then to abruptly retreat. The gold market historically has been shattered by volatility and by sharp ups and downs. These events have served to magnify the risks for those who
venture into this market. But at the same time, it also has created opportunities for those with the savvy and wherewithal to use the peaks and valleys to their advantage. For those of you buying physical gold coins, it’s crucial to understand the difference between “generic” gold coins and those that are genuinely rare. Generic coins exist in sufficient quantities to be traded as like-kind units—very much like commodities. These coins may be in high levels of preservation; more often than not, in fact, those traded frequently in the current marketplace are in mint-state condition. But they’re readily available in those grades, so buyers and sellers have quick access to supply sources. And one is treated much like any other so that these coins are interchangeable. Common-date Saint-Gaudens double eagles ($20 gold pieces) are viewed, for example, as generic coins. Many generic gold coins can be purchased for prices very close to the melt value of the metal. That’s because precious-metal content forms an integral part of generic gold coins’ value. This occurrence is particularly true for coins in high circulated grades, such as About Uncirculated-55 or 58. Additionally, it’s true of low-end uncirculated grades such as Mint State-60 through 62. In these preservation levels, generic gold coins are virtually “bullion” coins: They command just a modest premium over the market value of the metal they contain. They rise and fall in value as the precious metal itself goes up or down in price. The price differential widens considerably as the grade level moves up to Mint State-63 and above. By contrast, truly rare coins are one-of-a-kind pieces, and each has its personality. Low mintage or availability, combined with high quality, are key determining factors in their value. Some, of course, possess not only rarity but also higher than high quality—and that combination greatly enhances their value. But unlike generic coins, truly rare coins are treated first and foremost as collectibles, not commodities; they’re regarded as distinctive, rather than interchangeable.
GOLDEN GUIDELINES
As gold bullion climbs in price and draws greater interest, gold coins tend to get “hotter,” too. With that in mind, I’ve put together a list of four kinds of gold coins that are truly golden.
1. The one-ounce gold American Eagle bullion coin.
This coin is my number one recommendation. This popular bullion coin has a face value of $50, and its obverse design was adapted from that of the famed Saint-Gaudens double Eagle (or $20 gold piece), with a regal Miss Liberty in full stride. Many buyers find the design appealing. They also like the idea of “buying American.” And they prefer the fineness of 22-karat because, being harder than pure gold, it makes the coin relatively durable. The American Eagle trades at 7 or 8 percent above its bullion value. So, if gold is trading at $1,773 per troy ounce, as it is at this writing, an American Eagle will cost about $1,915. The price could be a little more or less, depending upon the dealer’s services. Some dealers will charge a lower premium when they sell in quantity – say, 50 or 100 coins at a time. Other dealers may charge 9 or 10 percent but will take time to sit down and talk with you, even eveneven if you’re buying just one coin. Travers’ Tip: Whenever you buy bullion coins, always check dealers’ spread – the difference between what they are paying to buy a coin and what they are charging when they sell the same coin. A narrow spread is the mark of an honest dealer. If you see a range spread of 20 or 30 percent, you might want to go elsewhere. I was present at the birth of the gold American Eagle in 1986. At the first-strike ceremony at the West Point Mint, I was privileged to join U.S. Treasury Secretary James Baker III at the podium and strike one of the first one-ounce American Eagles to land in private hands - my hands. I now display it proudly in a special grading service holder that bears my name. There is one additional reason to buy gold American Eagles, beyond those I have cited already: The U.S. government allows the inclusion of these coins in Individual Retirement Accounts – something it does not permit with foreign bullion coins. Before doing this, check with a qualified financial advisor. Your coins would need to be stored with an Internal Revenue Service-approved custodian. The gold American Eagle is a very liquid coin, easy to sell, and right now, it’s among the hottest coins on the market. It’s a great coin to have – or to give. However, one market tip is to steer clear of these coins bearing the year you are buying them in. The U.S. Mint charges its distributors a hefty
premium, passed on to the consumer, for current-year coins. That premium often dissipates as early as the following year. I do not encourage people to pay significant premiums for American Eagle gold coins on the basis that they are collectible. But as an investment, these are wonderful coins to have and a great insurance policy – something that will be there when you need it if times get really tough. The fractional Gold Eagles carry very high premiums and these should be bought only as an insurance policy. Being identical in design to the one-ounce version, they’re also highly recognizable. Through the years, their primary use has been in jewelry. 2. Saint-Gaudens double eagles certified as Mint State-65 by the Professional Coin Grading Service (PCGS) or the Numismatic Guaranty Corporation of America (NGC) and verified for grade by the Certified Acceptance Corporation (CAC). The “Saint” has been acclaimed for nearly a century as the most magnificent coin ever minted by Uncle Sam. Its beautiful design, by renowned sculptor Augustus Saint-Gaudens, has made it an unusually popular collectible ever since it first appeared in 1907, especially in gem condition – which MS-65 certainly is. In July 2002, one Saint-Gaudens Double Eagle, the 1933 specimen, changed hands at a New York City auction for $7.59 million (plus a $20 monetization fee) – the highest price ever recorded for a Saint-Gaudens double eagle.