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Published: September 13, 2010
Gold closed at a new all time high last week, settling at
$1,259 an ounce on Tuesday...
Gold is up +15% this year, +44% since the start of 2009 and +353%
in the last eight years. If gold's strength continues for the
rest of the year, it will have closed higher every year for 10
consecutive years.
"I'm swamped," said a gold bullion broker I spoke with on
Thursday. "Whenever gold hits a new high, the phones light up."
At DailyWealth, we've pounded the table for gold since
2005, when we launched this service. So the gold rally is
fantastic news for longtime readers. If you're one of these
readers, congratulations. You're on your way to making a fortune
in gold.
But what if you haven't bought gold yet... or you want more?
Gold has basically risen in a straight line for the past two
years, making it one of the hottest investments in the universe
right now. As much as I love gold, I can't bring myself to buy
bullion at current market prices.
Today, I'm going to tell you about the only gold investment I
know of that's suitable for new buying right now.
First, this investment is trading cheaper now than ever before.
Second, it's fairly liquid, so the bid-ask spreads are tight,
minimum investments are low, and you can trade it in almost any
town in America. Finally, it's 100% physical gold, so you can
hold it in your possession.
I'm talking about vintage gold coins.
The government outlawed gold in 1933. Vintage gold coins were
minted before 1933. Because the government melted down most of
these gold coins after the prohibition, few of the pre-1933
coins survive today. The historical value, the rarity, the
beauty, and the gold content make these coins extremely
valuable, especially if they're in mint condition.
(The vintage gold coin industry uses a grading scale to
determine the condition of a rare coin. Once the graders have
rated them, they enclose them in tamper-resistant cases, so
everyone instantly knows what they're worth and you don't need
to be an expert to judge the value of a vintage coin. I consider
any coin with a grading of MS-65 or higher to be "mint
condition.")
Pre-1933 gold coins' "intangible" assets mean they always trade
at a premium to the spot price of gold. For example, the most
common mint condition pre-1933 gold coin is the $20 Saint
Gaudens Double Eagle. It contains 0.98 of an ounce of gold.
There are around 200,000 in existence in mint state.
Right now, this coin trades for $2,150... a
65% premium to the price of the common modern gold coins. But
it's actually incredibly cheap...
You see, even though gold has risen 350% in the last eight years
and is shooting through the roof right now, rare gold coin
prices have lagged.
Take the mint condition $20 Saint Gaudens I mentioned above as
an example. In 1990, when gold traded at $400 an ounce, this
coin sold for $4,000... almost double today's price.
In 2003, when gold hit $400 an ounce again, the price of this
coin was around $1,000. Gold has more than tripled since 2003,
but the Saint Gaudens has only doubled.
In 2007, gold hit $700. It's up about 75% over the last three
years. This chart shows an index of vintage gold coin prices
over that same period. You can see vintage gold coins still
trade at 2007 prices.
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In other words, you're getting a better deal now than you
would have gotten at the bottom of the gold market in 2002.
Vintage gold coins have not risen in line with gold over the
last 10 years and -- relative to the price of gold -- they are
now at the lowest prices in over 30 years.
Given how cheap they are compared to gold, how little
they've gained in price over the last eight years, and how
special they are, vintage gold coins are the safest,
lowest-risk, highest-reward gold investment in the world
right now.
If you're considering buying gold, you should think about
vintage gold coins first.
-- Tom Dyson
Editor
Daily Wealth
Note: This article originally appeared on
Daily Wealth
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