-- Posted Monday, 27 November 2006 | Digg This Article
By Dr. Steve Sjuggerud
Few people have noticed…
But the bull market in gold is back in full swing. As I write, the price of gold is at $638, roughly 10% away from highs reached this summer.
While some have noticed this, absolutely nobody has noticed the complete detonation of rare gold coin prices this year. While the price of gold is near its highs, coins have gotten crushed - creating what I believe is the buy of the century in pre-1933 graded U.S. gold coins.
Take a look at the two charts below… the first one is the price of gold over the last two years. The second chart is the price of pre-1933 graded gold coins since 1970.
While gold is near new highs, pre-1933 graded gold coins have lost a third of their values. It’s extraordinary:
So what's happening? The story from coin dealers is that the new issue of 100% gold coins from the U.S. Mint sucked up any money that investors would have moved into rare coins. This is the first issue of a 100% gold coin in the U.S. (most other U.S. gold coins are not quite 100% gold).
The popularity of this issue caught the rare coin market by surprise. Don't quote me on this, but I've heard that the U.S. Mint has sold something like $350 million dollars of these since they began issuing them this past summer.
For following the rare gold coin market, the metric I like to track is the "premium over melt value." In recent years, rare gold coins have been trading at all-time lows in relation to their meltdown values.
But with this complete trashing of the pre-1933 graded gold coin market--a 33% fall based on the index above--high quality, graded gold coins are the cheapest they've ever been in terms of premium over melt value.
I want to own gold for the long run… and right now, the best way to own gold is through graded pre-1933 U.S. gold coins. Your downside is limited, as they've fallen closer to their melt value than they've ever been.
And if gold keeps going up, I expect these will go up even more.
If a bull market in gold really takes off, these things will absolutely go nuts. In previous gold coin bull markets, rare coin indexes from PCGS (like the one above) have risen by over 1,000% in just a few years.
The buy of the century--so far--is pre-1933 graded gold coins, right now.
Don't miss it.
Good investing,
Steve
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