Pre-1933 Gold Outperforms Today’s Gold Bullion…

Since 1970, an investment strategy that included Pre-1933 gold has been proven to outperform modern gold bullion, gold bars, Krugerrands, Canadian Maple Leafs, or American Eagles.

In fact, $1,000 invested in common date, Pre-1933 Gold coins has a market value of $19,595. But, gold bullion would be worth only $7,429.* Clearly, investing in common date gold coins has paid off handsomely.

Truly Rare Coins Bigger Winners- But, Collectors Universe reports that you would have done even better by acquiring investment quality, U.S. Rare Coins back in 1970. The CU3000 would be worth $54,158 and Mint State, Rare Gold would be worth $74,299 today, far outperforming gold or the Dow over the last 30 years.

Pre-1933 Gold Offers the Best Leverage - As you might expect, classic Pre-1933 U.S. gold coins are directly affected by the rising price of gold. When gold goes up, the generic gold coins follow. However, many people don’t realize that Pre-1933 gold coins offer substantial leverage to the gold market and advantages over modern gold bullion coins like American Eagles.

Pre-1933 Gold Soared When Gold Was Flat - However, sectors of the U.S. Rare Coin Market and the gold markets don’t move in tandem. Generic gold coins soared in value in the early 1970’s, in the 1976-1980 Bull Market for coins, and again in the mid-1980’s despite the fact that gold prices were relatively flat.

In today’s marketplace, gold trades near 20-year lows and generic Pre-1933 gold is also highly undervalued. Both offer investors a good soure of value during a time when high-tech stocks are crashing, the economy is headed for a recession and inflation is rising quickly.

All of these factors have historically put investors in a position of a flight to safety from paper assets into hard assets. When investors suddenly enter the U.S. Rare Coin Market, the demand can quickly overwhelm the limited supply.

Steve Renner is the CEO of cashcards-goldlynks http://goldlynks.tripod.com

Bookmark to:

In April, the U.S. Mint revealed plans to strike in early 2006 new .9999 bullion coins to go after the growing world market for .9999 fine (24-karat) gold coins. Studies show that pure gold coins claim 60% of the world’s gold bullion coin market, which is some $2.4 billion annually. The Royal Canadian Mint’s Maple Leafs hold the number one spot for pure gold coins. However, problems with Maple Leafs have surfaced.

If the Mint avoids the problems that have developed with Gold Maple Leafs, it has a golden opportunity to grab an even bigger share of the gold bullion coin market. The U.S. Mint’s American Gold Eagles are the best selling 22-karat gold coins in the world.

Despite being the world’s best-selling 24-karat gold coins, 1-oz Maple Leafs’ design and packaging leave them susceptible to damage. As a result, Gold Maple Leafs have fallen in disfavor among U.S. gold bullion coin investors. Indications are that gold bullion coin investors worldwide have the same frustrations with 1-oz Gold Maple Leafs.

It is nearly impossible to remove, inspect, and put 1-oz Gold Maple Leafs back in their tubes without scratching them, no matter how carefully done. Gold Maple Leafs have smooth, clear fields around Queen Elizabeth’s likeness and sharp milled edges. As the coins are put back in their tubes, the edges scratch the fields–and sometimes the Queen’s raised image.

And, Heaven forbid that a 1-oz Gold Maple Leaf is dropped on a floor or even a hard tabletop. But, most of the damage is done when investors handle the coins. If Gold Maple Leafs are handled roughly, as investors are used to handling Krugerrands and Gold Eagles, Gold Maple Leafs are easily damaged. Consequently, many badly damaged Gold Maple Leafs have come back into the secondary market.

Until a few years ago, Gold Eagles and Maple Leafs sold at the same markups over spot. But, as Maple Leafs, which investors have bought since 1979, started coming into the secondary market, problems surfaced. Now, to keep investors in the U.S. market buying Maple Leafs, the Royal Canadian Mint has to offer new (current year) Gold Maple Leafs at a half-a-percent below Gold Eagle prices.

Damaged 1-oz Gold Maple Leafs are such a problem that one important secondary market maker stopped dealing in the coins for a while. The head trader said he did not have time to discuss with buyers and sellers the conditions of the coins. Further, he said his staff did not have time to inspect each coin and classify it as to the amount of damage. It is commonplace for sellers to say the coins are in “perfect condition.” Yet when Gold Maple Leafs arrive, they often are badly scratched or rim nicked.

Another major bullion dealer (perhaps the nation’s largest) currently buys back “perfect” Gold Maple leafs from established dealers at a little over spot, which means investors receive less than spot if their dealers unload to this firm. For scratched or damaged coins, this firm pays less than spot, which enables the firm to send the coins to a refinery at a profit if the firm has no buyers for Gold Maple Leafs.

The secondary dealer returned to trading Gold Maple Leafs but buys all them only at prices that enable him to profitably melt the coins if they are really beat up. As noted, because of the problem with secondary market Gold Maple Leafs, the Royal Canadian Mint has to price Gold Maple Leafs below Gold Eagles to entice investors to take Gold Maple Leafs in the U.S. market.

Luckily–the free market being what it is–there are dealers who will take the time to evaluate Gold Maple Leafs and pay more for the ones in better condition. Still, the spread (the difference between what an investor can buy and sell for at any moment) on “perfect” Gold Maple Leafs is about $4 wider than on Gold Eagles. However, the U.S. Mint’s new 24-karat gold coins need not be problem coins.

For example, the 1-oz Austrian Philharmonics and The Perth Mint’s 1-oz coins are .9999 fine. Yet, these coins are not easily damaged during normal handling because of their designs and/or their packaging.

Philharmonics come ten to a tube and can be taken out and put back in their tubes without scratching. The Perth Mint coins come individually encapsulated in hard plastic capsules. As long as Perth Mint coins remain in their capsules, they maintain their perfect conditions.

Hopefully, the U.S. Mint knows of the problems with Gold Maple Leafs and will design its new .9999 fine coins and their packaging so that the coins are not easily scratched or damaged. If the Mint opts to go with packaging its new coins in tubes, as it does Gold Eagles and as Philharmonics are packaged, then the Mint needs to avoid milled edges.

Although Gold Eagles have milled edges, old U.S. gold coins ($20 Libs and St. Gaudens) were minted with lettering on the edges. So, lettering is not new to the U.S. Mint. With lettering, the edges can be smooth, making the coins less likely to scratch other coins in handling. Philharmonics, which are not prone to damage, have lettering on their edges.

[Over the centuries, mints learned to design gold coins to guard against “shaving,” a process by which a small amount of metal is “shaved” from the edges. Milled edges that have been shaved are clearly detectible. Light lettering on the edges solves the problem as well. If no lettering can be seen on coins that are known to have been minted with lettering, then the coins have been shaved and no longer have their original gold content.]

As do Maple Leafs, Perth Mint .9999 fine gold coins have milled edges and carry a likeness of Queen Elizabeth II on the obverse (front). However, to protect its coins from damage, The Perth Mint encapsulates them in plastic capsules. When Perth Mint bullion coins are removed from their capsules and put in tubes, the coins are susceptible to scratching as are Maple Leafs.

In going after a piece of the $2.4 billion .9999 fine gold bullion coin market, the Mint needs to consider the mindset of bullion coin investors. Bullion coin investors seek alternatives to paper money; they are not coin collectors. Bullion coin investors prefer coins packaged so that they can be easily stored and secured.

This means the Mint should package the coins twenty to a tube, which has become–primarily because of Gold Eagles–the preferred method. Five tubes conveniently total one hundred coins. Further, the tubes should be made of the same durable plastic from which Gold Eagle tubes are made. Hard plastic tubes, such as those used for Philharmonics, can and do break when dropped. Gold Eagle tubes, on the other hand, are virtually indestructible.

For protection against “shaving,” the Mint should design its new coins with lettered edges. Lettered edges would make the coins much less susceptible to scratching.

The Mint is going after the bullion coin market, and bullion investors like to feel and heft their coins. Packaging the coins in tubes enables investors to more easily inspect their coins. Collectors, on the other hand, want their coins in as pristine condition as possible. Although capsules are excellent for protecting collector coins, coins individually packaged in capsules require more space for storage. The other aspect that the Mint has to consider is the coin’s theme.

The Mint should make the theme something uniquely American, as it did with its American Eagles coins. For the Gold Eagles, the Mint chose a slimmed-down rendition of Augustus Saint-Gaudens’ famed Standing Liberty, which he created in 1907 to grace a new Double Eagle ($20 gold coin). Nearly one hundred years later, the Saint Gaudens, which the coin is now called, is viewed as the most beautiful coin produced by the U.S. Mint.

For its Silver Eagles, the Mint chose A. A. Weinman’s Walking Liberty design, which was used on half-dollars 1916-1947. Walking Liberty halves are among the most popular silver coins ever turned out by the U.S. Mint. Judging by the success of the Silver Eagles program (more than 128 million sold since their inception), putting the Walking Liberty on Silver Eagles was the right move.

Some may argue that the Standing Liberty and the Walking Liberty designs are being used in the American Eagles program, and, therefore, the Mint should go onto another design. However, the Standing Liberty and the Walking Liberty are immediately identified as American by the world’s bullion coin buyers. Besides, is not Miss Liberty as much our nation’s icon as is the eagle?

If the U.S. Mint avoids the problems that have surfaced with Gold Maple Leafs and offers gold bullion coin investors a strong alternative, then it has a golden opportunity to capture a big share of the .9999 fine gold bullion market. With the right planning, the Mint could shake the Maple Leaf’s hold on the .9999 bullion coin market.

Bill Haynes heads CMI Gold & Silver, one of the nation’s oldest precious metals dealers. See his website at www.cmi-gold-silver.com.

Bookmark to:

Time for Change

The United States Congress is once again contemplating several issues regarding our currency and coins. These include the Dollar, Quarter, and Cent. Many in congress wish to stay with the current designs, and pass laws so that they cannot be changed.

The first law governing coin designs dates back to 1792. Many during this time wanted our nation’s coins to bear the image of George Washington. Washington was very adamant against this idea, referring to a coin bearing the image of a person to being monarchical. In September of 1792 the Morris bill proposed our coins bear the emblematic image of Liberty. Rep. John Page, who served under Washington during the French and Indian wars not only echoed the presidential objection, but pointed out that however pleased they might be with the incumbent, there was no reason to believe that their descendants would be pleased with some of his successors. Other members of Congress insisted that it was no real compliment to place an image of Washington on a coin. The basic principles of coinage design were not for honoring people. It was hoped by the founding fathers that our coinage would represent and honor all of America. Lady Liberty was chosen as the design because she represented one of our foremost rights. A symbol that every American could understand and embrace.

This bill was signed into law on April 2, 1792. This act is the basis for subsequent American coinage laws; it is known as “Statute One”.

The law of September 26, 1890 stated that changes in the designs of United States coins cannot be made more often than every twenty-five years without congressional approval. Any design circulating twenty-five years or more could be changed without their approval. Since that date, all denominations have changed, many times without the need of congressional action. Today, congress is infringing upon this law. The Jefferson five cent coin by the new law will revert back to an image of Jefferson and Monticello in 2006. Congress is also considering a bill that would require the image of Washington to become permanent on the Quarter, along with Lincoln on the Cent. They are following the early logic of Henry Ford. Mr. Ford thought that one car in one color was good enough for the masses. American’s did not accept this logic then, and we should not be forced to accept it now.

We as Americans love and embrace change. We expect this in our fashions, cars, televisions, and in our everyday lives. Would any of us be happy if the manufacturers of America decided that the current design were the best for us, and never again created anything new or different? Are we so arrogant to believe that our choices today are suitable and acceptable for future generations?

The first design change of the Washington quarter took place in 1999. This was the first major change since 1932. The United States Mint estimates that more than 100 million American’s collect the State Quarters. That equates to 1 in 3 of American’s collecting coins. The proof is plain for all to see. What will happen to the 100 million plus American’s that are currently collecting these coins when the designs revert back to the same as they have been? What will be the reason to continue collect coins? The United States Mint and the Bureau of Engraving earn much of their profits by reissuing currency that is no longer in circulation. If our coins and currency are never again changed, why would anyone want to pull it out of circulation? This will require the government to wait for them to wear out. While currency has an average circulation of 18 to 24 months, coinage can circulate up to 38 years.

Most Americans today have only witnessed a few minor design changes in our currency. The last major change before the State Quarter program, was replacing Franklin on the half dollar with Kennedy. Now we have five of six coins bearing the likeness of a president. A new bill is currently being heard on capital hill regarding a new dollar design. This will make our sixth and final coin bearing a presidential design. The bill would create a new circulating commemorative coin honoring each president in their order of holding office. Most American’s would agree that all of these men do not need to be honored in this fashion. Our founding fathers knew this.

Our current elected leaders have still not figured this out. They haven’t learned that change equals a good thing. They insist that we maintain our lackluster currency and coinage in a mundane attempt at keeping the political peace. Proponents for the current designs have only one good argument for keeping the images present forever. That wish is to continue honoring these great men. That none should be lost to history. Our founding fathers knew that this was no honor. How can we honor these men while we are choosing not to honor their wish of not allowing a person to be placed on a coin?

Every coin collector is aware at just how stagnant our coinage has been. The designs are stale and mediocre at best. It does not take much effort to find coins dating back 30 years or more in our pocket change. This is directly related to a lack of interest. Many studies have been made on circulating quarters. More eagle reverse Washington quarters are found in change than the new state quarters.

Collectors across the country tell the tale of how difficult it is to find the newest quarter in circulation. All of the new designs have helped to spark school curriculums, and a revitalized interest in our nation’s history. I would think that this would be a lesson to all involved. We need change. Even if the decision is made that the current images are to be retained, they should be updated on a regular basis. If congress wishes to update the coinage law, it should be that all designs are required to be changed every 25 years, not etched into “forever”.

It is time to inform congress, that it is time for change.

http://www.congress.org/congressorg…command=congdir

Steve A. Bryan is President and CEO of MidAtlanticCoins.

Bookmark to: