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With the stroke of a pen on July 23, 1965, President Lyndon B. Johnson made the first fundamental change to U.S. coinage in 173 years … and set in motion the destruction in the value of your dollar.
On that fateful day in 1965, Johnson signed a law displacing the 1792 act that had established the U.S. Mint and regulated American coinage for nearly two centuries.
Since that time, U.S. dimes, quarters and half-dollars contained 90 percent silver. But Johnson believed silver had become too valuable to be used as money.
He had it half-right. Silver was indeed valuable — if not as everyday currency, then as a store of wealth. And so, today we’ll look at why every investor needs some “grab-and-go” wealth, and how silver bullion — particularly in coin form — fits the bill.
Plus, with silver prices currently pulling back and creating what I see as a buying opportunity, I’ll share with you some of the best coins to buy, and why some coins are more-valuable than others … especially now with coin sales soaring in the United States.
Also stay tuned for five tips for bullion-buying success. But first, let’s look at how your wealth — present and future — got into so much jeopardy in the first place.
The Day Your Dollar Was First Devalued …
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After the “Coinage Act of 1965,” silver no longer backed the value of dimes and quarters. The half-dollar was reduced to about 40 percent silver. And by 1971, all the silver was gone from this coin, too.
American money has been rapidly losing value ever since.
Johnson was right about one thing. When he signed the act debasing the value of our coins, consumption was outpacing production. That year he said, “Silver is a scarce material.”
The supply-demand equation remains out-of-balance today.
What Johnson Didn’t Know
About Silver Made Some Investors Rich!
However, Johnson could not have been more wrong when he stated that silver coins “won’t become rarities.” At the time, more than 12 billion silver dimes, quarters and half-dollars were in circulation.
Johnson went on to incorrectly assert that “there will be no profit in holding them … for the value of their silver content.”
Those who did not take Johnson’s ill advice and held on to their 1964 silver half-dollars can be thankful, because today they can be sold for more than 20 TIMES face value.
But if you sold your coins or otherwise missed out, don’t worry. There are plenty of opportunities to make money with money. You simply need to know how to spot value, which I’ll help you with today.
Every Investor Should Have
Some Grab-and-Go Wealth
After 1965, the U.S. used an alloy of nickel and copper to mint our coins. Ironically, the U.S. Mint has now proposed replacing these with cheaper metals such as aluminum and zinc!
Even base metals today are apparently too valuable to be used as money.
As my colleague Charles Goyette recently pointed out, every investor should consider owning some physical gold or silver. Given today’s uncertain financial landscape, I believe 10% of investable assets held in gold or silver coins or bullion is a good rule of thumb.
Let’s face facts: The world is in the midst of the biggest monetary bubble in history. It’s not just localized to the United States; it’s a global frenzy of legalized counterfeiting. Gold and silver bullion is the only form of money with enduring value in such a world.
I personally prefer coins because they are so easy to store, and a small collection of coins can represent a tremendous store of value. There are very few assets you can carry around that with you that possesses this kind of portability for your wealth.
Why Some Coins Are Worth More Than Others
There are two kinds of bullion coins available to investors: Collectable coins and bullion coins. Collectable coins generate a return in two ways:
1. The value of the physical gold and silver content, and
2. The numismatic value of the particular coin.
For collectable coins, a great deal of the resale value can represent the rarity of a particular coin. This means the actual value lies, to a certain extent, in the eye of the beholder — or what a coin dealer is willing to pay for it.
Collectable coins can command big premiums above and beyond the gold or silver content. And this premium can fluctuate quite a bit. Numismatics may be fine for the serious hobbyist, but most investors today are simply interested in wealth preservation and liquidity.
And that’s why many investors are turning to …
A Patriotic Path to Profits? Investors
Send American Eagle Coins Soaring!
Bullion coins can generate some premium value based on rarity, but the vast majority of the value comes from the price of physical gold and silver.
In other words, the value of a bullion coin should track dollar-for-dollar with the price of gold or silver. A one-ounce gold American Eagle coin, for example, is always worth its weight in gold!
And American Eagle sales have been soaring recently.
Uncertainty about the outcome of last month’s election and/or the approaching fiscal cliff drove American Eagle gold coin sales up 131 percent in November from October’s total, to 136,500 total ounces.
It’s easy to see why these coins are so popular; investors have several denominations from which to choose.
The U.S. Mint offers American Eagle gold coins in four weights: 1/10, 1/4, 1/2 and of course 1-ounce denominations, making it easy to target the asset allocation that’s just right for your portfolio. Each coin is composed of 0.9167 fine gold minted with a small amount of alloy to make it more-durable.
American Eagle silver bullion coins are also quite popular with investors and are even-more-affordable. The U.S. Mint has sold over 33 million ounces of silver eagles in 2012. These coins contain one troy ounce of 99.9% pure silver.
American Eagle bullion coins, both silver and gold, are the only coins whose weight and purity are guaranteed by the U.S., they’re also the only coins that are qualified to be held in an investor’s Individual Retirement Account (IRA).
These coins aren’t just for individual investors. Governments across the globe are scooping up bullion in coin form as well. And when governments are buying, it’s a big sign that investors should be on the lookout for buying opportunities, too!
Gold, Silver’s Appeal Knows
No Geographical Boundaries
Several governments outside the United States mint their own investable gold and silver bullion coins. It can pay to comparison-shop because you might be able to buy them cheaper than U.S. bullion coins.
For example, Canadian Maple Leaf gold coins are one of the world’s most popular investable coins. Minted since 1979, over 20 million troy ounces have been sold.
Maple Leaf coins contain 0.9999 fine gold, which makes for a softer and somewhat less-durable coin. But we’re not exactly carrying them around as pocket-change, either.
Perhaps due to the durability, or just a preference for buying American, Maple Leafs can often be purchased at a discount to American Eagle gold coins while both contain the exact same amount of gold.
In fact recently, Gold American Eagles were quoted at $1,803.83 per ounce, while Gold Maple Leafs traded for $1,771.86 an ounce. Nearly a $32-per-ounce discount for gold coins from the Great White North. That may not sound like much, but it’s nearly enough money to purchase an extra American Silver Eagle to add to your portfolio.
5 Tips for Successful Bullion-Buying
Here are a few pointers to keep in mind before you invest in bullion coins …
• Consult with your trusted financial adviser who may have specialized investment knowledge about bullion — the best places to buy bullion, the best places to store it, how to sell it, etc.
• Consider the added costs associated with storing your bullion. You may need to rent a safe deposit box, or arrange for offsite storage to safeguard your bullion.
• Be wary of any dealer who DOES NOT offer the option of delivering your bullion to you, but rather to a “secured facility” for safekeeping.
• Be willing to shop around to ensure you get the best-possible price when you’re buying and selling bullion.
• Beware bogus bullion. Surging gold prices have spawned a new generation of gold counterfeiters. An independent appraisal can ensure that your metals are of the highest-possible quality, plus tell you if the dealer’s quote is inflated.
“Buyer beware” applies equally to gold and silver bullion coins … especially at today’s prices. That’s why I recommend you stick with the most widely traded bullion coins, including: The U.S. Gold Eagle, Canadian Maple Leaf and even the South African Krugerrand, among other popular coins.
When you’re ready to make a small investment for a lifetime of enduring value, having a reputable and experienced bullion expert by your side can help you ensure that your precious metals are not just a store of wealth, but also a source of future wealth.
Good investing,
Mike