When Gold Became Illegal (And The Gold Boom)

1933. The year that would change the way gold was seen and how it was traded. Prior to 1933 paper money was backed by physical gold – the gold standard. The gold standard was the norm – world governments would give you physical gold in exchange for cash if you demanded it.

But it all changed in 1933. The U.S. government had got itself into a sticky mess – debt and deflation were widespread in the economy. The government took a drastic step – ordering all citizens to trade all their gold coins in exchange for paper cash, while increasing the value of gold immediately thereafter.

Owning gold coins became ILLEGAL. Many gold coins (even those that were nothing short of a work of art) were melted down. No individual was allowed to own gold coins and this carried on for decades. Then, in the mid 1970’s gold coin ownership was legalized again…with some startling effects.

This “false inflation” strategy certainly worked in the mid-30’s for the U.S. government – shortly after the long standing gold standard was destroyed, the value of the US dollar nose-dived while the price of gold soared. Even so, the American economy made a staggering recovery – and there are those who believe that the current U.S. government are emulating the very same strategy that Franklin Delano Roosevelt employed in the mid 30’s.

You should be very excited, because the conditions are startlingly similar now as they were when the gold standard was executed. The U.S. economy (as then) is struggling with deflation, debt and a faltering economy. The amount of paper money being produced today is increasing. The value of the dollar is decreasing.

And guess what? The price of gold at the time of writing is steaming forward …and it seems we could be heading towards another major boom which could mean huge gains for those who harbor gold holdings in their portfolios.


How Best To Evaluate A Gold Mining Stock Investment

Evaluating gold mining stocks takes a somewhat different approach to picking other types of stocks such as growth ones.

Commodities like gold are largely cyclical – that is, they experience highs and lows in cycles. Getting your timing right can be as equally important as picking the right mining stock. It brings to mind the old adage “all ships rise with the tide” – in a booming gold market, where gold prices are sky high, almost all stocks will benefit from the cycle (often even those that are not particularly sound). Equally, when gold prices are low and heading south even quality gold miners may suffer in terms of their stock price. This is why getting the timing right is important with mining stocks.

Here are some important factors when evaluating a mining stock:

1. What Is The Actual Value Of The Gold Stock? “Market Cap” is the mainstream way of valuing a company. But with miners dig a little deeper and figure out what the net asset value of the stock is. If it went bust tomorrow, what would the company be sold at? How much would it’s assets minus liabilities actually fetch?

Market Cap can be calculated by multiplying the number of shares by the market price per share. But, if the net asset value of the company is a fraction of market cap, then it could be a risky investment – particularly if things turn sour for the company.

By making sure that the net value of the company is close to the market cap value, you’re getting more value and reducing your risk with your investment.

2. The Management Is Key – We know that management is a crucial element of success within any company. However, it could be argued this is even more so for companies like miners, where industry specific knowhow is key.

If the management team within your potential gold mining investment is a proven winner – and they have created success stories with other miners, there is an element of security in that. If however your management team is unproven, or worse have failed in other companies then that is something to be wary of. Do research on the people at the very top – it can be a sign of the direction your mining stock could go.

3. Look For Cash Reserves – Mining in any industry is a cash intensive operation. Exploration, obtaining permits and the physical extraction process swallow huge sums of cash. Is the miner well placed for cash or will it have to run to the bank or other shareholders to raise money for future projects. If it’s the latter, there could be negative pressure on the stock price.

4. Analyze Annual Reports & Broker Research – Arguably, you should do this for any stock you potentially buy, but within the context of mining stocks, the tone of the annual reports (is it very bullish with lots of ambition and clearly defined strategy?) as well as what brokers believe the stock will achieve. Brokers are paid to be able to estimate future earnings and in turn they are best likely to be able to judge what levels of metal (etc) the company may be able to mine.

5. Low PE Ratio – Companies with Low PE ratios typically have lower to fall in case anything goes wrong (and with Mining stocks, they often do) – sound fundamentals should also be sought, including low debt, and good cashflow.

6. Exploration In Low Risk Areas – Many mining companies have lost value in their stock price because they try to extract their commodity from a politically unstable location. Such locations can be difficult to obtain permits from, and the fragile nature of their politics means the company can be subject to sudden changes that can lead to it abandoning projects at huge losses.

7. Good Prospects In The Pipeline – The company should have some exciting projects in the pipeline.

If you stick with these basic rules, then you will improve your chances of adding only the best gold mining stock prospects to your portfolio.


The Economic Argument For Long Term Gold Inflation

Right now the U.S. government is desperately trying to fight deflation (lower prices) and it has categorically stated that it will look to prevent this at any cost. The long and short of this is that more “paper money” becomes available while the amount of gold stays constant. Can you think what this means?

The same amount of gold costs more paper dollars (or “money”) to buy.

So as the amount of money being printed goes up – so gold prices strengthen. It’s expected that a significant amount of money will be printed over the next years, and you don’t need me to tell you what that means for where gold prices are heading.

Sadly, there are even more reasons why the current gold run could well be the start of a huge bull run. Traditionally, gold has always performed strongly during times of uncertainty. I say “sadly” because as the long running war on terrorism sees no end in sight the amount of paper money needed to pay for conflicts etc rises. This huge increase in paper money will only continue to peg up the gold prices.


Buying Gold Coins As A Long Term Investment

Now you may ask why rare gold coins instead of say gold bars? After all, gold bars are cheaper to buy than gold coins! True, but the appreciation potential of gold coins in a bull market is far better than gold bars. It’s also easier to sell gold coins than bars, and to receive a higher price for them.

You’ve already seen the types of appreciation that our secret gold has brought over various stages in history. But before you dip your toes into the rare coin market you should be aware of the highly important considerations set out in this document. Here, you’ll discover the most important factors that you must be aware of when investing in gold coins. This simple yet powerful information could well decide how your gold portfolio performs – because not all gold coins are made equally…and their value and potential appreciation can vary

wildly based on many factors. After we discuss the major points of successfully investing in the gold coin market we’ll look at some of the most valuable rare coins that could grace your portfolio.

So why certain rare gold coins?

1. Because the pedigree gold coins we’re going to talk about are a form of pure gold. This sounds obvious, but these coins will rise as the base value of gold as a commodity rises. And as we have seen, the likelihood of this to happen in the short/medium term is very high.

2. These rare gold coins not only give you a superb vehicle for owning GOLD but they have a sub- market within gold. The collectors market is huge – and this means that as the gold prices rise, so does the rare coin market.

3. The specific gold coins we’ll disclose in this guide are the ones that should in our opinion perform the best within any market condition – when choosing gold coins you should ensure that they have a high popularity (if the coin has been in great demand in the past you can almost guarantee that it will continue to experience demand in the future). There should also be a large market that will potentially buy the gold coins – owning a coin that cannot be readily sold can have serious problems for the coin holder in getting a fair price when the time comes to take profits.


The Grading & Composition Of Gold Coins

This is important, because it will help you understand the true value of your gold coin investments.

Coin grading has become a requirement in the rare coins market simply because of it’s popularity with non-professionals. The rare coin market has exploded in recent times and with it came the need to verify (or grade) the quality of various coins.

Consequently, the process of official grading came about.

One of the most reputed grading services available is the PCGS (www.pcgs.com) or Professional Coin Grading Service.

Here are the main stages of the grading process:

1. The coin is checked for authenticity. It’s also checked to ensure it is unaltered.

2. If the coin is authentic and unaltered the grading experts will assign a “grade” to the coin. Several of the coins characteristics are taken into account when coming up with a grade including toning, marking, luster and general appearance.

3. The grading number is assigned (between 1 to 70). 70 is the highest (best) grade of coin available.


Some Rare Gold Coins That Can Make Good Investments

For gold coins to be valuable in the long run, they should be fairly popular, actively traded and have had a distinguished past (where they have been in demand). The gold composition of the coin will be important along with the relevant grading.

Here are some gold coins that the experts believe can be good gold investments:

Coin Name: $20 St Gaudens
Description: One of the worlds most popular & well regarded coins. Used as actual moneyin the United States until the infamous coin for cash exchange in 1933.  Most likely to hold it’s value during poormarkets and soar during bullish markets. Many of these coins are graded Mint State 65 or better.
Coin Name: British Gold Sovereigns
Description: In the world of rare coins, British Gold Sovereign make up some of the worlds “most wanted” list.
Types: Queens -  (minted 1893 to 1901)
Kings – Edward VII (minted 1902 to 1910)
Kings – Canada Mint (minted 1911 to 1919)
Kings – India Mint (minted 1918)
Kings – George V (minted 1911 to 1935)
Coin Name: Texas Commemorative Half Dollar
Description: The popularity & scarcity of this coin makes it a fine addition to any investment portfolio. The coins were minted between 1934 and 1938 and it’s estimated that 30% of the issued coins no longer exist.
Coin Name: German Gold 20 Marks
Kaiser Wilhelm II Military Bust (minted 1913-1915)
Kaiser Wilhelm II (minted 1888 to 1912)
Description: Due to the scarcity of these coins they tend to fetch very good prices.
Coin Name: French 20 Gold Francs
Types :
Emperor Napoleon I (minted 1809 to 1815)
Lucky Angels (minted 1871 to 1898)
Roosters (minted 1899 to 1914)

These are some of the best french coins to hold gold deposits in. The Angel is far more scarce than the Rooster but tend to be available at the same price so holding this particular french coin can be a good addition to any gold portfolio.
Coin Name: South African Krugerrands
Description: These South African coins have had a turbulent history and were at one time banned from the U.S. – now, they are one of the most popular gold coins traded and over 42 million of these coins have been minted, mostly between 1967 to the mid 1980’s to cope with increasing demand for gold. This is one of the best ways to own gold in coin form because they are quite readily available but are relatively inexpensive.
Coin Name: Indian Head Eagle
Description: Minted in the early 19th century, the Indian Head Eagle coin is regarded as one of the U.S. most elegant coins. Given their relative scarcity and collectibility factor these coins tend to be rather pricey but the mint stateof these coins are typically high and thus will grow very well in value.
Coin Type: Canadian Maple Leaf
Description: This is one of the purest forms of gold coins with each coin providing an almost 100% gold composition. As such, the Canadian Maple Leaf coin is one of the best ways of investing in gold and gold coins. It’s also possible to purchase the maple leaf for practically the base gold price (the premium on these coins is far less than with other coins).
Coin Type: Swiss Gold 20 Francs
Description: The “Helvetias” were minted between 1897 to 1949 and are considered by many experts to be among the best pedigree coins available within Europe.
Coin Type: Capped Bust Eagle
Description: It’s estimated that there are no more than 65,000 of these coins in circulation, and aside from their gold content they are a favourite with many coin collectors.
Coin Type: US Gold Coins Dating Pre 1834
Description: In 1834 a lot of then existing gold coins were melted down. This makes any well preserved gold coins from prior to this date extremely valuable.
Coin Type: Australian Kangaroo
Description: The Australian Kangaroo was initially minted in 1989 and is still being produced to date. It’s known for its high gold content & is considered a leading gold coin to buy/sell.
Coin Type: Chinese Panda
Description: First minted in 1982 and still being produced, the Panda is a 24 karat gold coin well regarded by coin collectors.


Where To Buy Gold Coins For Investment

Investing in gold coins can be an expensive affair. Depending on the type and condition of the coin you may be required to invest several hundred to several thousand dollars so it’s worth knowing the best places to buy gold coins (and how to avoid being ripped off).

Coin Dealers
One obvious and reliable way of buying pedigree coins for investment is through a reliable coin dealer. Note that it can be risky using the first dealer you come over in Google!

The question is how do you know that a coin dealer is reputable? Here are some traits to look out for before doing business with any coin dealer:

1. How Long Has The Dealer Been Around For – Here, you’re looking for some evidence that the dealer is experienced and has been in business for a relatively long amount of time. An experienced dealer is more likely to be “on the ball” and length of time indicates that they wont suddenly close shop and scarper (in case you’re sold a donkey).

2. Is The Coin Dealer Recommended By His Peers Or Fellow Coin Investors? It’s always reassuring to do business with a dealer that is well respected and comes recommended by fellow dealers and investors. It significantly reduces your chances of going through an unethical or dishonest coin dealer.

The PCGS website has a listing of authorized dealers. Visit the below site and choose the Authorized Dealers link.


Or, you can choose to use the PNG dealer directory:


Rare Coin Trade Shows:

You can also discover more information about gold coins by visiting special seminars and exhibitions that tend to specialize in gold and rare coins. There is often a tremendous amount of information available in these shows and they can be a great way of learning more about rare gold coins and finding reliable contacts and dealers.

In the past, the coin market has had a dirty reputation because of sleazy agents and salesmen mis- selling coins for 50% to 500% over their market value. It’s important you do not get taken for a ride by these shady dealers.

Other Sources
You can get details of gold coin dealers in specialist magazines from your local newspaper store.


Buying Gold Coins On Ebay

Yet another interesting source to obtain gold coins is via eBay. This is an online auction site (the biggest in the world by far) and has millions of registered users selling practically everything you can imagine.

EBay has a dedicated coin category and you have an excellent opportunity to invest in gold from this source. For example, at the time of writing there were a number of gold coins listed for sale on eBay:

- 24 British Gold Sovereign
- 208 St Gaudens
- 7 Swiss Gold
- 5 Texas Commemorative Half Dollar
- 22 South African Krugerrands

And literally hundreds more gold coins.

Beware Of “Dodgy Dealers” Lurking On eBay – On the whole, eBay is a great place to buy and sell just about anything (including coins). However, before investing in any gold coins on eBay you must perform the simple following checks:

First, See what the “sellers feedback” is like – eBay allows all buyers to rate their buying experience. They are able to rate all sellers they buy from and insert comments for all the eBay community to see. This means that “cheats” and rip off merchants are soon exposed for what they are. Before buying any gold coins from a seller you should always check their feedback. You can do this by going into the details of the coin.

Second – drop the seller an email and ask him about the coin and it’s characteristics. A lot of information will have been given in the listing description but you may wish to ask additional questions such as the grade given or anything else that the listing may have left out. Not all sellers on eBay will be experts (in fact some may have no knowledge on gold coins at all) – you can certainly use this to your advantage.

Look Out For New Gold Coins – The United States Mint commented in 2005 that the 24-karat gold coin market is worth $2.4 billion. They also released the countrys first 99.99% pure 24 karat gold coin – never to be circulated and available only to gold investors and coin collectors. The coin was produced because the mint understands both the general direction of gold prices as well as the underlying demand for “secret gold” – quality gold coins.

Often, you can pick up a new gold coin issue such as this – new coins are produced from time to time and if the gold content is good and other “valuation” aspects discussed in this book are right then it’s a great chance to capitalize on the strengthening gold price.

You can also find rare old gold coins from visiting various antique dealers and general antique shops. In some exceptional cases you can also find old gold coins in places such as flea markets and general antique exhibitions. Many people just aren’t tuned into how valuable gold coins are about to become – and many may not even know that the gold coin they’ll let go for $50 is a genuine St Gauden in mint condition.


Coins That Are Not Valuabe

The Hype Surrounding “Sunken Treasure” Gold Coins – if you’ve been a gold coin collector/investor for some time then you’ll no doubt be aware of golden coins available for sale that have been rescued from sunk ships. Beware that these coins are sometimes marketed cleverly and sold at hefty premiums over and above their actual value. In some cases this can be a good chance to own valuable gold coins – but only if the analysis stacks up. Ultimately, you will want to analyze the coin thoroughly. What is it’s gold content? What will it’s value be on the open market? Has the coin suffered any damage because it has been submerged underwater for so long (this is quite likely so try and avoid buying sunken treasure coins that you have not seen firsthand).

Keep in mind also that as an investor, any coins you own must be of the highest graded quality to appreciate in value. Typically, you would want a grading of at least MS-63 and nothing below that.

Always remember, the better coins will perform better and sell whatever the market condition.

Bullion Coins Are Not Rare – Beware Of Dealers Who Will Try And Make You Think They Are! Bullion coins are those that have a value based on their gold content rather than their rarity. These type of coins will increase or decrease in value based more on the underlying price of gold than anything else. Coins that fall under this category include the South African Krugerrand and Canadian Maple Leaf. Some shady dealers may try and overstate the actual value of these coins by making them out to be rarer than they actually out. Be on the lookout for this sneaky tactic when buying and always obtain quotes from multiple dealers before purchasing.


Buying Gold In China & Alternative Gold Buying Methods

Where The Big Gold Deposits Are – Look To Chinese Companies

Traditionally, the big gold producing countries have been Australia, South Africa and the United States but China is strongly coming up as a gold mining nation. They are expected to get into the top three gold producing nations within a decade and the exciting thing is that gold stocks in China are available at a reasonable discount compared to their international peers. While it’s out of this books scope to provide specific stock tips, you may well be able to discover highly valuable gold plays in China (or invest in funds with exposure to Chinese gold).

Buying Gold Bars
Buying solid gold bars might be something you think only happens in certain types of movies, but in fact some investors do buy up gold bars. Gold bars are available in different sizes and can even have different finishes. Obviously, the bigger the bar the more you pay overall…but the unit costs can actually be cheaper when you buy bigger bars.

You can obtain gold bars from special dealers who will provide a certificate of authenticity. The gold bar should be 99.99% pure and come sealed in plastic. As with coins, you can also obtain gold bars from eBay but this can be somewhat trickier than buying coins here. Gold bars are fairly simple to both buy and sell and so can form a good vehicle to own gold.

Gold Futures & Options – Experienced traders & investors may wish to consider using futures & options as a way of making swift gains from the price of gold. This type of trading can be risky unless you know what you are doing.

Gold Certificates
It’s possible to purchase a gold certificate that marks you as the owner of bullion stock that is held by an institution. It’s a little known way of holding and benefiting from a bullish gold market without the hassle of stock/fund picking. The expenses to be considered are insurance & storage.

While it may not be your typical financial investment, gold jewelry is still a form of gold (and in some countries is used as a means of saving & accumulating wealth).