Most investors know by now that gold has been one of the most profitable investments since our economy first started to sour in 2001. By way of comparison:
-The Dow Jones Industrial Average has grown a total of 28 percent since 2001, with outstanding marks including a 25 percent gain in 2003 and a 33 percent loss in 2008.
-The Standard & Poor’s 500 Index has posted a slightly better 11-year return. The S&P Index has risen 76.7 percent between November 2001 and November 2012.
-Some wisely-managed mutual funds, including Boston-based CGM Focus Fund, have realized annualized returns as high as 18.8% since 2001, although the massive drop in oil prices in 2008 and 2009 have depleted such funds substantially.
-Real estate values in the United States have been utterly disappointing. A compilation of data from the Office of Federal Housing Oversight (OFHEO), the National Association of Realtors (NAR), the US Census Bureau and the Bureau of Economic Analysis, who all use slightly different algorithms to determine home value changes, show that US home prices have increased a total of 16.01 percent over the last 10 years. It is important to note that this statistic does not take into account the inflation of US currency, and if inflation was to be factored in then the average American’s home is worth 9-17 percent less than in 2001.
-Interest-bearing cash and money market accounts have been, by far, the worst “guaranteed gain” investments in 2012. The average US savings account with a balance of $100,000 earns only 1.75 percent annual interest ($1750 before taxes), and banks have made no mention of raising rates in 2013. Additionally, the fast-approaching insolvency of the FDIC as well as banks’ unwillingness to loan money to qualified borrowers has motivated a large number of people to convert bank account funds to hard assets like gold, silver and platinum.
The aforementioned investments’ profits all pale in comparison with the gold spot price’s movement during the last decade. The gold spot value has risen from $252 per ounce in 2001 to a November 2012 per-ounce value of $1,751. Those of you who have a calculator handy can see that this equals a 597 percent increase from the initial 2001 spot price. Granted, government intervention into the paper-backed markets has hindered gold’s upward movement at times. The Wall Street Journal recently reported that gold’s annual gain has slipped below zero percent for only 118 trading days in all of the last decade. The gold spot price recorded a negative 12-month “to date” return for the first time in three years in July, and a strong rebound soon followed. No investment ever moves straight up or down, but many precious metal market analysts have blamed these spot price anomalies on:
a. the current administration’s 2009 bail out of failing financial institutions (many of which still went bankrupt), and
b. the recently de-bunked optimism on the part of some American voters that more fiscally conservative politicians would be elected to office
Do all kinds of gold investments rise and fall at the same rate?
One common misconception among investors who are new to gold is that all gold products produce identical returns. This is a completely false statement and any broker who asks you to buy one type of “gold investment” simply based on spot price movement is not the broker for you.
10 Best Gold Investments in 2012
The current year has been kind to some forms of gold and other forms of gold investing have left many investors with shallow gains and, in some instances, substantial losses. The following gold-related products deserve recognition for outperforming the rest of the field this year, and it is of the utmost importance to remember that just because a certain investment looks more profitable at the moment, it may not be right for your personal investing strategy:
10. Online Gold Account Pools – Some Internet-based gold “pools” offer low exchange rates and the ability to cash funds directly into bank accounts or physical delivery gold. Critics have argued loudly that such accounts do not hold sufficient bullion to cover all the shares that are in “float”, and the lack of a regulated audit system has minimized gold pool accounts’ popularity except with younger investors, who analysts believe have a higher tolerance for risk.
9. Barrick Gold Fund (BGF) – BGF has proven to be a well-managed mining fund during since 1983. Tom Winmill of Midas’ Funds believes that BGF will continue to surprise people. BGF holds the world’s largest amount of gold reserves (about 140 million ounces) but gold bugs like to point out that about 20 percent of the company’s annual revenues come from copper and other metals besides gold.
8. American Buffalo Gold Coins – The 24-karat purity of the gold American Buffalo coins appeals to many collector and investors alike. The Buffalo, although a .999 pure gold coin, bears an extremely low premium over the gold spot price. Buffaloes are minted in four weights, and the US Mint even produces a Proof version of the gold Buffalo. However, the Proof-type Buffalo gold coin has not yet been approved for IRA purchases.
7. American Gold Eagle Coins – These US-minted, legal tender gold coins (also available in silver) are minted in an alloy of 91.6% gold, 3.0% silver and 5.3% copper. This translates into a 22-karat gold coin that is available in four weights, and US citizens can invest in these coins through personal checks, bank wires and even via retirement account transfers and roll-overs.
6. Canadian Maple Leaf Gold Coins – Gold Canadian Maple Leaf coinage is known for two things: purity and low premiums over spot. A survey of 50 gold coin dealers revealed that the average cost over spot for a one-ounce gold Maple Leaf coin is 5.5 percent. Some retailers promote the .99999 (5 nine) purity gold Maple Leaf as a collectible and charge a premiums of up to 8 percent over spot, and discount dealers like Certified Gold Exchange can supply institutional and household investors with .9999 and .99999 versions of the Royal Canadian Mint’s Maples at premiums as low as 4.5 percent per ounce over the current gold spot price, and Certified Gold Exchange also guarantees free delivery for orders of 10 ounces or more.
5. 2012 Australian Lunar Dragon Gold Coins – Australian Lunar Year gold coins are released every year with a design that harmonizes with the ever-changing animal of the Chinese zodiac. This year was an especially big year for the Dragon coins, being the first release year since 2000. Many gold coin analysts believe that Australian Lunar Year gold coins could go from being a high-premium bullion product to a collector coin in a few decades.
4. South African Krugerrand Gold Coins – Krugerrands were some of the first gold bullion coins that were mass-produced for public investment. Prior to the introduction of the Krugerrand many nations were reluctant to manufacture mass amounts of gold bullion coins. Bullion ownership was still outlawed in the United States and the rest of the world appeared weary to use physical gold as an investment vehicle.
3. Proof American Eagle Gold Coins – The “Proof” version of the American Eagle coin is available in gold, silver and platinum. Proof gold Eagles are extremely popular with security-minded investors who want to protect their retirement accounts. American Eagle Proof gold coins are the only collectible gold coins that investors can buy for IRA storage. A Presidential Order as well as historical precedent says that collectible coins are non-confiscatable by the US government. Such laws became necessary in 1933when our government decided that it was unwise for US citizens to hoard physical gold.
2. COMEX-approved Gold Bullion Bars – A COMEX-approved gold bullion bar usually carries a very low premium over the gold spot price. Popular and reputable brands include Credit-Suisse, Pam-Suisse and Johnson-Matthey. Although gold bullion spot prices have failed to cross the $1,800 threshold five times, history has shown that the more times a new record is almost reached but falls short, the more likely it is that the record eventually falls within that cycle. This has caused a large number of US financial analysts to call for one-ounce gold bullion bar prices of $2,000 and above, depending on the hallmark.
1. MS64 Saint Gaudens $20 Gold Coins – 2012 has been a very kind year for all Saint Gaudens coins. Rare pieces as well as the ever-popular 1908 “No Motto” common-date Saints have outperformed gold bullion coins on a regular basis, even during gold’s last bear cycle. For example, the gold bullion spot price has risen approximately 9 percent during the last year-to-date. PCGS and NGC-sanctioned versions of the MS64 Saint Gaudens $20 gold coin have risen over 19 percent since November of last year. This sort of return is not typical, but such one-ounce coins routinely match or beat the returns of one-ounce gold bullion coins.
The gold coins and bars described above have shown significant growth over the last 365 days in terms of monetary value and investor appeal. How will those investments fare in the upcoming trading year, and which other gold-based assets could lead the pack in 2013?
10 Best Gold Investments in 2013
10. Liberty Head $10, $5 and $2.50 Gold Coins – Fractional gold coins that have been certified by PCGS and NGC lay flat value-wise throughout most of the last two years, but the eventual threat of a US government retraction of the fiat currency system looks to alter this trend. Certified gold coin dealers have have been reporting increased sales of fractional Liberty Head gold coins and Indian gold coins. “Clients love the $20 coins for their ability to store lots of money discreetly but the mind set is that smaller coins could be useful for buying things on a day-to-day basis during a (currency) transition period.
9. Barrick Gold Fund (BGF) – BGF is the largest precious metals miner and an unbiased blog about the top gold investments has to mention Barrick and its’ new CEO, Jamie Sokalsky. BGF projects that the gold spot price could go far above $2,000 in 2013, and “even higher in the next year.”
Many gold mining stocks have shown an inability to keep pace with the gold spot price but Sokalsky’s philosophy involves careful distribution of capital and not precious metal price movement alone.
8. MS63 $20 Saint Gaudens Gold Coins – The MS63 Saints are the most-held investment-grade gold coin in terms of value per ounce. PCGS first started grading $20 St. Gaudens gold coins in 1986 and the coins that have been graded as Mint State 63 (on an investment-grade scale of 61-65) have been one of the ten best-performing gold coins 8 out of the last 11 years.
7. MS65 Lady Liberty $20 Gold Coins - Lady Liberty Double Eagle gold coins are perennial favorites of collectors and investors alike. Some people choose to buy circulated Double Eagles; other buyers like the “Very Fine” coins, which are more visually appealing but carry no official grade. The MS65-graded Liberty $20 gold coins are more popular with investors who want peace of mind concerning gold confiscation and wealth reimbursement, and these coins have shown a 4.5:1 ratio of movement parallel to the gold spot price over the last 25 years.
6. Canadian Maple Leaf Gold Coins – The Canadian Royal Mint is a regular on the Certified Gold Exchange Top 10 Gold Coin list. Canada offers extremely low premiums and the Mint is always releasing unique, attention-grabbing items. Canada is the only nation to produce a gold coins with proven .99999 purity, and in 2007 the Mint released their highly-anticipated 100 kilogram Maple Leaf gold coin. The coin was manufactured with a face value of $1 million, but the actual melt-value currently stands around $2 million. As of November 2012 dozens of orders have been submitted.
5. South African Krugerrand Gold Coins – The South African governments’ decision to keep Krugerrand prices low is what makes these beautifully designed coins so popular around the world. US citizens are some of the most avid buyers of Krugerrands, or “Krugs”, because many discount gold coin dealers sell these coins for as low as 3.5 percent per ounce over spot, depending on volume. These coins are recognized and accepted around for the world, for those of who who may have an escape plan from the United States in mind. However, a second US government-initiated gold bullion confiscation could mean seizure of Krugerrand coins under penalty of law.
4. American Buffalo Gold Coins – These coins have been the eighth most popular gold coin so far in 2012, so why does our Economic Research Team foresee a 2013 jump in gold Buffaloes’ popularity ? Gold coin specialist 22-year CGE employee Robert Vitale gives us two crucial reasons that the Buffaloes’ popularity could skyrocket next year:
“Let’s not beat around the bush. Our economy is showing no signs of improving in any permanent way, no matter what some pundits tell us. The low premium over spot for Buffalo bullion coins will attract a lot of new investors. Plus, people who do their research know that Congress is currently working on a deal that would let people put the collectible Buffalo Proof coins in their IRAs. If this law passes then the problem of the Proof gold Eagle shortage could be diminished.”
3. COMEX-approved Gold Bullion Bars – Many gold investors have started to liquidate their bullion holdings for security reasons, evident by the lackluster 1 percent gain in gold bullion products’ values for the current year to date. Products such as Proof gold coins, rare PCGS-certified gold coins and pre-1933 Double Eagles have far outperformed the bullion market over the last year, and recent election results (and their impending tax implications) could increase the level of gold bullion liquidations as well as bullion-to-rare coin trades.
2. MS64 Saint Gaudens $20 Gold Coins – The MS64-graded St. Gaudens could see a slight decrease in sales and profit next year due to the large amount of retirement account funds bring poured into retirement accounts. The gold Proof American Eagles carry roughly the same value as the MS64 Saints and their movement in comparison to the gold Proofs is roughly the same over the last decade. However, only the modern-day Proof Eagles have the “go ahead” from the IRS in terms of IRS storage.
1. Proof American Eagle Gold Coins – CGE analysts have called for a rise in the purchasing volume of gold, silver and platinum American Eagle Proof coins. Retirement accounts such as Roth, Traditional and SEPP IRA’s, 401Ks and 403Bs are under careful scrutiny at the moment for their ability to use funds for gold bullion purchases. The US Mint added the high-premium Proof Eagle coins to its repertoire as a way to attract investors who want to evade a government confiscation of gold bullion. Proof coins are minted in limited numbers, and they have not been minted at all during several of the last few years. The safety and history of profitability of Proof gold Eagles could make them the best gold investment in 2013.
How can anyone know what gold prices will do in 2013?
No one can predict with absolute certainty what the next fiscal year will bring. Tax cuts, volatile stock markets and a seemingly overbearing government leaves us with a grim financial forecast but household investors do not have to suffer the same pain of the general US economy. Gold investments may rise or fall in terms of their USD worth but their value will remain. A well-diversified investor knows that falling gold prices can be beneficial for other sections of their portfolio. If gold investments are an important part of your diversification strategy or if you have been considering adding hard assets to your savings, you could be on the path to self-sufficiency and wealth preservation. Call Certified Gold Exchange for a free copy of their self-produced Real Money Magazine, as well as a tutorial on buying, selling and trading gold coins. Call us today at 1-800-300-0715 to get involved in the gold coin market, request information or even ask a question about gold you already own.