30 Times Better than Gold?

by Travis Johnson, Stock Gumshoe | April 23, 2009 9:20 am

Eric Roseman[1] is at it again, it appears — a few months ago I wrote about an ad of his that was based on some very sketchy assumptions, an ad that gold[2]-at-a-600ounce-discount.html">promised you could buy gold for a $600/ounce discount. There was a little truth to it, of course, but not $600 worth … and today, we’re seeing heavy circulation of another Roseman ad for his Commodity Trend Alert[3] that also promises a big opportunity to buy the best kind of gold available.

You’ll have to subscribe to his newsletter first, of course … at a discount, naturally (he’s asking $1,281 for it now … I wrote that he wanted $1,100 back in February, the current price on their website appears to be $1,161, so take your pick). The newsletter is focused on commodity picks and trends in general, not just on gold, but I don’t know what his track record has been, and we don’t have any reviews in yet for that service.

So … what is it that’s “30 Times More Profitable Than Ordinary Gold?”

He starts with the following:

“When I first heard about this, I thought, “Must be a typo.” How could one type of gold jump 24%…60%…even 82%, when common “bullion” rises 2-3%?

“The good news is, it’s not a typo… no leverage[4] is involved… and I can prove it! In fact, hundreds of investors are exploiting this trend as we speak…”

He talks about the genuine scarcity of gold, and about the importance of holding it in person instead of in certificate form — though his example of “paper gold” is the Gold ETF GLD, not exactly the same as a mint certificate that represents personal holdings in a vault somewhere.

“My point is, in reality, gold is scarcer than diamonds[5]. And because of this, and all “gold bugs” stocking up like a squirrel heading for a long winter – there is one form of the precious metal that trumps all others – by a long shot.

“… And I’m not talking about bullion bars, “ETFs” or mining company stocks… there’s plenty of them to go around.

“Rather, I’m talking about a kind of gold that’s issued by the U.S. Treasury. Last year they sold $948.8 million worth…and every last ounce was snapped up. Gonzo. This year’s shaping up to be even worse.

“Why? Because thanks to a colossal government screw-up, the Treasury is completely sold out. Thousands of mom ‘n pop investors have been turned away. Some folks even put their names on a waiting list to buy gold at $1,200 an ounce.”

You may have heard about this problem from the treasury recently — the demand was so high for gold coins[6] that they got totally swamped, and were clearly unprepared for the massive increase in orders. They’re not currently selling the 2009 American Eagle bullion coins because they don’t have any, but they are dedicating all the 22K gold blanks they can get to minting more of them, and they won’t be making any other gold coins[7] or fractional (less than an ounce) Eagles in the near future, either.

And the bit about putting their names on a waiting list? That might refer to the Ultra High Relief St. Gaudens coin that the Mint offered earlier this year — the price for that one was often up around $1,300 when gold was close to $1,000, but delivery was significantly delayed so it was kind of like being on a “waiting list.” Who knows, there may have been people who were so panicked about the economic meltdown that they bid up more than that to get on waiting lists for regular American Eagle coins, too, I don’t know.

It does seem, though, like the mania might have settled a little bit, at least temporarily, with the gold price retreating from that $1,000 level. People do seem willing to bid up to $1,000 or so for 2009 American Eagle coins on eBay at the moment, which is still a stiff premium over the melt value[8] of better than 10%, but not quite as crazy as it got for a while back in December and January — and those assessments that the price of these gold coins went up by 20, 30, or 80% when gold was virtually unchanged are, I’m sure, verifiable … but they’re also implying that you can currently profit from a mania that is unpredictable.

We still hear that there are lots of complaints from desperate people who urgently need to buy 2009 American Eagles …

“Mark Wilson says, ‘[they] ought to initiate an internal investigation of Mint staff and employees. Something is very wrong and deteriorating at the Mint.’

“Diane Beasley complains, ‘It is unforgivable that a government-run enterprise with unlimited product demand and unlimited profit potential is so blatantly incompetent.’

“And Tom Pelicano recently fumed, ‘My opinion – the U.S. government has no gold left to mint.’
You can hear the frustration in their voices. Clearly it hurts to be shut out of this booming market.”

(as far as I can tell, by the way, those are all anonymous comments posted on one of the many mint-follower collector blogs — they’re almost verbatim of the comments on MintNewsBlog here[9], here[10] and here[11]. I guess blogs really are the copywriters best friend — what better way to get defensible quotes on almost anything?)

So what is Roseman offering, other than the subscription to his newsletter? He tells us that he has scrounged up a supply of these fabulous, hard to get coins — and that you’ll get the opportunity to buy some of them if you subscribe.

“Because this month, a small number of these little wealth-builders have become available…except… instead of 342,000, I’ve only been able to secure an allotment of 200 for readers of this FREE report.”

The 342,000 is the mintage of the gold American Eagle for the first quarter this year, a number that climbed in January, February and March — and I t hink that includes both the bullion coins and the collectible uncicrculated and proof coins.

And despite the fact that there is a shortage of currently available coins and the direct sales by the Mint are suspended, the Mint is still producing bullion coins and selling them to dealers, at least as far as I can tell, just not in the volume that’s being demanded … and not the snazzier Proof and Uncirculated coins that they previously sold direct to collectors (those are marked with the W — for Washington, I guess? And are more desirable by collectors, but have no more gold value than any other one ounce coin). [Correction, as you’ll see from the comments below, I didn’t think that through clearly — the W is for West Point]

It probably is hard to find 2009-W American Eagles, and if Roseman has 200 of those to sell at a reasonable price perhaps that will be worth it for some folks, though he doesn’t go so far as to make that specific promise.

There seem to be regular bullion American Eagle 2009 coins in “uncirculated” condition available from some of the dealers I’ve checked online (APMEX and Gainesville Coins have them for about $60 an ounce over spot prices, Kitco and bulliondirect don’t currently have them). So if that’s all he’s selling, I don’t know if there’s great value or not in the cache of 200 coins he claims to have available. Maybe he’s got some kind of great deal, but there are bullion American Eagle coins available both from dealers and on eBay (folks seem to be willing to spend a bit more on eBay, as usual, the pricing gets up to around $1,000 for 2009 coins that have $890 of gold in them at current prices — I expect there’s probably a fair amount of arbitrage going on with folks buying from dealers and selling on eBay for a quick profit).

Is this all Roseman is telling us he can provide? A cache of American Eagle bullion coins that you can possibly buy? If so, that’s a little silly — demand is certainly high, but if you’re someone who simply wants to buy bullion coins (as opposed to specific collectible coins) and hold gold coins personally because of the commodity value of that gold in the future, there are a multitude of options[12]. I am no coin expert, but with four or five countries producing widely-recognized and trusted one-ounce gold coins I see very little reason to pay huge premiums for the American Eagle coin.

You can easily buy Canadian Maple Leafs, which are purer gold than Eagles, Austrian Philharmonics, South African Krugerrands or any of a number of other coins at lower premiums to their gold value — and even if you want the American Eagle coins, if you’re happy with a good quality uncirculated coin from a random year and don’t need a 2009 or 2009-W coin, those are also available on eBay and from plenty of dealers at lower markups than the newest mintage.

Buying a coin for its collectible value gets into all kinds of “what if” situations, but if you’re really just wanting to hold some personal gold for safety and don’t want to put in the time to understand the collectibles[13] market and monitor the value of your coins, it seems like just buying an ounce of verified gold (meaning, minted by one of the major countries, and bought from a reliable dealer) is a much easier step.

Of course, Roseman may well have other things in mind — he inserted a couple hints about “other G-8 countries” in the letter, so he may well be implying, as he did in “>the last teaser of his we looked at for gold coins[14], that he can get you better returns by buying a non-American gold coin and pretending it’s worth as much as an American one in the current market. That doesn’t seem to be the case now, but you never know.

He also mentions that the American Eagle coins are safe buys despite the “confiscation myths” that have folks being worried about whether the government can seize their bullion coins … but he also used those “myths” to his own advantage a few months ago when teasing us about a collectible gold coin, the Vancouver Olympics commemorative edition of the gold Canadian Maple Leaf (you can buy those coins for about the same price as the regular Maple Leaf coin from folks like Kitco, by the way … and for a bit less than what most folks will charge for a 2009 American Eagle.) Or maybe he’s teasing that he’s got a line on some of those Ultra High Relief St. Gaudens reissues that were in hot demand earlier this year (they’re being sold directly by the mint still, unlike the American Eagle). There aren’t really enough clues for me to share with you exactly what coin it might be, though the implication is that he can get you a line on some “rare” Eagles (though in hot demand, they’re being minted at a much higher rate than at any time in recent history — scarce in the current market, but far from rare).

So … I don’t know whether Eric Roseman’s Commodity Trend Alert is as valuable as he thinks it is, or if he is truly, as he claims, on his way to becoming the best commodities analyst in the world. I’ve never seen the letter or heard from his subscribers. I do know that getting the inside track on a cache of gold coins that are already freely bought and sold in the marketplace is probably not a good enough reason to buy a newsletter that focuses on a lot of other things, but folks have done crazier things in the pursuit of gold. And who knows, maybe the ad worked really well and those 200 coins have already been sold (I first saw the ad on Tuesday this week).

And the claim that gold coins will perform 30 times better than gold? As far as I can understand, that takes a bit of convoluted math or an assumption that the mania for American Eagle coins becomes a massive bubble, and it pretty much requires that the coins become valuable collectibles in their own right, far above and beyond their gold value. It’s certainly true that gold coin demand around the world is close to unpredented right now — the US Mint, for example, minted six times as many American Eagle bullion coins in 2008 as it did in 2007, and 2009 was at a faster pace still until their supply problems, and Canada[15], Australia[16], South Africa and other national mint producers of gold coins have reported similar demand spikes.

But if you want to speculate on collectibles, it can get complicated, and premiums to “melt value” can disappear as quickly as they appear. You can join the thousands of collectors who watch the mintage counts to try to identify coins that they think will become relatively scarce and keep your eyes peeled for those, read the blogs and collector magazines, or hang around coin shows and dealers long enough to learn a little bit about the business — personally, I don’t have the time or inclination for that, and I can’t imagine that following the relatively illiquid collectibles market is going to be a major focus of Roseman’s newsletter in the years ahead (I could certainly be wrong on that).

The other newsletter guy who often touts and teases gold coins, and has been selling his subscribers on the collectibles “asset class” for a number of years is Steve Sjuggerud[17] in his True Wealth[18] letter (you can see that most recent tease of his here, for the Treasury’s “gold glitch[19]“, and a good number of reviews of his newsletter here[20]).

Have you ever subscribed to the Commodity Trend Alert newsletter[21]? Let us know what you thought by sharing your opinion today[22]. You can also see reviews of other commodity-focused newsletters here[23] (or add reviews of your own).

Full disclosure: I own some gold coins, including Maple Leafs and American Eagles, for their bullion value.

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