Those of you who have long toiled in the dusty, grimy classrooms of Gumshoe University will probably recognize this one — it’s an ad that has been around for years, with adjustments and variations depending on the market’s pulse and on the price of gold.
The essential promise is that Steve Sjuggerud has found a “secret currency” that is gold, but outperforms gold. So what’s the promise this time?
Today, with gold having enjoyed a nice run up to $1,000 or so per ounce in the past year before falling back to below $800, he’s promising that he has found a way for you to still get in on the momentum — because he has an investment that goes up after the gold price rises.
Sounds pretty cool, no? Imagine if we could do that for other investments, just wait for them to go up and then say, “hey, I’ll take some of those shares after all … Fire up the time machine, please!”
It’s almost irresistible. So what is it?
Well, I feel almost obliged to share with you a little of the hard sell from the ad, since it’s not so fun if you don’t have your little greed synapses firing …
“FORGET collapsing stocks, bonds, real estate, and mutual funds. Now that gold prices are up, there’s an opportunity for you to safely triple your money or more, thanks to a glitch in the U.S. Treasury Department…”
Ooohhh, government glitches and secrets! The mainstay of the newsletter ad, good stuff.
“Everybody knows that gold is a safe investment in times of economic chaos–that’s why the U.S. mint recently ran out of gold bullion coins to sell to investors (source: The Los Angeles Times).
“But few Americans realize what happens after gold demand jumps and prices rise…
“In short: There’s a U.S. Treasury Dept-created “glitch” in the gold markets, which could give you gains of 665% or more after gold prices rise. You could see these gains no matter what happens to stocks or the overall economy… and with almost zero risk.
“I can practically guarantee you will not see this opportunity discussed in any newspaper or on any television program. And I’m sure you won’t hear about it from any broker or advisor.
“But right now, because gold demand has increased, and prices have risen, you can safely make a fortune… even if you’ve never bought a currency, stock, or gold investment before.
“In fact, you need only about $100 to get started. But you don’t need a brokerage account or even a bank account.”
Excellent! So what is this “glitch?”
It has already made lots of folks fabulously wealthy, of course — the letter cites a couple examples:
“The New York Times recently reported that one of the current owners of the Boston Red Sox baseball team used this exact currency vehicle to amass a fortune, worth more than $15 million.
“The paper also reported that a fellow named Stephen Fenton recently made $6.6 million thanks to a similar gold currency trade.”
The glitch was the period from FDR to Nixon, between when Roosevelt signed the order forbidding private ownership of gold bullion, and when Nixon rescinded that law. So yes, what we’re talking about here with this glitch are gold coins.
And while they may not be on the front pages of many newspapers now, you probably remember seeing the headlines back in the first part of this year, when Bear Stears was collapsing and the price of gold shot over $1,000 for the first time (in nominal dollars, not inflation adjusted). There were stories everywhere about people enthusiastically buying up gold coins, or about other folks melting down their jewelry.
That’s also when I last wrote about a similar ad from Sjuggerud that introduced me to this “secret currency” — you can read that original article here if you like.
I don’t know if there’s a lot of enthusiasm for this topic in Gumshoe land — I doubt that there are a huge number of numismatists in the vast and unusually handsome Gumshoe readership, but I’ll try to explain the situation as best I can.
So yes, Sjuggerud is an enthusiastic gold coin investor — in fact, he’s pretty enthusiastic about lots of fairly unusual investments, which makes him fun to follow. I’ve read his articles extolling the virtues of collectible musical instruments and Macau condominiums in the past, always worth a thought or two.
The biggest distinction in gold coins is between bullion coins and rare or collectible coins — with the bullion coins trading at a somewhat steady, usually reasonably small premium to the current price of gold, and the collectible and rare coins trading at usually a far more significant premium. As I read the ad, essentially Sjuggerud’s argument is that in the runup of gold prices over the last few years, collectors were not as quick to accept the sea change in gold pricing and the premiums for collectible coins shrunk, but now that gold seems to be remaining at historically high prices, those premiums should grow. That’s how you benefit from buying gold after gold has had it’s run (or benefit even more if gold goes back up again, as some folks are always predicting).
Gold bullion coins are the contemporary coins struck by national mints, usually, and they typically include an ounce of gold. The most famous, and by far the most widely traded, are the American Eagle gold coins — these are an ounce of gold, alloyed with a bit of silver to make them more durable, and you can buy them from the U.S. mint or on the secondary market at what is usually a relatively small premium to their melt value. As of this moment the new coins from the mint are selling at a hefty premium to the melt price of gold, last I checked the 2008 American Eagle is going for $1120, while gold is down around $780 an ounce. I’m not sure why, though it might have to do with the fact that they suspended sales of some coins earlier this year due to high demand. You can buy uncirculated older Eagles for more like $830, and other gold bullion coins, like the Canadian Maple Leaf or South African Krugerrand, typically are slightly less than that. With the price of gold so volatile, and gold trading on the world’s fear and emotion to a large degree, there’s no telling where it will go next, but in general you can usually get bullion coins at a premium of well under 10% of the melt price, and sometimes the less popular ones trade for just a few dollars over melt.
When Sjuggerud is talking about being able to invest in these for “as little as $100” he must be talking about the 1/10 ounce coins, which are also offered by most mints and have been for a number of years. The smaller the coin, the larger the premium, so you would pay a bit more for the convenience of a smaller denomination — while the American Eagle with one ounce of gold is sold new for $1120, the 1/10 ounce coin goes for $125. The same disparity exists for older coins on the secondary market, though the prices are lower for both in many cases.
I have no idea which if any of the current bullion coins might someday attain a premium valuation or become rare or collectible — some of them already have, during years when designs were changed or there weren’t as many made, or at special anniversaries, and a coin expert could probably tell you which of the older coins of the last 20 years or so might be more promising in that regard. But the coins Sjuggerud has typically been most excited about are the older and rare collectibles — specifically, the most popular and one of the most beautiful gold coins, the ones whose run ended with FDR’s order in the early 1930s: The St. Gaudens Double Eagle.
That’s actually where the Stephen Fenton story comes in from the NY Times, too — he’s a British coin dealer who came into possession of one of the very few 1933 St. Gaudens Double Eagle coins that were struck after Roosevelt halted the program — none of these coins were distributed legally, but a number of them got out of the mint anyway. One of those came into Fenton’s possession, and he got arrested for owning the illegal coin — they later made some sort of deal that involved auctioning off the coin for an ungodly amount of money, and he got to share in the proceeds.
The St. Gaudens was around for 25 years or so — starting in 1907 and running until 1932 (legally). It was designed by Augustus St. Gaudens, a famous sculptor (I believe one of his designs is also on one side of the current American Eagle coin), at the behest of the previous Roosevelt (Teddy), and it contains almost an ounce of gold. If you’re interested in gold coins and think you might like to get into these kinds of higher value collectibles, it would probably be worth your while to do some research — but so far this year, at least, Sjuggerud has definitely been right on this.
When I first wrote about these coins back in March, for that previous Sjuggerud ad (if I haven’t misspelled his name at least once today, I’ll be amazed), the lower-quality end of the “uncirculated” certified coins (Mint State 63, or MS-63) were selling for around $1150, with gold at about $950, and Sjuggerud rightly called attention to the fact that this premium has rarely been so small.
Today, though the spot price of gold is much lower, those same coins are offered for a minimum of about $1,400 by most online dealers that I’ve checked lately (some of the years and variations are much, much more expensive). The ones that are of higher quality, MS-64 or 65, are significantly rarer and more expensive, too, and there are all kinds of things to think about if you buy these — including the group that did the rating, and the trustworthiness of the dealer, etc. etc. Whenever gold prices go up the scam artists leap out of the woodwork, so if you end up deciding to investigate a coin purchase I’d urge you to go slow and be careful.
These particular coins are probably as close to a liquid commodity as you get in “rare” gold coins, since they were widely used in the early part of this century and there are probably still half a million or so of them in collectors’ hands. There are enough of them to create a good market, they’re beautiful, and they exist in several different variations, some of which are very rare, so there are a lot of fans and buyers for these coins.
If you’d like to start your research, Sjuggerud has been behind this idea for a long time and there are many older articles by him and his affiliates available — a couple examples are here and here . There’s also an interesting article by a coin dealer (who’d also like to sell you something, naturally) here that explains the historical vacillations in coin premiums and gives the basics of the grading systems — and some warning about fraudulent coin grades.
So … are you excited about squirreling a few gold coins away in the freezer? Or has the recent drop in gold prices scared you off as the dollar is regaining some ground? Is it all about the Indian jewelry market, or is this the “end of the world” trade? Do you like modern bullion coins, pre-1933 St. Gaudens or other gold coins, or something else?
I’ve heard it said many times that one should always have enough gold to bribe the border guards (or, for the less colorful, that having 5% or so of your portfolio in gold hedges against inflation or currency fears), and I do personally own a few gold coins, but I’m far from an expert on anything numismatic, or on the yellow stuff in general. Feel free to share your opinions below, but take mine with a grain of salt.
Personal Capital is an advertiser with Stock Gumshoe, but Travis also uses it every day for his personal accounts and finds it invaluable. Here's what he said: "They offer a great (and genuinely FREE) 'second opinion' for your financial plan, but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.