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Thursday, January 17, 2013
Germany wants its gold back...
The European nation wants to bring home 300 tons of gold currently held at the U.S. Federal Reserve and all 374 tons held at the Banque de France.
Why does Germany want all of its gold OUT of France? Legendary investor Bill Gross has a thought about that... On Twitter, he asked, could it be that "central banks don't trust each other"?
Not anymore. The Germans now want to be certain their gold is there – all of it.
"This is stunning news, and the scramble shall be on," trader Dennis Gartman wrote in his excellent Gartman Letter. "Suddenly there is concern... for if the Bundesbank is uncertain [that its gold is there], then should we not also be [concerned]?"
The best way to be certain your gold is there is to actually have it in your own possession. So is it time for you to "bring home" your gold holdings, too? And if so, what's the best way for you to hold your gold?
I ran into Dana Samuelson – one of my (very few) recommended coin dealers – last week in Orlando. He has some great answers to both of these questions...
Dana recommends you hold at least a portion of your gold actually in gold – physical gold – as opposed to in bits and bytes through a brokerage account.
The simplest way for most Americans to hold physical gold is by buying "bullion" coins – gold coins that sell for roughly the gold content in the coin. These are coins like U.S. Gold Eagles or South African Krugerrands. These are easy to store and easy to buy and sell.
The thing is, there is a better opportunity out there at this moment...
"Bullion" coins will always sell for their gold content – nothing more, nothing less. But right now, it's possible to get incredible upside potential on certain gold coins, with just a tiny bit more downside risk than bullion coins.
You see, the premium over melt value on rare gold coins is hovering near record lows.
For example, the famous pre-1933 Saint-Gaudens coin (in MS64 condition) bottomed out in early 2008 at a premium of 31% over its melt value (according to Dana's chart). After the premium bottomed, coin prices soared. The Saint-Gaudens soared by more than $1,000 a coin in just over a year.
But today – as I write – this coin is once again at a 31% premium to its melt value.
Dana pointed out that over the last 10 years, the average premium is about twice what it is right now. And that it's climbed as high as 118%.
The current risk-versus-reward setup is a setup I like to see... You have incredible upside potential here, as these rarer coins can (and typically do) skyrocket in value in gold bull markets. But your downside risk is limited by the amount of gold in the coin.
Dana's recommended pre-1933 MS64 Saint-Gaudens coins are currently selling near a record-low premium to melt value, so you have two ways to make money – gold can go up in price or the premium over melt value can expand.
Germany is bringing its gold holdings back closer to home. You should, too... This is one of the best ways to do it.
P.S. You can read more about these coins on Dana's website. (Please note: I don't get any compensation for recommending Dana or any other coin dealer.)
If you're interested in rare coins, you won't want to miss the interview our sister site, The Daily Crux, conducted with rare-coin and collectibles expert Van Simmons. In this exclusive interview, Van shares the benefits of adding these assets to your portfolio... the key to successfully investing in them... and how to find a reputable dealer. Read it for free here: The World's Greatest Investment Ideas: How to buy rare coins, art, and collectibles.
AIRLINE STOCKS ARE ON A TEAR
The airline move we noted in December has turned into one heck of a rally...
About a month ago, we highlighted the positive price action in airline stocks. As measured by the airline ETF (FAA), the sector had just reached a new 52-week high.
Since most flights are for business trips and vacations, we said this action was "good for America." It was also confirmation the bullish call we made on the sector back in September 2011 was the right call.
Since last month's update, airline stocks have continued to rally. As you can see from the chart below, shares of the airline ETF have "ripped" from the low $30 area to the $38.50 area in just a few months.
This rally has made airline stocks far too "overstretched" to buy right now. But from a "big picture" economic point of view, we have to note the improving profits and surging share prices are evidence the U.S. economy is doing much better than the pessimists would have you think.
– Brian Hunt
In The Daily Crux