How to buy gold now with a proven track record

Posted: Mar 13, 2009 12:00 AM
How to buy gold now with a proven track record

In June 2003, I thought gold coins were the absolute best way to buy gold. But I didn't want to buy bullion coins like Krugerrands. I wanted to buy something with a little rarity. That way, you have two ways to make money: if gold goes up and if the "premium" over melt value goes up.

Honestly, I was a little embarrassed to bring up the idea in print. Back then, gold was thought of as loony, not to mention gold coins. My readers probably thought I lost my mind. Thankfully, both the price of gold and the rarity premium rose.

My favorite coins back then were 100-year-old Saint Gaudens coins. They contain roughly an ounce of gold. You can buy them graded, authenticated, and encapsulated in plastic. At the time, you could buy coins graded "MS63" – that's rare but not ultra-rare – for $490 per coin. Today, they're selling for $1,765. That's a 260% gain and counting.

Here in 2009, gold is catching on. What's the lowest-risk, highest-reward way to play gold now?

This is exactly the moment that you can make a fortune by buying coins even rarer than the Saint Gaudens I liked back in 2003... that means coins grade MS64, MS65, or better. These ultra-rare coins can go up fivefold, sevenfold, even 12-fold in a gold bull market.

Since bottoming in 2001, these rare coins are only up about 100%, according to PCGS (the Professional Coin Grading Service). In other words, ultra-rare gold coins have risen less than the price of gold. So far.

But I expect that will change very soon. Prices can get very crazy during bull markets.

I recommend you start looking into rarer gold coins – ones costing at least twice the price of gold – if you want to have the potential to make huge returns with limited downside risk. As you can see from the chart, your upside potential is ridiculously high. But even if the price of gold falls, people won't sell 'em, so your downside is low.

Remember, gold has increased in value faster than these coins. So their "premium" to the price of gold has actually shrunk. Now, higher-end gold coins are at their lowest premium to their meltdown values in the recorded history of the grading services (which go back to 1986).

If you're looking to own gold, you have a lot of choices... gold bullion, gold ETFs, gold stocks...

But when I size up the upside potential versus the downside risk, I want to own the ultra-rare gold coins.

Good investing,

P.S. I've prepared a report on how to go about investing in gold for the biggest, safest gains. In it, I show you what to expect, who to call, and when to buy to maximize your gains. As you'll see, we've got hundreds of percent upside from here. For more details, read on...