Gold As an Investment?!
Wednesday, 13 January 1999
N E W Y O R K (AP)
GOLD IS probably the last choice that performance-minded
investors would consider these days. It keeps going nowhere, as
they say, while some Internet stocks zoom 50 times in a couple of
years.
In fact, the idea of buying gold is scorned by new-age investors as
a cultural lag from a more primitive time, a relic in a world that
has outgrown its fear of the unknown.
But quietly, and with little of the commotion and promotion that
accompanies high-tech stocks, investors with more prudent
aspirations have been loading up on gold bullion coins, and
making money doing it.
According to the 1998 Collectors Universe, which monitors prices,
a $1,000 investment in a basket of generic or common gold coins
in 1970 would now have an average market value of close to
$22,500.
While that doesn't approach the two-year gains of Internet
stocks such as Amazon.com - which soared from $2.62 1/2 a
share in 1997 to $185 recently - it represents a 15 percent annual
return versus a 60-year average 11 percent for stocks in general.
More recent buyers of selected gold items have been doing even
better, as quiet, insistent demand pushes up prices. Most of that
demand is from small, savvy investors who doubt the staying
power of the high-flyers.
Obscuring the phenomenon is that widely published prices for
what might be called industrial gold show only limited movement.
The action is mainly in rare, mint state, collectible legal tender
coins.
Rarity and mint state, or quality, have enormous impact, enough
to raise the market value of that 1970 investment to nearly
$87,000. And still another vital factor is exemption from possible
confiscation.
Most U.S. legal tender gold coins minted after 1986 may be
seized by the government in a national emergency. However,
post-1986 gold and silver proof (top quality), coins cannot be
confiscated, and thus are especially attractive for Individual
Retirement Accounts.
While gold is the star, silver too has taken on a shine. A bag of
pre-1964 junk silver coins with a face value of $1,000 could be
purchased for $3,600 six months ago. It might cost $5,100 today.
There are literally hundreds of numismatic dealers in every state
of the country, some very large, such as Blanchard & Co., New
Orleans; Investment Rarities, Minneapolis; and Lear Financial,
Santa Monica, Calif.
The business can be an intricate one, however, and investors
shouldn't jump into the market as uninformed stock market
investors have been doing. Almost any library has a good book or
two on the subject.
The most recent of them, "The Bulls, the Bear and the Bust," by
Kevin DeMerit, Lear Financial's president, provides details on
what to buy, how to store it, how to fit it into an IRA, and how
to sell. He offers it free.
The beauty of gold, silver and other precious metals, he and
others in the trade sometimes point out, is that the supply is
limited by Mother Nature and may become more so when
stressed economies quit selling.
You really can't say that about stocks. Why, you can't even say
that about dollar bills so long as the printing presses remain oiled.
---
"The Bulls, the Bear and the Bust," the book referred to in this
article, is available free from Lear Financial, Inc., 425 Santa
Monica Blvd., Suite 440, Santa Monica, Calif. 90401. Phone:
(800) 965-0580.
My comments
Collectors already know that 1999-2000 gold coins will be collectors items forever. That is why the mints can't keep up and demand keeps rising. The demand for gold coins will help the POG over the next two years-- and those coins will have a higher value for the date stamp than for the gold as soon as the mint changes the date. |
