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”?[ad#Google Adsense 336×280-IA]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.