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| Buying Swiss Gold at Less than Melt
The Investment U E-Letter: Issue # 430 Swiss Gold…Buying at Less than Melt On Tuesday in Zurich, I bought an 1897 Swiss franc gold coin, at a ridiculous price I bought it at one of the most famous Swiss banks in the world. This gold coin is in fantastic condition – “Brilliant Uncirculated” condition, as the experts call it. It is, of course, more than 100 years old. And unbelievably, I bought it at LESS than the value of the gold in the coin! Yes, I paid less than its “melt” value. In addition to being in the hard-to-find Mint State condition, this Swiss gold coin is actually somewhat rare only 400,000 of them were minted in 1897, but not many at all survive As I’ve learned, the Swiss have been melting them lots of them. Yesterday I had breakfast with the former head of coin dealing at one of Switzerland’s largest banks. And he told me a story about melting that blew my mind. I’ll share one bit of it with you He was in charge at that major bank back in the heyday of gold coins – for the entire decade of the 1980s. He now owns a coin shop in Zurich. (I visited the shop today – twice, actually – and bought some coins from him today, too. Zurich is expensive. But the coins are cheap!) For the story, in short, the Swiss have been melting an extraordinary number of gold coins. The former Swiss banker said, “I don’t know how many HUNDREDS OF THOUSANDS have been melted.” Unless the gold coins are in absolute mint condition, as the ones I bought are, they’re gone, off to be melted, never to be seen again. You can see it from the bank’s perspective since they’re only selling coins at close to melt value anyway, there’s no profit in bothering to keep them on hand. $80.69 Worth of Swiss Gold for $79.35 – Unbelievable! I bought that coin from the bank a few hours ago. As I write you, at current exchange rates and current gold prices, I paid $79.35, and the melt value is $80.69. Unbelievable. As you might imagine, I didn’t just buy one coin. I also bought a 1904 one. But I didn’t pay melt. I paid 200 francs for this special one or $169 dollars. Why did I pay so much? Because it was a bargain. Let me explain: The Swiss only minted 100,000 of these 20-franc gold coins back in 1904. Who knows how many of them have been melted since then? And who knows how many of them still exist in “Brilliant Uncirculated” condition like this one? So far, NGC, the coin grading company, has only graded three of these 1904s in Brilliant Uncirculated condition. In my estimation, if this coin were a U.S. gold coin, it would be worth thousands of dollars. But since it’s a Swiss gold coin, I paid $169. Nobody in Switzerland, it seems, cares for gold coins.
A big part of the story is the man I’ve been traveling with He’s been flying over here many times a year to buy coins for over 30 years. At the big Swiss bank today, he bought a bag of coins at below melt while I was standing there. He also bought some random gold coins for his clients back home strange things like a large gold coin from Colombia, dated 1764. (With the constant state of chaos in Latin America, I was surprised to learn that Colombia was even minting gold coins back then, before the U.S. even existed.) Without my friend, I know I wouldn’t have gotten the great deals that I did It was clear to the man at the bank that I was with this big buyer who was a longtime customer. But even if the bank had sold them to me at 5% over melt – or even 10% – I’d have paid it. Again, what I’ve learned in the last few days has really blown my mind. Next week I’ll follow up on this story. There’s a lot more to come. Good investing, Steve P.S. I often hear from savvy readers: “Steve, don’t you know gold is priced in dollars, so a rise in the dollar means a corresponding fall in gold? You can’t own dollars and gold coins: it doesn’t make sense!” Well, we live in unique times. Year to date, the dollar is up over 4% versus the euro. And year to date, the price of gold is down just 1.3%, from $438 to $432. Not exactly one-for-one And it gets better If the PREMIUM of gold coins over their melt value grows (which is the only direction it can go), then you can make money in the U.S. dollar, AND in gold coins, in the next 12-18 months. Sure the dollar stinks, but other currencies stink even more. For bold traders, the ultimate trade is long gold/short euros. For regular folks, the right trade is to own gold coins for the LONG TERM. And to own dollars (NOT EUROS) in the shorter term. Related Articles:
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