An Easy Way To Amp Up Gold Gains

Dear Rich Lifer,

Ever since I began writing these Rich Life Roadmap dispatches, I’ve argued for holding some physical gold – especially in the form of U.S. coins like pre-1933 St. Gaudens Double Eagles and modern-day American gold eagles.

My biggest reason?

Well, here’s how I explained it back in December …

“I like pre-1933 St. Gaudens Double Eagles because they’re beautiful antiques that are trading at historically low premiums over spot prices.”

Four months and a major pandemic later, that’s no longer true.

And for anyone who bought on my recommendation, that is excellent news.

In fact, it means that someone who bought American gold coins has been making double the money compared to people who invested in the yellow metal through many other forms.

To understand why, let’s take a look at a few charts.

Here’s How Gold Pricing Has Been Moving

This first one is of gold spot prices …

Gold Graph

As you can see, the yellow metal was already climbing into the fall of last year but it has jumped another $234 an ounce since my article mentioned earlier.

That amounts to a gain of roughly 16%.

Not bad considering everything going on in the world right now!

But remember, that’s the spot price.

The reality is that various forms of physical gold trade at prices that vary from spot.

What’s more, even within a particular form of gold, that spread can change wildly over time.

For example, here’s a chart from Bloomberg that shows premiums for modern 1 oz. American Eagles over the last six years…

Premium Surge

As you can see, a typical premium might be somewhere between $25 and $50 an ounce.

Right now, however, buyers are willing to pay $135 or more.

As Bloomberg explains it:

“The surge is being exacerbated by coronavirus-related lockdowns, which have led to a squeeze in the supply of coins and bars available for shipment around the globe. At the same time, bullion’s status as a haven is luring investors rattled by worldwide market and economic turmoil.”

That’s how this always works.

Panic Hits, Gold Prices Boom

When nobody wants physical gold, or demand is at least level, premiums are relatively low.

Once a panic hits, they can jump quickly.

So combine the premium expansion with the rise in spot prices, and someone who opted to play gold through American Eagles has made more like $334 an ounce since my December 17th article went out.

Put another way, that person earned an extra 6.7% for every ounce or 42% more overall return.

In a real-world example from my own life, I bought two 1 oz. American Gold Eagles on March 7, 2019 for $1,325 apiece.

They were each graded MS-69 and were on sale for just $42 over spot.

Today, it’s hard to even find the same coins in stock anywhere, but I’m seeing them go for $2,000 or more apiece.

That equates to a gain of roughly 50% in a little over 13 months.

It’s the same basic thing with the pre-1933 double eagles.

One of my preferred dealers is currently offering MS-61 graded double eagles at $195 over the spot content price.

Since each of these coins contain .9675 of a troy ounce, you’d be paying $1,851.36 per double eagle.

Most other dealers are charging more like $2,000 for the same thing.

So that’s a special price in the current environment.

But it represents an even higher premium than we’re seeing on modern American Gold Eagles and it’s astronomical compared to where premiums were back when I last told you to buy.

My Own Recent Gold Gains & How You Can Trade The Trend

At that time, the coins were trading at roughly 13% over their spot content.

Right now, it’s more like 20%+.

And again, that’s on top of a big jump in the metal price itself … for a total gain of roughly 25% per coin in four months.

Will this trend continue?

It’s anyone’s guess.

However, I can tell you that this is not even close to previous tops we’ve seen.

During the financial crisis, investors were paying 84% premiums over spot content as the stock market was bottoming in March of 2009.

That amounted to $1,672 per coin on gold content value of just $905.

Using today’s gold price, it would equate to pre-1933 double gold eagles selling at $1,391.34 over gold content value of $1,656.36.

Add it up and you’re looking at about $3,047 per coin!

That would represent another $1,000 per-coin profit over current prices … without any additional upside move in underlying gold prices.

Obviously, there’s no guarantee it will happen.

However, the most important takeaway is that the spot price of gold is just one of the factors that goes into what people are actually paying for various physical coins, bars, and bricks.

If you learn to buy when those premiums are relatively low, you set yourself up for an additional way to profit independently of underlying metal prices.

To a richer life,

Nilus Mattive

Nilus Mattive

You May Also Be Interested In:

Americans Must Get Used to This…

Happy Friday! After your morning cup o’ joe and reading this piece, it’ll be a coast into the weekend. I imagine you’re looking forward to that glass of wine with great anticipation. Enjoy it.  You deserve it. What I’ll be talking about in this piece is something you’ve already felt.  But it’s time to bring...

Nilus Mattive

Nilus is the editor for the daily e-letter The Rich Life Roadmap and a Paradigm Press analyst.

Nilus began his professional career at Jono Steinberg’s Individual Investor Group, where he published his original research through a regular investment column. Later, he worked for a private equity business and spent five years editing Standard and Poor’s...

View More By Nilus Mattive