Masters Series: How to Buy Gold – a Famous Dealer Explains

How to Buy Gold – a Famous Dealer Explains
By Steve Sjuggerud, editor, True Wealth

I spoke with Van Simmons recently...

Van is a legend when it comes to gold and gold coins – and he's one of my good friends.

(A few things from his résumé... In 1986, Van was a founder of PCGS – the Professional Coin Grading Service – which revolutionized the gold-coin industry. As a dealer, he has possibly bought and sold more dollars' worth of rare coins than anyone on the planet.)

Van is a mentor of mine. I give him a call and ask him his opinion when I'm considering buying an alternative investment (even beyond gold and coins). Having collected and bought and sold so many different things over the decades, he has priceless experience.

This time, we kept it simple... I asked him:

What's the best way for the typical American to own gold?

"Bullion is where you start – which usually means modern gold coins. The most widely traded gold coin is the U.S. Gold Eagle," Van said. "If you're new to gold, and you want to physically own gold bullion, the U.S. Gold Eagles are the way to go."

(It's easy to buy Gold Eagles. I'll show you where and how at the end of this essay.)

I asked Van why we should want these in particular... For example, my parents owned Krugerrands (which are gold coins from South Africa). I asked Van why we shouldn't own Krugerrands or Canadian Maple Leafs.

"Well, you can own those you mentioned... But when a customer sells a Krugerrand or a Maple Leaf, a dealer has to fill out a 1099 form about who bought and sold and mail it to the government. We don't have to do that for Gold Eagles."

All things being equal... the fewer reporting requirements, the better. (You can also hold these coins in IRA accounts.)

"Also, importantly, they're the most liquid coins... so while you might not find a full-price buyer for a Mexican Peso gold coin, there's always a buyer for an American Gold Eagle – you can always get a good price."

How much should people hold in gold bullion like Gold Eagles versus stocks or rare coins?

"Right now, personally, I'm about equally split between those three... I might have a bit more in gold stocks. For customers, it's their decision. If you want to have a speculative element to it, you should have gold stocks and rare coins. Some people don't want rare coins. And some people just want bullion. It's your call."

How should people store the stuff?

"Once again, it's your call... You can put it in a safety deposit box, in a home safe, or bury it in the backyard. One thing – I do not recommend having a dealer store or hold it for you."

What about shipping? Any concerns?

"It's no big deal. We typically send coins by registered mail, insured. We also use FedEx. The only complaint we hear is when registered mail takes more time to deliver than the customer expects, and they start to get ant­sy. But buying coins is as easy as when you order a book on Amazon.com and it shows up at your house."

As for how much to pay, expect it to cost around 5% to 6% more than the cur­rent gold price, plus shipping (which is typically around $25).

For where to buy... In my nearly two decades of writing investment letters, I've dealt with a handful of dealers that have handled thousands of our readers and have proven to treat them right. These dealers include:

I don't receive any compensation for mentioning these guys. And you're welcome to call around or buy locally. I'm just letting you know these dealers have handled thousands of orders – each – from my readers over the years. And I've had few complaints about them (and never anything serious). They each have decades of experience.

In sum, if you want to get started owning gold bullion, the best starting point is U.S. Gold Eagles.

Don't worry if you've never bought gold before. If you buy from one of the dealers above, it's as easy as ordering a book on Amazon and having it show up on your doorstep!

My talk with Van didn't end there...

Van doesn't have all of his gold investment in bullion. He thinks of his gold holdings in "three buckets." I like that approach. I asked Van to explain how it works...

The three buckets Van holds gold in are: gold bullion, rare coins, and gold stocks. You can choose the mix that's right for you, based on how much risk you want to take and how much you want to "juice" your port­folio to take advantage of a big move in gold.

For your bullion "bucket," Van suggests U.S. Gold Eagles, as we just discussed.

For your rare coins "bucket," you need expertise. In the last major bull market in gold, coin prices soared. The entire market (as measured by the PCGS 3000 Index) rose 1,195% from 1976 to 1980. We haven't seen anything like that this time around. You can learn all you want from books and doing your own research (which you should do). But Van is my "go-to" guy.

I always say, "You and I can't call Warren Buffett about stocks, or Bill Gross about bonds... but we can call Van about gold and gold coins." He's accessible. You can reach him through www.davidhall.com or over e-mail at info@davidhall.com. Dana Samuelson and his team at American Gold Exchange (www.amergold.com) also do a nice job.

At the end of the day, I think you'll do great relying on Van and Dana. They've proven to be trustworthy, they know their stuff, and their prices are reasonable.

For your gold stocks "bucket," a great starting point is shares of the Mar­ket Vectors Gold Miners Fund (GDX). GDX is an exchange-traded fund that holds the top 36 names in gold stocks. You make one invest­ment, and you've got it all.

If you want to "juice" your returns in gold stocks, you might consider "junior" mining stocks. The simplest way to buy them is through the Market Vectors Junior Gold Miners Fund (GDXJ). This one in­vestment gets you exposure to 52 junior gold stocks.

If you're just starting out in gold, or if you'd like to add more money to your gold position, Van laid out your path...

Choose your mix of these three based on your risk tolerance.

Regards,

Steve Sjuggerud