The S&A Digest

Editor's note: We believe physical gold is the best way to protect your money from the government's perfidy... Your gold is no one else's liability. So we've been telling our readers to buy gold coins since at least 2003, and we get more questions on the topic than almost any other. Below are the whys, hows, and wheres of buying "gold that clanks."

On gold and financial turmoil: Gold has a unique and timeless role in the world's markets. It is the ultimate store of value. Thus, while it might not be an "investment," it is the ultimate form of savings.

Additionally, in a world awash in paper money, where debt forms the basis of most commerce, an ounce of gold is no one else's liability. This makes it uniquely attractive during periods of financial turmoil. – Porter, March 14, 2008

On bullion vs. rare coins: Buying collectible coins or collectibles of any kind is a specialist's game (Steve Sjuggerud is our specialist). If you're not a specialist, or if you're not working with a specialist you can trust, you're very likely to get burned – meaning you'll pay far too much for the coins you buy, and you'll end up selling your coins at a dumb price.

I collect wine, not gold coins. And I can tell you the price of the wine I collect has absolutely nothing to do with the price of grape juice. Prices for fine, collectible wines have soared in the last eight years, simply because drinking wine has become very popular recently. In the past, the same thing has happened in the rare coin market – most recently in the late 1980s. Coin manias can be extraordinary... The prices for certain coins can become completely unhinged.

If you want to invest in a very liquid, easy to buy, and easy to sell monetary commodity, you should buy bullion. When I buy gold, I buy bullion because I want to protect my savings against inflation and I have no interest in becoming a coin collector. On the other hand, coin collectors can make money whether the price of gold goes up or down. Gold coin collecting is a good hedge against inflation. It's a noncorrelated asset (meaning it doesn't follow the value of the stock market). From time to time, rare gold coins will make you a tremendous amount of money – and they've done pretty well since 2003 when we began recommending them. But rare coin investing is a completely different art than simply buying gold. – Porter, March 12, 2008

On coins vs. the gold ETF: It's awfully difficult to make an ETF security disappear. Gold coins, on the other hand, are very easy to buy with cash and to hide. – Porter, March 12, 2008

On scarcity: We received this note from our own Matt Badiali:

Just got off the phone with Van Simmons (an executive with David Hall Rare Coins). He said there is a shortage of both Silver Eagle coins and 100-ounce bars. He can't get them. He said that, for the first time in his career, a supplier that guaranteed delivery simply couldn't make good on the promise. He also told me that platinum eagles are in serious short supply. I guess that means someone out there is buying up the physical metal in a big way.

The U.S. Mint has run out of one-ounce American Eagle gold coins. And it's been rationing Silver Eagles because of the high demand.

The U.S. mint sold 60,000 one-ounce gold coins this month, up from 47,000 in July and 13,000 in June. When gold fell from the $900s to the $700s, small buyers didn't sell, the way they usually do. They bought.

Abraham Lincoln may have been an even worse president than FDR, but he had one thing right: You can't fool all of the people all of the time. People know the government is destroying their currency, so they're turning it in for gold, which is exactly the right thing to do. – Dan Ferris, August 23, 2008

On buying gold: Pick up the yellow pages. Look up "Broker, Gold" or try looking under "Bullion" or "Gold Coins." Call the numbers you find. Ask them what their price is on gold bullion. Buy from the guy with the best price, assuming he's been in business in the same location for a long time.

If you're nervous about whether or not it's real gold, ask a jeweler. If you don't have a local gold dealer, call the folks we know: David Hall, Camino Coin, or Asset Strategies International. – Porter, February 27, 2008

On selling gold: I'm no expert when it comes to coins. So far, I've only bought them. I haven't sold any yet... and I doubt I ever will. I buy bullion coins and I keep them as my preferred form of savings (it seems a lot smarter to save gold instead of paper currency). But I've been told that selling on eBay is relatively easy. And my coin dealer regularly quotes buy prices, so I could sell back to him if I wanted. – Porter, February 27, 2008

On where to keep your gold: The property inside a safety deposit box belongs only to you. And the bank can't go inside your box unless it's complying with a search warrant. (At least, that was true before the Patriot Act... I'm not so sure now.)

But here's my question for you. Do you really think the government is going to let you access that box in the event of a real currency crisis? No way. No way in hell. They'll make owning gold illegal overnight. And they'll instruct the banks to open every box and seize all of the gold.

Think it'll never happen? It already did. The best way to own gold bullion is to keep it someplace safe, where no one will know anything about it. – Porter, July 23, 2008