Best Investment Secret of Billionaires

• This and other investment articles in the series explore what is the best such investment for us in India.

Silver is a volatile commodity, it behaves much like the mind--it has rapid fluctuations and extremes in its price behavior. Gold is less volatile, and it and silver have been the real assets of choice universally over the centuries--with the allure of gold being the greater.

Whether there is an inflation or recession or deflation, stagnant inflation (stagflation), or any other difficult economic situation, gold has been the preferred safe haven for individuals everywhere. This is another investment secret. Gold is valuable, portable, and does not deteriorate in time in any way.

The best investment secret
The rich and wealthy have always held a significant portion of their wealth in gold, silver and now recently--in platinum and palladium bullion. Combined with a special type of secret investment, these billionaires have succeeded in keeping well ahead of the gold bullion price appreciation.

• This special secret investment is in the form of high premium collector gold coins.

There is a section of investors predominantly in America, England and Europe who invest in gold coins of a special grade called numismatic coins. 'Numismatic' simply means, to do with collecting coins and money. We can call them 'collector coins'.

These collector coins have a market value greater than the value of the metal content in it.

The reason for this is simply that the coin is very rare or unique 'one of', and is attractive to many collectors who are willing to pay a high premium price for it. The more demand by collectors and the less the supply, the higher the price.

This then is basically the investment secret with which billionaires have enhanced their fortunes over time.

English Double Leopard
One such example of a collector coin is this 34 mm diameter double leopard gold coin minted by King Edward III of England in 1344. This was auctioned by Spink's at London in 2006 for a royal sum of 460,000 pounds. That made it the most expensive British gold coin ever auctioned.

There are two other such coins known to be in existence and both are in the collection of the British Museum. The ones at the Museum are slightly different and said to be not in such excellent condition as this one.

Known as the 'Faroukh-Fenton' 1933 double eagle, this particular coin is the only known such coin in private hands and permitted to be so held officially by the US government. The Faroukh-Fenton double eagle has a history worthy of a spy thriller. You can read more about the history of this coin at Wikipedia here.

The St. Gaudens double eagle has a face value of $20 and at 33.431 grams contains 90% gold and 10% copper. It contains exactly one troy ounce of gold.

It's intrinsic gold value today would at the market price of gold--far, far less than the auction value of $ 7.59 million, or 30 crore rupees--give or take a few lakhs. You can get the current spot one ounce gold price for this coin from the live rates chart below. As you can see, the gold value of this 30 crore one ounce coin is negligible compared to its auction price.

Chart provided by TheBullionDesk.

The Indian numismatic (collector coin) scene is quite murky as there is no accessible reliable authenticating authority. Clearly, a reliable collector coin industry is yet to develop in the country.

• In essence, this is the reality and problem of a collector coin: The price depends upon whether someone is willing to pay premiums for the rarity value or some otherwise perceived unique quality of the coin.
• If there is a serious general crisis or disaster situation, the premium on these coins will not be worth much. In the absolute worst-case scenario, the melt-down value, or close to it, is what the collector would get.

The up side--even if one does not have the means to invest in collector coins, the track record of gold and silver bullion value--which is unequaled by any other type of highly liquid store of wealth, should encourage one to invest in precious metals. This is the best investmen secret.

• Chris Weber, who writes the Weber Global Opportunities Report, a well-respected financial newsletter, said in 2001 that gold would very soon cross $1,000 an ounce. At that time the average gold price was around $310 per ounce and few thought this would happen. Since 2007 Chris has been forecasting gold at an ultimate $3,000 an ounce and silver at $180 an ounce by the year 2020. That date is not too far away, but will the gold and silver prices get there, is the question.

  In the few years since Weber made his $1,000 an ounce forecast, gold increased in value more than 3 times and in March 2008, and September of 2009 crossed the $1,000 mark briefly. In terms of the gold price cycle, the seven years from $310 to $1,000 is indeed a very short time.

  How long gold takes to stabilize over the $1,000 mark is anyone's guess. Chris made his fortune in trading and accumulating gold, becoming a gold millionaire by the time he was 21 years old. A multi-millionaire today, he holds around 30% or more of his net worth in gold and silver bullion in physical metal form or ETFs (exchange traded funds). You can read interesting articles about him and especially his History of Money article at his website.

• Indian ETFs managed by fund houses like Benchmark, UTI and Kotak, offer tradable units on the stock market on an ongoing basis. ETFs offer the advantage of eliminating the storage charges and problems associated with physical gold. Also one can buy small units, as each unit of the fund is approximately 1 gram for a value of near spot price of gold.

What is the best 'bullionaire' investment secret?
In India, historically people have invested money in gold and silver in various forms, but there is almost no trading and holding of high-premium or collector gold coins. This is because such premium coins may be forgeries and ultimately not tradeable in emergencies.

• In our opinion, this is a wise approach and the best 'bullionaire' investment secret finally would be:-- holding the actual metal acquired at near its spot-gold value by paying a small premium (3%-7%) over the gold price as for the local gold dealer coins. These coins should be of .900 to .995 purity, or be of 90% to 99.5% pure gold content.

  'Hold real gold' is the best investment secret!

Examine this further in the article: "Bullion Portfolios for Your Needs - 2 - Key Points", or read the articles in sequence as given in the links below.

To 'India Bullion' from Best Investment Secret of Billionaires

To 'Money Matters'' article from Best Investment Secret of Billionaires