Best Investment Secret of Billionaires

This asset, as you may have figured out by now, is gold and silver bullion--coins and bars. This may not be a 'secret' for you, but how does this become a 'best investment' may be somewhat of a secret.

  • 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.

Gold and silver have been the real assets of choice universally over the centuries. The allure of gold being the greater because of its higher value and portability.

  • 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.

460,000 GBP Double Leopard gold coin of Edward III

Double Leopard gold coin of Edward III, England

American 1933 Double Eagle
In 2002, a St. Gaudens designed 1933 American $20 double eagle coin was sold for $ 7.59 million. This was the most expensive American numismatic coin ever auctioned. A very small number of these coins exist, mostly in the hands of the US government who asserts that as these coins were stolen and never issued officially, and any that surface are the property of the US government. Naturally, none have come to light publicly and this is an investment secret that is likely to remain hidden.

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.

Chart provided by TheBullionDesk.

The Indian numismatic (collector coin) scene is quite murky as there is no accessible reliable authenticating authority. 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.

Chris Weber publishes the fortnightly Weber Global Opportunities Report, a well-respected financial newsletter. The Report is basically a narrative of his investments and he updates his readers as he updates his holdings or has fresh insights on the current investments and wealth protection. Weber is a firm believer in holding bullion.

In 2001 Weber famously wrote that gold would very soon cross $1,000 an ounce. At that time the average gold price was around $310 per ounce and very few thought this might happen. Weber was ridiculed roundly by the 'experts' for his forecast.

In 2007 Weber went further, 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.

In the 10 years since Weber's 2001 $1,000 an ounce forecast, gold increased in value more than 5 times, surpassing Weber's own estimates.

In 2011 gold has ranged between $1600 and close to $1900 an ounce. In terms of the gold price cycle, the 10 years since 2001 from $310 to $1,600-$1,900 is a very short time indeed.

The experts are not scoffing so much now at Weber's predicitons.

  • 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 more than 30% of his net worth in gold and silver bullion in physical metal form or ETFs or exchange traded funds. (He recently upped his recommendation to hold up to 50% of assets in bullion.)

    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 (now bought over by Goldman Sachs), UTI and Kotak, offering 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 (1/2 a gram in the case of Quantum gold fund) 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 tradable in emergencies.

  • In our opinion, this is a wise approach and the best 'bullionaire' investment secret finally would be--Holding real gold, acquired over time.

There will be a small premium (3%-7%) over the spot gold price for the local gold dealer coins.

These coins should be of .900 to .995 purity (90% to 99.5% pure gold content).

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.

"India Bullion"--World's best performing assets
This article: Best Investment Secret of Billionaires.
Next--Investment Bullion- St. George Sovereigns and others
Investment Bullion Portfolios for Your Needs-1 - An Overview
Investment Bullion Portfolios for Your Needs-2 - Key Points
Investment Bullion Portfolios for Your Needs-3 - The Portfolio Options

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