How to Not Own Precious Metals but Profit from Them
By Moe Zulfiqar for Daily Gains Letter | Feb 25, 2013
After the financial crisis, precious metals have gained a lot of attention. Investors are running to precious metals because governments are spending extensively and central banks around the world just keep on printing more and more money.
Take a look at the demand:
Demand for Silver Coins
To say the least, there seems to be a “silver rush” currently happening around the world. In January, the U.S. Mint halted sales of silver coins. It sent a letter to coin dealers stating that the U.S. Mint was sold out of its stock of silver Eagle coins (Source: Schortgen, K., “U.S. Mint halts sales of silver eagles as agency runs out of the precious metal,” Examiner, January 17, 2013, last accessed February 22, 2013.)
Later in the month, the U.S. Mint reported that silver American Eagle coin sales rose to an all-time monthly high in January, with 7.1 million ounces of silver sold, compared to 6.1 million ounces sold in January of 2012. (Source: Tang, F., “U.S. silver coin sales set record in January after halt,” Mineweb, January 30.)
Similarly, the demand for silver in other regions in the global economy is also unprecedented. Take the Royal Canadian Mint (RCM), for example. It announced that it’s rationing the supplies of Silver Maple Leaf (SML) coins due to high demand. In fiscal year 2012, the RCM sold 3.9 million SML in the first quarter, four million in the second quarter, and 4.8 million in the third quarter. (Source: Unser, D.L., “Canadian Mint Limits Sales of 2013 Silver Maple Leaf Bullion Coins,” CoinNews, January 25, 2013.)
Demand for Gold Coins
As investors ran toward silver coins, the demand for gold coins also increased—though not enough to halt sales, the demand was still amazing. In January 2012, the U.S. Mint sold 127,000 ounces of gold in coins. In the same period this year, it sold almost 150,000 ounces of gold in coins—that’s an increase of more than 18%. (Source: United States Mint web site, last accessed February 22, 2013.)
Once again, other regions in the global economy are experiencing similar demand. Consider India. The country is known for its high demand for gold jewelry. But in third quarter 2012, the World Gold Council reported that Indian demand for gold coins increased to 87 tonnes of coins, versus only 26 tonnes in the same quarter of 2009. (Source: Bundhun, R., “Indians now investing in gold coins over jewellery,” The National, December 22, 2012, last accessed February 22, 2013.)
The Opportunity
As governments and central banks around the world spend and print fiat money, the expectation of inflation is increasing. The precious metals are considered to be the best way to protect one’s wealth in the current market.
If this continues—investors will rush to precious metals, and basic economic rules dictate that the prices will increase. If that is the case, then investors have few choices; they can go buy either the physical metal (which costs money to store) or companies that mine for these precious metals—but there is a third option: investors can look at companies like Collectors Universe, Inc. (NASDAQ/CLCT).
Remember, during a gold rush, sometimes the person who sells the shovels can make the most money. Collectors Universe can be compared to a shovel seller during a gold rush.
Chart courtesy of www.StockCharts.com
This company provides authentication and grading services to dealers and collectors of high-value coins, trading cards, event tickets, autographs, memorabilia, and stamps in the United States (Source: Yahoo! Finance, last accessed February 21, 2013.)
Instead of owning gold and silver coins or the companies that mine the precious metals, Collectors Universe lets investors take advantage of the buying activity. Plus, contrary to physical holdings of the precious metals, this company provides shareholders with a quarterly dividend. Currently, Collectors Universe is trading at a forward annual yield of 11.4%. (Source: Yahoo! Finance, last accessed February 21, 2013.)
When it comes to retirement planning, preserving your life savings is, hands down, your top priority. When investors own precious metal coins, bullion, or even companies that mine for them, they are highly affected by their prices. A company like Collectors Universe is unique in the sense that it lets investors take advantage of any increase in demand for precious metals, while also protecting their portfolios due to its diversification in several areas of the market.
Tags: gold coin, silver coin
