“Every day I wonder, ‘Is there a deal between the East and the West so that we are permitting all of our Western gold to be taken by the East so they don’t collapse our paper markets?’ I don’t know, but the fact is I couldn’t be more bullish about the prices of physical gold and silver going forward.” –John Embry, Sprott Global Assets
Physical Gold: How To Stack With Stealth ..by Biz Bluetree
Gold bugs, inflation hedgers, coin collectors and sovereign central banks everywhere, especially in the east, are putting their hands on as much physical gold as they can at bargain prices.
In fact the price has dropped so low the cost to purchase one ounce of gold in many cases is now on parity with the cost to produce one. Some mining companies are already curtailing exploration and development to save associated costs, and if the price of gold continues to drop, these miners one by one could at least temporarily stop production. Strong companies should endure the costly task of putting mines on “care and maintenance” while others will go away and not come back.
Imagine what might happen to gold’s price if demand stays the same or drops to just half the shortage.
But for the John Embry quote above, there will be no more opinion of the kind in this article, except to say it’s ironic how the price of gold is disconnected from the physical realm, but rather fixed in the over extended paper gold universe. And using the word “fix” here is not a shallow implication. It is what the LBMA does twice daily in the city of London via conference call.
Welcome to another 1%
If you stack gold and know why you stack gold, welcome to an alternate 1% of the wealth demographic.
No one knows for certain the percentage of people buying and holding gold, which is one of the nice things about stacking the physical – it’s a private practice – I’ve heard only two percent of Americans hold physical silver and gold.
This article will focus on gold.
If you’re not interested in stacking gold and don’t agree with an importance to do so because of a sagging price or because an economic recovery is underway, or for whatever reason – like having read my last piece, “Physical Silver: How To Stack With Stealth“, you may feel you’ve misspent your time reading here, too.
This article simply serves as a guide for those interested in stacking the yellow stuff. If you agree transferring paper currency into physical gold makes sense as a store of wealth outside the fractional, fiat banking system, you may too agree physical gold is to have and to hold, not to trade – that is what the SPDR Gold Shares ETF (GLD) or the Sprott Physical Gold Trust (PHYS) among others, are about. Or if you want exposure to gold without the responsibility of personally storing it, a paper gold investment like those above might make sense for you. Not for me, if your intention is to hold gold in your private possession; stack the physical and read on…
Let’s get into it
Some readers agree stacking gold makes sense, yet ask, “What is the best way?” Are hold-in-your-hand bars, ingots or rounds right? Should I accumulate government minted gold coins? Which ones? Where to buy? Is this a good deal on eBay?
The best way to address these questions is to out right show you Bluetree’s method of gold stacking. I hope this is helpful.
Note: you are wise to avoid buying precious metals on eBay (unless you really know what you’re doing and trust who you are dealing with) as counterfeiting is rampant in the coin sector. Also be aware the best and most reliable dealers don’t have to advertise on TV.
In discussing Bluetree’s method
We will discuss what to have and to hold and where to buy. Not how to store or how to protect. That’s personal.
For this discussion, we begin
*One ounce of gold means one troy ounce, weighing 31.1 grams (same for silver) and generally minted in 24 karat which is 9999 pure gold bullion or 22 karat which is 9160 fine gold alloy. Note: 12 troy ounces equal one troy pound.
*A karat is a measure of purity of gold based on a 1/24 ratio rather than a measure of weight. However, a “carat” is usually the term used as a measure of weight used for gem stones and pearls.
*A coin is only a coin when issued by a sovereign government. A planchet of gold pressed at a private mint is not legally a coin and must be advertised as a round.
*United States minted gold coins circulated as legal tender in the U.S. economy from 1795 to 1933. In 1986 silver and gold collectible coins were minted and made available to the public. These modern coin types will be our focus here.
The Bluetree method
The Bluetree method recognizes three specific one-ounce, modern gold coins that are exempt from IRS 1099B reporting. But, before I go any further, I am not a tax professional or financial planner and cannot advise you. The examples in this article are my own observations and provided for your information and entertainment. I suggest everyone consult a tax professional before adopting my ways for my reasons.
But, exempt from 1099B? Yes, in any amount.
Over time, with help of credible sources, (confirming one here for purpose of this article) we learn that if selling 25 or more ounces of gold to a dealer, that dealer/buyer is obligated to fill out form 1099B and report the transaction in his IRS filings, unless the sale involves one of these three exempt gold coins: the American Gold Eagle, the American Gold Buffalo or the Austrian Gold Philharmonic. (You will notice compliance differs slightly for silver)
On the other hand, if 25 or more ounces of gold is sold to a dealer in the form of gold bars, ingots or rounds, or other government minted gold coins including Canadian Maple Leafs, South African Krugerands and Chinese Pandas among others, a 1099B form is required to be filled out and submitted with the tax filings of the commercial buyer.
But, of course, that’s only if you intend to sell your gold to a dealer. Many gold stackers have other plans for their gold when time comes to exit.
Investment in physical is personal. Nuance of play will differ for everyone. For as important to me the legal, stealth aspect of exiting gold, a comfort level exists in buying and holding gold in these exempt coin types.
#1 The American Gold Eagle, first issued in 1986, carries a $50 USD face value. American Gold Eagle coins are guaranteed by the U.S. government, among the most popular gold coins in the world and said to be minted exclusively using gold mined in the United States. Commissioned by the Gold Bullion Coin Act of 1985, the American Gold Eagle is widely accepted as one of the most beautiful coins of modern American coinage. The obverse of each Gold Eagle was inspired by famed artist, Augustus Saint-Gaudens’ Lady Liberty design which graced the now sought after $20 gold piece that circulated in the U.S. economy from 1907 to 1933. The reverse of each features Miley Tucker-Frost’s family of eagles design, which depicts a father eagle soaring above his family’s nest, holding an olive branch in his talons.2011 American Gold Eagle coin, obverse. Photo: providentmetals.com
AGE coins contain one troy ounce of .9167 (22K) fine gold and can be purchased from a reputable online dealer individually or in stacks of 20 contained in official U.S. Mint tubes. Buying this amount will incur a lower premium per ounce over spot.
This gold coin is also available in varying weights of one ounce, half ounce, quarter ounce and 1/10 ounce.
The Bluetree method remains aware that whether for purchase of gold, the down payment on a new car, or a deposit in your bank account, $10,000 is an IRS reportable transaction.
Comply with all U.S. tax laws and sleep better at night in your own bed.
#2 The Austrian Gold Philharmonic, first issued in 1989, is the only one ounce gold bullion coin denominated in EURO carrying an €100 face value. Prior to the introduction of the Euro these coins were denominated in Shillings.
Austrian Gold Philharmonic coin, reverse. Photo: providentmetals.com
AGP coins contain one troy ounce of 9999 (24K) pure gold and can be purchased from a reputable online dealer individually or in stacks of 20 contained in official Austrian mint tubes. Buying this amount will incur a lower premium per ounce over spot.
Celebrating the Vienna Philharmonic Orchestra the obverse of this coin features the iconic Great Organ housed inside the Golden Hall of Vienna, Austria and inscribed with REPUBLIK OSTERRIECH, 1 UNZE 9999 GOLD, the date and 100 EURO. The reverse of each coin depicts a bouquet of orchestral instruments; a string bass surrounded by cellos and violins, bassoon, harp, and Viennese horn. WEINER PHILHARMONIKER is inscribed across the top.
This gold coin is also available in varying weights of one ounce, half ounce, quarter ounce and 1/10 ounce.
#3 The American Gold Buffalo, authorized by the Presidential Coin Act of 2005, the Gold Buffalo is the only 24 karat gold coin minted by the United States made available to the public and carries a $50 USD face value.
AGB coins are composed of one troy ounce of 9999 (24K) pure gold. Only 300,000 American Gold Buffalo coins are minted at West Point each year. American Gold Buffalo coins arrive in original U.S. Mint packaging, while multiples of 20 come in uncut U.S. Mint plastic sheets. Buying this amount will incur a lower premium per ounce over spot.
The obverse of each gold coin celebrates James Earle Fraser’s wildly popular five cent Indian Head Nickel which circulated in the U.S. economy from 1913 to 1938. The design bears the word LIBERTY at top right, the date bottom left (with the artist’s initial F) and a profile believed to be a combination of three Native American Indian chiefs of different tribes: Iron Tail of the Lakota Sioux, Big Tree of the Kiowa and Two Moons of the Cheyenne.
Each American Gold Buffalo coin features Black Diamond, the 1,550-pound American Bison who spent his years living at the Central Park Menagerie.
Numismatics – Graded & Certified Gold Coins
Unless you are a coin collector, (numismatist) and enjoy owning these coins for their beauty, perfect Mint State pedigree or rarity, they are not the least expensive to purchase for stacking. Their cost can be many times more than their loose gold coin counter parts. However, if you know implicitly what you are looking for and have a network of other collectors who may be interested in purchasing your collectible coins, you may be successful in profiting in the near and mid term. The subject of numismatics is covered in more detail in a previous article, here.
2006 MS70 American Gold Eagle coin, obverse. Photo: greatcollections.com
Graded and certified coins do not currently align with Bluetree method goals. Whether modern issue or vintage, in the end if gold is priced the moon, I doubt these slabbed coins will fetch the stars based on their numismatic value.
Purchasing gold coins
You may already use an honest and reliable, customer-centric, bullion and coin dealer. I say, great! That’s half of the equation in this endeavor. However, if you do not have such a dealer, I am happy to introduce you to my choice, Provident Metals. I also use APMEX from time to time.
Note: I receive no compensation from these vendors.
Conclusion: We may never know gold’s true value, but its power to preserve wealth may well be fundamentally infinite.
physical gold, American Gold Eagle