Gold extended its losses to a 16-week low yesterday.
The precious metal now trades for $1,256 an ounce, representing a 33% discount to its all-time high recorded in the summer of 2011.
While prices languished in the spot market, though, a treasure trove of rare gold U.S. coins just hit the market for auction.
The coins were discovered buried in the backyard of a California couple.
One of the coins – an 1874 $20 Double Eagle – fetched a reported $15,000 at auction.
All told, roughly 1,400 coins were unearthed, which are expected to pull in over $10 million when the dust settles.
Bidding for the most expensive coin, an 1866-S Double Eagle without the “In God We Trust” motto, started at $1.2 million.
Now, before you rush to the hobby store and buy a metal detector, the traditional gold market is rife with opportunity. That is, if you know where to look.
With that in mind, I asked the country’s foremost gold dealer, Richard Checkan, to get us up to speed on the very latest.
Richard is as close to gold’s frontlines as you can possibly get, so his perspective is incredibly relevant.
Onward and Upward,
Founder, Wall Street Daily
Transcript of Interview:
Robert Williams: Hi there, Robert Williams, the Founder of Wall Street Daily. I have Rich Checkan with me today. Rich is with Asset Strategies International and he’s one of the most respected gold dealers in the entire country. Welcome, Rich.
Rich Checkan: It’s good to be here, Bob.
RW: So Rich, let’s jump right in. Get us up to speed on what the price of gold is presently doing; where it’s going and what we can expect maybe over the next couple of weeks.
RC: It’s a good question. It’s on a lot of people’s minds, Bob. The bottom line is the market’s been in range trading, you know, anywhere from $1,100 an ounce to a little over $1,300 an ounce for the better part of two or three years, and when you look at the cost of production of gold you know that this cannot be sustained.
The bottom line is I liken this to being in the business of producing widgets. If I were making widgets and it cost “x” to produce a widget and when I went to market I could not get paid that much money… do I have a successful business model?
So that’s where we are with the gold industry right now. It costs more to produce the stuff than they’re getting for it on the market and that can go on for a little while, but it cannot be sustained and we do expect it to turn and I just cannot tell you when.
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RW: So Rich, when you say it can’t be sustained, what are we gonna see in the coming weeks? Are we gonna see some consolidation in the industry or what are you seeing might happen?
RC: We’re already seeing some of that, to be honest with you. That’s exactly what you’ll see, amongst a few other things. I mean, some mines that just can’t produce and they don’t have the cash available any longer to keep the business running, if it’s a non-productive business, they will shut the doors.
They’ll either shutter it up and say we’ll revisit it at higher prices, or they’ll just go out of business entirely. Others will be bought. So we’ll see some mergers, acquisitions and consolidation in the industry for sure.
Some folks that have good cash positions will continue to operate, hoping that their cash won’t run out before the market turns, and the very last category of folks are – and we haven’t really seen this yet in the market – but we’ll see some folks go out there and start doing what we’ll call forward-selling and that basically means they’re gonna sell tomorrow’s production at today’s prices, and although they expect prices to be higher in the future they’re willing to do that just to get the cash flow to keep the doors open until the market turns.
RW: So Rich, if we were able to identify some junior miners that would survive all of this, and would maintain their operations through this consolidation with gold prices, where they are right now, might they be a good buy for us?
RC: We think so. You know, that’s not our area of expertise obviously and we’ve been working as physical bullion dealers for 32 years now, but we are familiar with the industry and I can tell you over the past couple of years we have been buyers of mining stocks and we’re going for value, and some of those values, we’ve written down as I’m sure you and your readers have as well.
We’re not letting go of value because we know what the supply and demand fundamentals are telling us. Gold is an incredible demand. China has surpassed India as the world’s largest consumer. They’re buying more gold than anyone else in the world on top of the fact that they’re producing more than anybody in the world and they’re just not letting go of it.
Investors are buying up gold. So the demand is there. It’s not abating. The supply is a concern with this drought in the mining stocks and the market price is gonna have to turn. So we’re holding on to our value.
RW: Rich, we had Frank Holmes of U.S. Global on our airwaves not too long ago and he thought the current prices in gold represented a good buying opportunity and was very bullish from this point forward. Do you agree with Frank, Rich, and also how would a regular everyday investor go about buying physical gold?
RC: Great questions and, yes, I do believe so, but I’m a little different than most. I don’t look — even though we have what could be a profit opportunity here with gold selling at the cost of production, I don’t look at gold for profit ever.
For me it’s insurance and – you know, Bob – we’ve talked many times over the years. When I buy gold, it’s a small portion of my portfolio. It’s a liquid store of value for a financial crisis that I hope I never have. If I have that crisis I cash it in immediately and meet the need. If I don’t have that crisis, great; good for me, I’ll pass it on to my heirs. So I buy gold to maintain an allocation in my portfolio personally all the time, and when the prices are cheap that just tells me that my insurance premiums are low right now.
RW: Interesting, Rich. So how do our readers go about buying physical gold, then?
RC: Primarily over the years it’s been one ounce gold coins because they’re liquid. They serve that purpose. They are a store of value and you could hold a dense amount of wealth in a small place.
We also like a small amount of junk silver. Glen Kirsch, one of the founders of our company, always thought that every family member ought to own a $1,000 face bag of junk silver. It’s a very divisible form of silver to complement your gold and we think you take possession of that because it’s got to be close at hand, if you need it.
Anything over and above, what you feel comfortable storing yourself or what you foresee to meet a financial short-term need, we think you should start spreading it around and actually hold it in the hands of professionals, different storage facilities, and it could be Perth Mint certificates in Australia, it could be ASI Precious Metals Direct.
It could be just domestic or foreign storage in a safe deposit box, but we do think, you know, if you have significant wealth, better to spread that around different jurisdictions.
RW: Good stuff, Rich. As always, I appreciate your time.
RC: Hey, appreciate it. Thanks for having me, Bob.
RW: For our readers out there who are interested in positioning themselves in physical gold at these current prices, I’m including a link to Rich’s Asset Strategies International Group below and there’s also a phone number. For Wall Street Daily, I’m Robert Williams.