by Mark Skousen Thursday, March 19, 2009 Wisdom of Wealth

Thursday, March 19, 2009: Issue #959

Once again, the U.S. Mint can’t keep up with the huge demand for American eagle gold and silver coins. Americans are so anxious about the uncertainty of the seemingly never-ending financial crisis that they are demanding physical positions of their gold and silver, the only true money.

It’s not hard to see why. In many ways American eagles are ideal ways to buy gold and silver.

They are easily recognized, certified by the U.S. government, and easy to buy and sell through any coin dealer worldwide. And they normally sell for close to their bullion value. That is, until recently.

Prices for gold have skyrocketed as skittish investors ran for the hills.

But just because everyone else is paying too much for gold doesn’t mean you have to. Here are some smarter ways to add gold and silver to your portfolio — without overpaying.

Buying Gold On the Cheap

When Congress authorized the Gold Bullion Act of 1985, the U.S. Mint was mandated to produce American Eagles in quantities sufficient to meet public demand. But the act also insists that the metal come from mining operations in the United States.

The problem is that shortages have developed from U.S. suppliers.

Last August, the demand for these bullion coins was so great that the U.S. Mint temporarily suspended sales. The effects were dramatic and the market hasn’t been the same.

The premium paid for American Eagle gold coins skyrocketed to 8% over spot prices. Some dealers are charging almost $23 for one-ounce American eagle silver dollars, that’s $10 over the silver spot price of $13.

I love the American eagle coins. The gold eagles are beautiful and come in one ounce, ½ ounce, and ¼ ounce sizes. The silver eagles come in one-ounce only. They make excellent gifts and can serve as unique tips or awards to employees.

Jesse Livermore, the famed Wall Street speculator, once said, You need to feel the money in your hands every once in a while. I personally believe he had gold and silver coins in mind. They are addicting. Many of my subscribers carry a silver dollar in their pocket as a good luck piece and a reminder of our nation’s greatness — I do.

How to avoid the huge premiums on American eagles? There are several options.

Great Ways to Buy Gold

If you want the a great way to invest in gold. skip the American eagles, which are selling for 8% over spot gold right now, and buy the Mexican 50 Pesos Gold coin, which is selling at the cheapest premium among bullion coins, only 4.5%. It’s a big coin, with more than an ounce of gold.

I think it’s more beautiful than the American St. Gauden’s double eagle.

If you want silver, buy silver rounds, one-ounce medallions issued by private mints such as Sunshine Mining Company and other mining operations.

You can buy one-ounce silver rounds for less than $14.69 each, only $1.55 over silver spot ($12.94). If you want to buy the American silver eagles, Camino Coin in California offers the best deal around — $17.44 (prices may vary depending on when you buy). I’ve seen other dealers charging as much as $23 per coin.

Another popular choice is to buy is the pre-1965 U.S. silver dimes and quarters, so-called junk silver. You can buy them in full or half bags. Unlike bullion coins, the U.S. Mint isn’t minting any more silver dimes, quarters, halves or dollars. (Expect to pay more for bags of half dollars and silver dollars.)

I also like the Morgan and Liberty silver dollars in good, uncirculated condition ($28 or more, depending on quality), and the pre-1933 St. Gauden Double Eagle gold coins ($1,350 or more, depending on quality).

Two Additional Ways to Buy Precious Metals

If you don’t want to take possession, but still want a position in hard, precious metals in your portfolio, there are two additional ways to do it.