A 1970 Gold Story

In early 1970 I served a wonderful gentleman during an over-the-counter transaction. He had decided he wanted to buy some gold coins.

With gold in 1970 at $38.50 per ounce, a $10,000 order was important. The request was for a variety of gold coins of the United States as well as from the rest of the world. To make up the package, and make the unit cost per coin as close to the gold content, I suggested a mix, which included U.S. $20 gold, English sovereigns, French 20 francs, Swiss 20 francs, Italian 20 lire, Mexican 50 pesos, Austrian 20 coronas and issues from other countries that would fill the bill.

After the selection was made, he examined the coins and selected enough to fill the $10,000 order. He proceeded to write a check and asked that after it cleared we ship the coins to his home in Palm Beach, Florida.

He then looked up at me over the top of his glasses and remarked, “I bet you think I’m crazy.” I quickly responded “absolutely not!”

He then went on to tell me about his motivations. He was brought up in Hamburg, Germany before World War I. Hamburg was situated away from the war and commerce was not interfered with to any extent.

His father was a mortgage broker. At the time it was customary to give a five year mortgage on a home, pay a yearly mortgage fee and pay off the principal of the loan after five years. There was no amortization during the term of the loan.

His father made a loan of 5,000 Marks (which were gold marks in 1917). After five years in 1922 the man gave his father 5,000 Marks, which were paper inflationary marks, no value in gold!

The father gave the son the 5,000 Marks and asked him to purchase cigars. The son, for the 5,000 Marks, was able to get two cigars and two matches. The father went into the sun parlor in his house, closed the door, and then smoked his two cigars for two hours. He re-joined the family in the living room and said, “This will not happen to me again!” He liquidated all his holdings and moved his family to the United States and was able within a few years to remake some of his fortune. (As a side bar to this happening in 1922, if the father had asked for the same items one additional week later the son would have been lucky to get one match for 5,000 Marks.)

The gentleman then explained to me why he bought the gold. “I believe in insurance,” he said. “And this gold is my insurance. But why did I pick gold? Let me explain my reasoning.”

He then related that he had a lovely home in Palm Beach and insurance against fire and theft. The premium covered the property for one year, and at the end of the year, he had nothing left for his money.

He owned a wonderful car. He bought insurance to protect him should he have an accident or the car was stolen. As above, at the end of the year he had nothing for his money.

He also believed in life insurance. He favored “Term insurance” which was the lowest premium for the buck. At the end of the year, he had nothing left for his premium.

He bought the gold coins as insurance against his father’s experience. Whatever he paid and regardless how long he kept it, it would always have some value! If the price he got were lower or higher than what he paid, he always would have something left!

The experience he had and the logical reasons he gave me, have stuck with me all these years. If you or I ever had the same experiences we might surely react the same way. It makes one realize why people have an interest in owning gold.

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