Precious Metals and IRA Retirement Portfolio

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1 Universal Coin & Bullion s INVESTOR S PROFIT MARCH 2007 ADVISORY Numismatic Literary Guild Award Winner for Best Dealer Publication industry wide! Universal Coin & Bullion 7410 Phelan Boulevard Beaumont, TX Gold for Your Golden Years Precious Metals IRA Tax regulations allow you hold gold, silver, and platinum in an Individual Retirement Account. Here s how to do it and why you should. BY: PAUL MONTGOMERY Everybody knows Uncle Sam expects you to settle up your tax bill next month. But did you know you can still make a contribution for 2006 to an IRA and put it into precious metals? Many people, including long time gold bugs, still aren t aware that Uncle Sam allows certain gold, silver, and platinum coins and bars to be held in Individual Retirement Accounts. Just as with your regular investment portfolio, you d be wise to have a component of precious metals in your retirement portfolio, for reasons I ll explain in a moment. It s quite easy to set up a precious metals IRA or transfer funds from your current IRA into a precious metals account. Your account representative can handle the details for you.

2 2 P RECIOUS M ETALS A PPROVED FOR IRAS IRAs were once limited to cash, stocks, and bonds. For the most part, legal restrictions barred holding hard assets like precious metals in an IRA. However, the Industry Council on Tangible Assets (ICTA), of which I have been a board member since 1996 and served as chairman of the board from , successfully championed legislation that in 1986 made proof gold and silver American Eagles acceptable for IRAs. A little over a decade later, again largely as a result of active support from ICTA, the Taxpayer Relief Act of 1997 pried the door open for a wider choice of precious metals assets that can be held in IRAs. Now gold and silver, as well as platinum American Eagle business strikes or uncirculated coins are eligible. The way it stands today, gold, silver, and platinum American Eagles are the only coins that are specifically approved for IRAs, but they aren t the only ones eligible. Other precious metals coins qualify under the current rules for IRA eligibility, which require that the coins must be at least.995 fine (that means 99.5% pure) and they must be legal tender coins (which means they can be spent for face value to pay debts). Under this definition, besides gold, silver, and platinum American Eagles, these other coins qualify for inclusion in your IRA account: Canadian gold, silver, and platinum Maple Leafs, Austrian Philharmonics, Australia s Perth Mint Lunar Series coins, and Mexican silver Libertad bullion coins. In addition to coins, you can now also add precious metals bars and rounds to your IRA if they meet the following criteria: Gold bars and rounds manufactured by a NYMEX or COMEX approved refiner/assayer and meeting minimum fineness requirements of Gold bars come in the following sizes: 1 ounce, 10 ounces, kilo (32.15 ounces), 100 ounces, and 400 ounces. Silver bars and rounds manufactured by a COMEX approved refiner/assayer and meeting minimum fineness requirements of Silver bars are available in 100 ounce and 1000 ounce sizes. Platinum bars and rounds manufactured by a NYMEX approved refiner/assayer and meeting minimum fineness requirements of Platinum and palladium bars range in size from 1 ounce to 100 ounces. Palladium bars and rounds manufactured by a NYMEX approved refiner/assayer and meeting minimum fineness requirements of Note that only coins and bars meeting these strict requirements are eligible for IRA investments. Many popular gold coins such as Kruggerands, which are only 91.67% pure, do not qualify. Neither do old U.S. gold coins (90% pure). Pre-1965 U.S. 90% silver coins, such as the ones many hold in bags, are not eligible as legal investments for an IRA. The coins also must be raw that is, ungraded, although they can be proof coins (Legislation has been proposed in Congress that, if passed, would allow graded coins to be included in an IRA as well). You also cannot add coins and bars you already own to an IRA. They must be purchased and held for you by the custodian of the account. You can buy coins for any kind of IRA traditional, Roth, simple, SEP, etc., and you can mix coins with stocks. The amount you can put into your IRA each year varies according to the type of account and your age (you re allowed higher contributions in some cases if you re aged 50 or older). For the most common traditional IRA, you can contribute up to $5,000 for 2006 and 2007 if you re aged 50 or above; otherwise the maximum is $4,000. Check with your tax advisor to determine the allowable contribution in your case. If you have an existing IRA that you want to convert to a precious metals account, you can easily transfer or rollover the funds to a qualified precious metals IRA custodian. When it comes time to take distributions from your IRA account, you can either convert your physical assets to cash for withdrawal or take delivery of the coins held in the vaults in your name. Of course, the same penalties apply for early withdrawals that would be applicable with any other IRA account. As with any IRA, there are some nominal fees involved to open the account, along with an annual management fee. Call your account representative today toll free... (800)

3 RECOMMENDED CHOICE FOR IRAS: AMERICAN EAGLES Among the choices of precious metals you can now put into an IRA, our recommendation without question is the tried and true American Eagle. In fact, the gold, silver, and platinum American Eagles are the only coins we recommend for IRAs. Though relatively young as coin series go, the American Eagle precious metals coins are well on their way to achieving status as classics. Since it was introduced by the United States Mint in the mid-80s, the American Eagle program has multiplied in popularity among both investors and collectors. As an example, the U.S. Mint reported recently that seven of the 11 options for the Uncirculated 2006-W American Eagle gold, silver, and platinum coins completely sold out within weeks of issue. Bullion American Eagles Congress authorized the launch of the American Eagle bullion coin program in 1986 to provide investors a convenient way to add gold and silver to their portfolios. It gave America a competitive entry in the world bullion coin market dominated then by the Canadian Maple Leaf, South African Krugerrand, and others. The Internal Revenue Service qualifies American Eagles for inclusion in IRAs (Individual Retirement Accounts). The highly positive response to the gold and silver American Eagles prompted the Mint to add platinum bullion coins in Commonly referred to as business strikes, bullion American Eagle coins are valued according to their weight in a specific precious metal, with only a small premium above the current market rate for the metal. The value rises and falls according to the underlying metals market as well as the condition rarity of the specific item and the prevailing market in each. What distinguishes the American Eagle bullion coins is that they are the only ones whose weight, content and purity are guaranteed by the United States Government. That means no assay is required to buy or sell them, so they are easily convertible to cash. Proof American Eagles The program also includes proof specimens of the coins prized by collectors. Proof coins get special handling in the production process, which makes them more valuable to collectors. The burnished coin blanks (called planchets ) are manually fed into presses that are outfitted with special dies. Each coin is struck several times to raise the fine detail in the design, making the softly-frosted images appear to float above the highlyreflective mirror-like field on the face of the coin. White-gloved inspectors examine each coin for any imperfections cracks, scratches, smudges and then seal the coin in a protective plastic capsule. The sealed coin is mounted in a satin-lined velvet presentation case. An official Certificate of Authenticity is issued with each American Eagle proof coin. The difference between proof and bullion coin is in the special production and handling methods. A Full Measure of Precious Metal All American Eagles are monetized as legal tender (one of the qualifications for being legal for IRAs). That means you can actually spend them for the face value imprinted on the reverse of each coin. Of course, you would never do that, because the intrinsic market value of the coins is far greater than the face value, a purely symbolic denomination designated by the federal government to qualify them under the law as legal tender. Gold American Eagles are minted only from gold mined in the United States. Proof American Eagles may be ordered directly from the Mint, but bullion and certified business strike must be obtained through coin dealers - such as our company. They cannot be bought from the Mint. We also offer the proof versions. 3 Universal Coin & Bullion, Ltd Phelan Blvd. Beaumont, TX universalcoin.com

4 4 Gold and Platinum American Eagles proof or uncirculated grades are issued in four sizes one-ounce, half-ounce, quarter-ounce, and tenth-ounce. Silver American Eagles only come in the one ounce size in all categories. American Eagle Shown to Scale Each gold and platinum coin actually contains the weight of precious metal designated. Any alloy metals are added weight, so the coins actually weigh slightly more than their stated weight. 1oz For example, the one-ounce gold American Eagle contains one troy ounce of 22kt gold, but the addition of some traces of silver and copper for strengthening and metal-working characteristics brings the gross weight of the coin up to troy ounces. The silver American Eagles are fine silver with a gross weight of exactly one troy ounce. When you see oz. in reference to precious metals, you can assume it means a troy ounce. The troy ounce is the standard unit of weight for precious metals and is slightly heavier than a regular ounce. One troy ounce equals regular (avoirdupois) ounce. The $100 face value displayed on the platinum American Eagle is the largest coin denomination and the only one of this size in U.S. history. However, it is not the first $100 coin to be proposed. In the 1850s following the California Gold Rush, a denomination to be called the union was proposed with a value of ten $10 gold eagles. Prototypes for the $100 equivalent coin, along with a $50 half union were presented to Congress. Congress declined the proposal on the premise that the $20 double eagle was already a substantial chunk of money for the general public and the union and half-union coins would only be used for transfers between banks and other financial institutions. The $50 one-ounce gold and half-ounce platinum American Eagles are the only U.S. coins ever produced for circulation in this denomination, although a $50 commemorative gold coin was issued in The $25 half-ounce gold and quarter-ounce platinum American Eagles are also the first of that denomination. The following table shows the dimensions and gross weights of all the denominations of American Eagles. METAL SIZE FACE VALUE DIAMETER PRECIOUS METAL WEIGHT GROSS WEIGHT GOLD 1oz $ troy oz troy oz 1/2 oz $ troy oz troy oz 1/4 oz $ troy oz troy oz 1/10 oz $ troy oz troy oz PLATINUM 1oz $ troy oz troy oz 1/2 oz $ troy oz troy oz 1/4 oz $ troy oz troy oz 1/10 oz $ troy oz troy oz SILVER 1oz $ troy oz troy oz Call your account representative today toll free... (800)

5 HOW TO SET UP PRECIOUS METALS IRA Even though tax-filing time is right around the corner, you still have time to get a precious metals IRA account in action before the April 15 deadline for 2006 contributions. But you ll need to act quickly! It takes an average of two weeks to set up a new precious metals IRA account, so you need to do it now in order to make it under the wire for 2006 filing. The process is straightforward and will take relatively little of your time. You can get started with a phone call. We ll send you a diversification kit and application that gets you started easily. There s no minimum amount to start an account, and no minimum transaction limit. You ll need an authorized third party known as a Custodian or Trustee to buy the precious metals for you, take delivery of them, and store the physical assets in a federally-approved depository (neither you nor the seller can hold the coins). You provide funds to the custodian-trustee, who handles all the transactions for you. Bear in mind that not all IRA custodians qualify to handle precious metals accounts. The custodian must have approved facilities for handling and storing precious metals. We have a working agreement with Sterling Trust, one of the most respected companies authorized to manage precious metals IRAs. We recommend the Sterling Self Directed IRA. What distinguishes Sterling Trust from other precious metals IRA trustees is that they keep your coins segregated from those held for other people s accounts. You might not think it would make a difference with bullion coins like American Eagles, but certain dates command higher prices than others. So if you have coins with the more valuable dates, you certainly don t want them commingled with other less valuable dated coins. You can direct the purchases yourself through us, making selections from our listings of the recommended coins qualified for IRA accounts. Just remember to tell us that the coins you re purchasing are for your IRA, and we ll handle all the transaction details and communications with Sterling Trust. ACT NOW... April 15th is just around the corner! Having at least a portion of your normal investment portfolio hedged (against inflation, dollar devaluation, geopolitical strife, etc.) with a component of precious metals makes a smart strategy. So the same prudence should apply to your retirement account planning. Having an IRA qualified for precious metals investments allows you to structure the same kind of portfolio asset allocation that you maintain (or should maintain) in your day-to-day investing strategy. If you have not yet made an IRA contribution for 2006 and would like to put it into a precious metals account, I encourage you to make the call today to receive your easy to follow, IRA kit absolutely free. Time is short. Milton s Rule: No Free Lunch One of the late Milton Friedman s best-known (and my personal favorite) pearls of wisdom is this one: There s no such thing as a free lunch. It s so oft-quoted that we should call it Milton s Rule. In investing, the corollary to Milton s Rule is this: There s no such thing as a sure thing. Many investors tend to forget this axiom or shove it into the background of their minds, especially when a mania hits. They buy something believing with absolute certainty they will make a lot of money when they sell it. Most investors, except for short-sellers, by nature tend to be optimist. Nobody ever buys an investment asset believing it will lose value. So the very act of buying a stock, or a bond, or a piece of real estate, or a gold coin generally implies a belief that it s going to become more valuable. Obviously, it doesn t always happen that way, as most of us have learned through painful experience. The natural order of things is that markets rise and fall, and individual assets within a given market gain or lose value, not uncommonly separate and apart from the broader market trend. As I have said over and over again in these newsletters, as did Mike Fuljenz before me, every investment transaction presents the opportunity for reward, but it also comes with an element of risk. Some investments offer much higher reward potentials than others, but usually come with greater risk as well. The greater chance you take, the more you can win but also the more you can lose. Both Mike and I have repeatedly advised that you never invest money you can t afford to lose. In this respect, rare coins are no different than other asset classes. Over the long term, rare coin values tend to rise, for the simple reason that by definition they are scarce and more people want them. However, coin markets are not immune to fluctuations and sometimes will have dips, corrections, and reversal like any other kind of investment market. Furthermore, individual coins at any given time may behave differently than the general rare coin market. Publicity about a certain coin selling at record prices may tend to raise values for other coins of the same type. Conversely, the discovery of a previously unknown hidden cache of a particular type of coin can suddenly depress values of that coin with the flood of new supply. When you re contemplating buying a rare coin, apply the same due diligence you would use in making any other investment decision. The information provided by your account representative, who receives frequent and regular briefings on current market activity and trends, can be of immeasurable help to you in making an informed decision about buying rare coins. We constantly analyze the macroeconomic and market factors and inform you about what the data indicates is most likely to happen with gold values and rare coin values. Our track record shows that more often than not we re on target. However, the gold market is like the weather in this respect: It doesn t always behave according to the forecast. Ultimately, of course, you have the final say on what opportunities you choose to pursue and the amount of risk you re willing to chance. We can assure you that you will get fair value for your money when you buy a coin, but no one can guarantee what its future value will be. It s true there s no free lunch and there s no sure thing in investing in rare coins. But with the thoughtful information we try always to provide and a full awareness of the risks involved, you have a much better chance of being right than being wrong when you buy a rare coin. 5 Universal Coin & Bullion, Ltd Phelan Blvd. Beaumont, TX universalcoin.com

6 Words to the Wise Retirement is expensive. Experts estimate that you ll need about 70 percent of your pre-retirement income lower earners, 90 percent or more to maintain your standard of living when you stop working. Today, only 42 percent of Americans have calculated how much they need to save for retirement. The average American spends 18 years in retirement. - Employee Benefits Security Administration, U.S. Dept. of Labor On the road to a comfy retirement, many folks hit detours. Job loss, divorce, illness, disability Whatever the reason, many baby boomers are just now waking up to the fact that they are underfunded for retirement. Some 58% of Americans age 55 and older have saved less than $100,000 Only 19% have saved $250,000 or more. If you're fiftysomething and underfunded, it's time to take bold action. You must radically improve your savings strategy fast and perhaps adjust your expectations for retirement. - Stephanie AuWerter, SmartMoney.com In a 2006 survey, even though 73 percent of retiree's indicated that they think they will have enough money for a comfortable retirement, 42 percent admitted that they are more concerned about their financial future than they were when they first retired Retirement Confidence Survey, Employee Benefit Research Institute The glitter of gold is always tempting particularly for investors worried about uncertain stock markets, global hot spots, increasing inflation, and the continuing weakness in the U.S. dollar But precious metals' value as a means of diversification is where you should really focus your attention if you're worried about the weakening U.S. dollar and inflation, then gold may be a good bet for a small portion of your portfolio. - Gordon Powers, Sympatico/MSN Finance To get an idea of what can happen over a period of 10, 20, 30, or 40 years, look back that far into the past. Wars. Inflation. Recession. Oil embargoes. Stock market corrections. Diversifying your retirement portfolio with precious metals can be an insurance policy against such events, and could yield large profits in a variety of circumstances. - Coin Connoisseur Coming In the APRIL Issue... Next month, Paul Montgomery explains why patience is a virtue in gold coin investing, even and especially during short term dips in the long term mega-trend bull market for gold. Universal Coin & Bullion welcomes the opportunity to be your rare coin team. Call toll free today... (800) Est Universal Coin & Bullion, Ltd Phelan Blvd. Beaumont, TX universalcoin.com Board Member: ICTA / Member: PCGS, NGC IMPORTANT DISCLOSURE NOTIFICATION: In the opinion of the Publisher, all statements made herein by third parties are believed to be reliable, truthful and accurate to the best knowledge of the Publisher. However, the Publisher disclaims and is not liable for any liability or losses, which may be incurred by other third parties, while relying on information published herein. All readers of Investor s Profit Advisory are encouraged and advised to independently verify all representations made herein, or by its representatives, before making investment or collecting decisions. Universal Coin & Bullion wants you to carefully examine the collectible coins you ordered. Except for special orders, bullion related items and trades, if you are not 100% satisfied with the value of your purchases, please return them in the original packaging within ten days of receipt for a refund. Other returns of numismatic items may be subject to restocking fee of up to 20%. Our policy is that payments for coins received and confirmed for liquidation or refund by UCB will be processed and sent in business days after receipt and confirmation unless specified otherwise in writing by management. Please read important terms and conditions that may accompany any purchased products. Some experts may recommend that in typical times, a diversified investor s portfolio contain a rare coin or precious metals component of 5% minimum to 25% maximum. The collectible coin market is speculative and unregulated. Many areas of numismatics lend themselves to third party grading and authentication. Certification does not eliminate all risks associated with the grading of coins. Coin collecting recommendations are meant for those who are financially suited for the risks and holding times involved, which may span up to 5 years, or possibly more. We encourage you to not overextend yourself in your numismatic pursuits. Past performance is not a guarantee of future results. Universal Coin & Bullion, its principals and representatives do not guarantee a profit, or guarantee that losses may not be incurred as a result of following its coin collecting recommendations, or upon liquidation of coins bought from Universal Coin & Bullion. They may also have positions in areas they recommend. We may contact you from time to time regarding items of interest. Subscribers should not look at this publication as giving legal or investment advice. Customer agrees the exclusive and mandatory venue and jurisdiction of any dispute or suit arising between Universal Coin & Bullion and customer shall be in a federal or state court located in Jefferson County, Texas. 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