Buying Gold Coins vs. Gold Stocks: The Real Difference

Many investors interested in gold start by buying coins. It is intuitive. You can hold a gold coin in your hand, store it in a safe, and know that it will never go to zero. But Dylan Jovine’s BTM Gold War presentation makes a case that buying gold coins is the wrong approach if your goal is to profit from a gold revaluation. The real gains, he argues, come from owning the companies that produce gold, not the metal itself.

As we explain in our full review of the BTM Gold War presentation, the historical data supports this claim in ways that may surprise investors who have never looked at the numbers.

What Happened to Gold Coins in Past Rewrites

When FDR signed the Gold Reserve Act on January 30, 1934, gold was revalued from $20.67 to $35 per ounce overnight. That was a 69 percent increase in the price of gold, executed by decree, not by markets. If you held gold coins, you gained 69 percent. That is a solid return, but it is not transformative.

When Nixon closed the gold window in 1971, gold eventually climbed from $35 to $850 by January 1980. That was a 2,329 percent rise. If you held gold coins through that period, you made 23 times your money. That is an extraordinary return for a physical asset.

But here is what Jovine points out that most investors miss: gold stocks did dramatically better than gold itself in both rewrites.

The Gold Stock Difference

In the 1934 rewrite, while the Dow Jones collapsed 73 percent, Homestake Mining, the largest gold miner in America at the time, rose 474 percent. Dome Mines, the biggest gold producer in Canada, climbed 558 percent. Both companies raised their dividends straight through the Depression. In 1935 alone, Homestake mailed shareholders $56 per share in dividends on a stock that had cost $65 before the rewrite.

In the 1970s rewrite, gold itself climbed 276 percent in the final two years of the mania. But a basket of the top junior gold miners climbed 23-fold, a 2,200 percent rise, roughly eight times the metal. And the single best performer, a small explorer called Copper Lake, returned more than 100-to-1. Over 10,000 percent. Every $10,000 became more than $1 million.

Jovine summarizes the lesson: “When Washington rewrites the price of gold, cash holders pay for it, and gold-stock holders mint fortunes.” The numbers are 474 percent, 558 percent, 2,200 percent, and in the most extreme case, more than 10,000 percent. Gold coins returned 69 percent and 2,329 percent in the same periods. The stocks outperformed the metal by a factor of three to ten.

Why Stocks Outperform Bullion

The reason is leverage. When gold rises $100, a coin holder gains $100 per ounce. But a mining company gains $100 per ounce on every ounce in its reserves. If a company has millions of ounces in the ground, a $100 rise in gold prices rewrites the value of the entire deposit at once. The market does not just reprice this year’s production. It reprices every ounce simultaneously.

Jovine explains this in the context of the Arsenal, a company he describes as holding one of the richest open-pit gold deposits in the country. The company produces no revenue yet, but it owns millions of drilled, measured, and certified ounces. Every $100 gold climbs rewrites the value of the whole deposit.

There is also the permit moat. In America, obtaining permits for a new gold mine takes roughly 15 years of federal review, state review, water rights battles, and court challenges. The Arsenal survived this gauntlet. No competitor can appear behind it because the permits alone represent a barrier that would take decades to cross. For more on this, see our article on gold mining investment.

The Kinross Alternative

For investors who want gold stock exposure without subscribing to Jovine’s service, he gives away Kinross Gold (KGC) for free. Kinross is one of the largest gold producers operating on American soil, with a flagship mine in Alaska literally named Fort Knox. It trades near 12 times earnings, and Wall Street’s average price target sits at $40.24, about 74 percent above recent prices.

Kinross is a producer, meaning it profits from the price of gold. The Arsenal, by contrast, is what Jovine calls a weapon: it profits from the policy of gold. As he puts it: “Kinross rides the wave. The Arsenal is welded to the hand that makes the wave.” For more on Kinross, see our Kinross Gold analysis.

When Coins Make Sense

None of this means buying gold coins is a bad decision. Coins provide a store of value that cannot go to zero, cannot be hacked, and cannot be frozen by a government. They are insurance. In a true monetary crisis, physical gold is the ultimate backstop.

But if your goal is to profit from a gold revaluation, the historical record is clear. Gold stocks deliver multiples of what gold coins deliver. The trade-off is risk. A gold coin will always be worth something. A gold stock can go to zero if the company mismanages its operations or fails to bring its mine into production.

The 96-to-1 Gap

Jovine’s thesis rests on what he calls the 96-to-1 gap: the U.S. Treasury values its 261.5 million ounces of gold at the statutory price of $42.22 per ounce, set in 1973 and never updated. At today’s market price near $4,000, that same gold is worth over $1 trillion. That is a 96-to-1 gap between book value and real value. If Washington revalues that gold, the effect on gold stocks could be dramatic. For more on this concept, see our analysis of the gold revaluation thesis.

This is not financial advice. Always do your own research before investing.