Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Investors Warning, Despite Record Prices Your Holdings May be Worth Less Than You Think

Commodities / Gold and Silver 2010 Oct 14, 2010 - 06:53 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleKeith Fitz-Gerald writes: Record gold prices are becoming an almost-daily headline, with the "yellow metal" making a run at $1,400 an ounce. And while this is great for the investors who are along for the ride, there is an important caveat - your gold may not be worth as much as you think it is.

Moreover, because of the tax consequences of ownership, chances are it'll never add up to what those guys hawking gold coins on late night TV lead you to believe.

But that doesn't mean you shouldn't invest. With an estimated $202 trillion in unfunded pension liabilities and the global public debt clock ticking higher, I believe gold and other precious metals should be a part of every investor's portfolio.

I believe gold is going to double in the next five years and am not alone in my expectations that all metals will be much higher - not in a straight line, mind you, but higher than their current values. Legendary investor Jim Rogers and U.S. Global Investors Inc. (Nasdaq: GROW) Chief Executive Officer (CEO) Frank Holmes are just two of the experts who have voiced similar opinions about higher gold prices in the future.

So what's the problem?

According to the Internal Revenue Service (IRS), gold is considered a collectible - a capital asset with its own tax rate. This makes it no different from art, antiques, stamps, certain coins, wines, or your favorite single-malt scotch for that matter.

No doubt this will come as a rude surprise for millions of people who think they are investing in the precious metal. And if you think this isn't a big deal, think again.
Gary E. Ham of the Beaverton, Ore.-based accounting firm of Jones & Ham P.C., notes that gold does not qualify for the 15% minimum tax bite that many investors consider routine when calculating gains on investments held more than a year (by that I'm referring to long-term capital gains).

Instead, profits from gold investments are subject to a 28% maximum tax rate if held for more than 12 months. And, if those investments are sold in less than a year, the profits from gold count as ordinary income, which can also be taxed at far higher rates. (And those "higher" rates could become a whole lot higher in the future, depending upon what strategies present and future White House administrations resort to in order to deal with the mounds of debt U.S. taxpayers will be financing for generations to come.)

On the bright side, taxes aren't triggered until there is a "taxable event," meaning you buy or sell your gold.

It's worth noting that the same is true for losses in that you can't use them to offset other taxes if you haven't actually had a taxable event.

However, the same is not true for investors who chose one of several popular metals exchange-traded funds (ETFs) like the SPDR Gold Trust (NYSE: GLD), the iShares Silver Trust (NYSE: SLV), or the iShares COMEX Gold Trust (NYSE: IAU). Holders of these investments can be held accountable every step of the way.

Precious metals ETFs are set up as something called a "grantor trust," according to Barron's and the IRS. This means that ETF investors are treated as owning undivided interests in the actual metal that's owned by the fund. Therefore, when the ETF sells some of its gold for any reason, investors are liable for gains or losses from the sale. And this has to be reported to the IRS as part of gross income even if a cash distribution from the sale is never received.

There also are wrinkles depending on how an ETF achieves its objectives. For instance, both the PowerShares DB Gold Fund (NYSE: DGL) and PowerShares Silver Fund (NYSE: DBS) use futures contracts to mimic underlying direct gold investments.

This means that they fall prey to something the IRS calls the "mark-to-market" method, which stipulates that any futures contracts held at the end of a calendar year will be treated as if they were sold at fair market value. This is called a "deemed sale."

Where this matters to investors is that each shareholder is then, in turn, liable for his or her pro-rata share of the taxes on the deemed sale even if the underlying asset (the futures contracts the fund owns) haven't actually been sold.

The one area of wiggle room still left to investors who want to own precious metals funds, and who also want to potentially mitigate the tax impacts of doing so, is to hold such investments in their IRAs or 401(k) plans.

But - and I often get this question - coin collectors should note that regular gold coins don't qualify. The IRS says you can include only 24 karat gold bullion and coins demonstrating a 0.995+ fineness and silver coins and bars with 0.999+ fineness in tax-deferred accounts.

If you're beginning to get the idea that the IRS wants a piece of your hide no matter how you invest in precious metals, you're right. That's certainly the case, and I can't possibly cover all the scenarios, so I'll end with one final thought.

No matter whether you are just beginning to invest in gold or have established a meaningful position in the precious metal, please take a minute to talk with your accountant or tax professional.

If gold doubles in five years or less - as I expect it will - the last thing you'll want to do is hand over a sizable portion of your gains to Uncle Sam just because you made the right decision to preserve your wealth.

[Editor's Note: Commentator and best-selling author Keith Fitz-Gerald has maintained a perfect record with his Geiger Index advisory service. If you missed out on all or part of that run, don't despair: Subscribers to his newest service, TheMicroQuake Alert, will be able to benefit from the insights of one of the shrewdest investors in the marketplace today. To find out more about MicroQuake, please click here.]

Source :

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


14 Oct 10, 21:18
Fools Gold: "Death Through A Thousand Knives"

Money Morning is sure correct on that point: "Your holdings may be worth less than you think". If one just expected to be fleeced and scourged only whenever he traded the metal, he can guess again.

Uncle Sam will burn him at the stake. If he doesn't get gored and crucified by the tax man at the unfortunate time he should dare to sell the metal (indirect confiscation), he'll face a stabbing through a thousand knives when the government ultimately confiscates the gold outright.

Surely one can hold precious metals funds through his IRA or 401K plan as Money Morning suggested; it's just as sure that the U.S. government will confiscate those retirement plans.

Take my word for it. Some of these pundits mean well but it's better to play ball with Uncle Sam than trying to outsmart him; he'll get you every time. Take a cue from me and just buy TIPS. Then you can plan on that second home.

15 Oct 10, 03:41
gold - tax - confiscation

Hi Keith,

you might be right if you buy gold as an investor like other investors buy bonds or shares to realize profit.

I think that it is normal to get taxed in this situation.

But if you buy gold as an assurance against hyperinflation, state default etc. it might be different.

If you buy gold and then you "burry" and forget it until the case arrives the world will look different afterwards.

In a Weimar-situation when money was worth nothing precious metals will be traded untaxed in barter systems locally as money.

And even if you sell officially one day and you have to declare it next year in your declaration for the finished year it doesn't matter because if you sell today for 10000$ with a profit of 9000$ (let's say equal to 1000 donuts) - in your tax declaration a half year later your 9000$ gain will be inflated to only 1 donut where is the problem to give this old donut to the taxes if you have in meantime eaten the other 999 ?

This is the reason why in german Weimar-inflation (1921-1923) and in the french assignate-inflation (1791-1796) the expeditures of the gouvernment was only covered by less than 1% by taxes the other 99% were covered by the printing press.

It is also the question in a situation like this if there would be a central government anymore with enough autorithy and tax-men to takes taxes.

I think the americans are very "marked" by the confiscation of Roosevelt. But in reality less than 30% of all gold was confiscated (given by the people against $20.67 in paper per ounce) the other stuff was burried and forgotten til 1971 or brought abroad or traded under the table. Take an example in the behaviour of your grandfathers if you see a problem.

The situation today is also very different to 1933 when gold was more then 20% of all capital now it's less than 1%. In 1933 gold was money (legal tender) and nearly everybody had gold. Now gold is no money (yet) and less than 1% of the people owns some gold as investment. It is doubtful that the gouvernment will take special methods for this "little" amount people and money (except in case of system default).

A confiscation of gold would be the ultima ratio and a confession that fiat money is broken - THIS IS THE DECLARATION OF SYSTEM DEFAULT! Therefore we won't see this before - and in case of a system default there is perhaps no tax-system anymore (for some time) and nearly nobody will give his gold away for worthless declared paper (this wasn't the case in 1933).

I think that within 5 years gold will be very much higher than the double of today - if there is the $ anymore.

Greetings from Germany


Shelby Moore
15 Oct 10, 04:07
tax reaper cometh

Rick, I agree with you on tax risk, and of course the retirement accounts will be raided by the bankrupt governments eventually. Remember I wrote an article about that, "End Game: Gold Investors Destroyed":

However, TIPS will not help you in the end game, for two reasons at least:

1. They underperform the actual price inflation, because CPI is underreported:

2. At the end game, all bonds will be rendered effectively worthless, as will all fiat.

There is going to be a period of chaos between when the new world order gold-backed currency is established, and during that time, it is likely that gold will be expendable in black markets wherein people might choose to not report sales to tax authorities. I am not advising people to do that, it is an individual decision.

Of course, eventually the tax man will come looking at your assets (houses, etc) and try to determine if you avoided reporting taxes. There is even talk in UK now of accessing people taxes at what ever level the UK tax agency deems to be the "fair share" of that individual, regardless what the tax law actually says is due.

The bottom line is we are sliding into socialism with some fascism and theft and fraud is on the rise. This is the environment where individuals have to fight to survive and retain their net worth. Gold is the only way to do that, not even silver can be compactly hidden and transported.

We are all going to be illegal in the eyes of socialist and fascist slide into failure by the masses:

This is a slide into war and chaos. This is the time you must own gold and pray.

The other suggestion I have is to leverage up on communications technology and try to have a cash income business on the internet which is based around some aspect of the social and fascism trend.

Mankind is going to have to fight his way through this period. TIPS are just paper from the socialist and fascist government. Don't expect your country to love you Rick. Your country is going to eat you up and spit you out. It is not personal, it is just that the citizens are bankrupt and will demand the government steal in order to maintain their retirement. I also suggest you read Gary North's latest article, he got most of it correct:

What he may not grasp is the level of chaos, teeth gnashing, fighting, stealing, etc, that he is writing about, that will occur before we come out the other side into renewed prosperity. That renewed world order is going to be from a much lower level, as the global economy will reset with a implosion of China due to their Yuan peg mis-allocation of capital, etc.. North is correct, we have about 1 to 2 decades of chaos ahead to correct the imbalances in the global economy and the youth to push the boomers over the cliff. I expect universal health care will turn into a form of universal euthanasia, which is basically what happened in Nazi Germany:

15 Oct 10, 12:09
Bought Gold/Silver

I bought gold/silver in 2005 & I am one of the lucky few who made a profit. Living in 3rd world countries enlightened me to take this bold stop.

The Democrats want to tax everything & take all of our money. It's time to take a stand by all Americans. Remember, it was a Tea Tax that started the 2nd American Revolution.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in