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3 Things You Should Know About Gold

This precious metal is used as hedge to a failing economy, which is why smart investors diversify their portfolios with it. Although it is not being used as the primary form of trade anymore, it is still legal tender and can be used to buy products and services in most countries around the world.

We have featured an article on reasons to invest in gold. However, before you begin buying more of the commodity, you might want to know some of the things that are involved in it, as well as options that you may want to consider.

Physical Gold is Taxed as a Collectible

Gold investments in the physical form (bars or coins) and gold-backed ETFS are both counted as collectible. This means that when you sell your gold, you have to pay taxes on the gains that you’ve accumulated from it, which is more than 25%. If you invest in gold using your retirement account (IRA), the taxes for gains are much lower.

You Can Have Gold Reserves in Other Parts of the World

Investing in the metal doesn't necessarily mean that you have to ship them all back to your safe at home once a deal has been struck with your broker. Today’s investors can take their cue from Germany, the world’s second largest holder of gold. Apart from its reserves at home, the country holds some gold bullion in Paris and New York vaults. Germany originally held gold assets outside its home in order to access them in case war breaks out from an invading country. Investors whose home is prone to political turmoil are advised to have gold holdings abroad. Buying gold abroad and storing them in different parts of the world are much easier now thanks to the creation of bullion markets online. In addition to making an investment, gold is cheaper now compared to its peak in 2011. For $1,200 per ounce, an investor can make precious metal investments and store them in secure vaults around the world.

Going short term or long term?

Short term investors usually hold their gold investments for two years before making a sell. This provides investors a window to buy on a pull back and sell when the prices skyrocket. It also allows people to enjoy long capital gains on profits before paying taxes for gains from gold holdings in less than a year.

Long term investors, on the other hand, are those who hold gold for  5 – 10 years. If recent historical data has taught anything, it’s that gold rewards those who patiently wait. In 2001, gold’s price per ounce was merely at around $250. Ten years later, gold sold at above $1,800.

Before making an investment in gold, make sure to research everything about the precious metals market first. There are reasons to invest in gold but you should also know the responsibilities and options that are associated to it.

What do you think about Gold as an investment? Join the discussion here.

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