Fears of inflation are everywhere, and this is where many investors turn to precious metals because they are considered safe havens during times of uncertainty and economic meltdown. For centuries, civilizations considered gold and silver to be valuable, and the sentiment didn’t change even today.
Investors are now asking whether a precious metals investment makes sense, and the answer is YES. Now, before you open an account that allows you to keep gold, silver, platinum, and palladium in your retirement portfolio, there’s something that you need to know about before investing your hard-earned money in bullion that you can know more about on this page.
How to Start Your Investment Journey?
1. Buy Physical Bullion
Online shops, government mints, brokerages, wholesale dealers, and pawn shops allow you to buy gold coins and bars that have over 99.5% purity and fineness. Most bullion will have the manufacturers’ name stamped on them, and they will also give information like their purity and weight on the surface. Bars can range from a tenth of an ounce to one kilo.
Rounds can vary in designs, sizes, and shapes, and some investors are actually paying a premium for the collectors’ value, engravings, and other designs of these. It’s also common for many countries to make them as legal tender, but their spot price is sometimes more than their face value. They are more convenient to keep than the actual currency because their prices can increase along with the commodities.
Buy something that’s tangible and only gets deals from banks and other sellers who are reputable. Local sources will also give you a wealth of options, and in some cases, you can also get other metals like rhodium and palladium that may interest you. These also have various industrial uses like in catalytic converters and water treatment so you’ll know that they are not going to lose their value anytime soon.
2. Stocks Are Not the Same as Actual Precious Metals
You might have heard of mining stocks and bonds that are related to gold. However, they are not essentially the same. Companies like the Oxford Gold Group can offer a more secure retirement account option where you can get tax advantages and receive gold bullion even when you’re no longer working.
However, so many companies that are more focused on the company management and production of precious metals may not be a good choice, especially if you haven’t made any background checks about them. Stocks will give you passive returns and dividends, but they tend to also decrease in value when the markets fall so always be on the lookout for the prices.
3. Correlation to Fiat Money
Inverse relationships are common in investing, especially in the case of gold and the US dollar. Prices can move in two different directions, and when the value of the fiat currency rises, it can result in lower demand for the precious metals. The same is also true when many people think that the value of their money is getting eaten away by inflation.
A weak dollar will mean more support for gold, and this can increase its value during times of economic downturns, the precious metals can be a safer investment that’s worth considering. You’ll essentially have an asset that goes up when the others are coming down.
4. Taxes Are at a Collectible Rate
One of the benefits when it comes to precious metals investing is that your holdings are essentially going to get treated as collectibles and will be taxed accordingly. These include the mining stocks, ETFs, closed-end funds, and physical stamped bars & coins that you might be holding.
You’re going to essentially receive a more favorable rate that’s lower than the marginal or standard ones. However, when it comes to selling, it can be a different story where the capital gains rates are capped at 28%. Regardless of your short and long-term plans, you should talk to the experts, so you can make tax preparations accordingly. Read info about the taxes.
5. No Consistent Returns to Expect
Tangible assets can be handed down to the next generations, and getting a gold bar is saying something. This allows you to hold wealth in your hands, and you don’t have to worry about your portfolio going into a downward spiral overnight when you’ve at least invested around 5% to 10% of your holdings into precious metals.
However, it has its downsides too, where you will not get any consistent returns, dividends, and outputs if you have a long-term hold in gold. On top of that, you also have to pay for brokerage fees, custodians, insurance, and storage costs. Your coins and bars won’t breed more if you keep them in a vault, and precious metals are deriving the entirety of their returns from price movements. This is where you should buy low and sell high, so it will work well for your situation.
6. Premium Fees Apply
Buying precious metals will mean that there are extra charges that you should be aware of. This includes premiums and other markups that are not included in the current spot price of gold in the market. Labor, shipping, storage, and other costs can accumulate, and the gains are not often realized until you decide to sell it.
Before deciding to buy several bars, you should see if this is a sound investment for you according to your risk appetite. This does not discourage you to buy precious metals, of course. You just need to have a realistic view of what you’re getting into before taking the plunge.
7. Scammers May Usually Offer Certificates
Paper gold is available online, and it can be in the form of certificates. You’re not actually holding or seeing the bullion where you’re invested, and many con artists will sell the same thing to multiple people. During an emergency, you’ll find that you’re not the only one trying to cash in, so be careful with these operations.