Best way to invest in Gold and Silver

Investors use Precious metals to store value, hedge against economic disturbances, and diversify their Portfolios. Held long enough, these Investments may also appreciate in price, producing some hefty profits when sold.  

Bullion 

Then there are tax considerations. The IRS taxes most Precious metals at the collectibles tax rate, meaning you’ll pay up to 28% of your capital gains to the government.

Government-minted Bullion is usually eligible for IRA Investments which means you can use your tax-advantaged retirement savings to invest in physical Gold and Silver. With an IRA you can avoid the 28% tax rate and know that your metals are securely stored with an IRS-approved Custodian.

PROS

• Tangible ownership of physical assets

• Available in a range of types, weights, and purities

• Bullion is highly liquid

CONS

• Dealers charge markups for purchase and then repurchase at a discount

• Storage and insurance costs

• Taxed at collectible rate (unless held in an IRA)

• Physical metals don’t generate revenue

Bullion bars 

Bullion Coins 

Collector’s Coins carry additional value on top of the price of the included metal. Some of the highest-priced Coins were minted prior to the U.S. government removing Gold Coins from circulation in the 1930s. These Coins, typically referred to as “pre-1933 Gold Coins”, can attribute half or even more of their price to their current desirability as a collectible item. Collector demand is a variable factor that clouds the valuation of these Coins.

If you want to add Precious metal Coins to your IRA, you’ll have to be much pickier: the IRS doesn’t permit collectible or Numismatic Coins as retirement Investment assets. Instead, you’ll have to choose regular Bullion Coins and these Coins must meet strict IRS purity, weight, and country of origin requirements.

Most IRA-eligible Coins are minted in recent years and priced closer to their actual valuation. Their IRS-approved status means they’re more widely-circulated and thus more liquid. Examples include these Gold and Silver Coins: American Eagles, Canadian Maple Leafs, and Austrian Philharmonics. 

Bullion rounds 

PROS

• Several beautiful designs and metal types available

• May be cheaper than government-minted Coins

• Value determined by metal weight and purity

• Widely available

CONS

• Not considered legal tender

• May not be IRA-eligible

• Physical metals don’t generate revenue

There are, however, some drawbacks to investing in Precious metal stocks. To begin with, their prices tend to be volatile. They rise and fall along with metal prices, but investor sentiment and company success (or lack thereof) also affects their valuation. 

Also, there are more than 2000 companies involved in exploring for and mining Precious metals. Only a handful of these companies are (or will be) successful. Sorting the wheat from the chaff requires specialized knowledge so most investors in this sector should stick with well-known, proven companies.

While Stocks are riskier than buying physical Precious metals, they do provide another way to potentially profit from Silver and Gold. 

PROS

• Diversify your paper Portfolio with exposure to tangible assets

• May generate dividends and price appreciation

• More flexible than taking possession of physical metals

CONS

• Prices don’t directly correlate to metal values

• Prices can be volatile

• Must vet companies

It is important to note that some Precious metal ETFs and Trusts are taxed as collectibles, meaning you won’t benefit from lower long-term capital gains rates. You may also be surprised with an unexpected tax expense caused by the ETF or Trust selling assets.

PROS

• Highly liquid and convenient

• Can invest in small dollar amounts

• May be cheaper than storing and insuring physical Bullion

• Diversify your paper Portfolio with various levels of tangibility

CONS

• Doesn’t give you access to physical commodities

• You can’t claim or redeem shares for physical metal (the threshold for redeeming shares is very high)

• Funds may stray into unrelated assets

• Bullion-backed ETFs may be taxed at higher rates

• Unexpected tax expenses caused by the Investment vehicle selling assets

Most investors, however, don’t get that far. The bulk of futures profits are tied up in buying and selling the contracts themselves as prices fluctuate. Very few futures buyers take delivery of physical metal. For buyers that do hold contracts to maturity, sellers typically settle in cash and deliver the metal to a registered Depository.

By contrast, options on futures contracts give buyers the right, but not the requirement, to buy an asset under similar conditions. In this way, options contracts provide the same leverage as a futures contract without the risk of being forced to take delivery of the Precious metals.

Both types of derivatives are considered risky and speculative, and typically should be left to advanced investors. 

PROS

• Can produce hefty profits

• “Paper assets” don’t require storage or insurance costs

• Relatively liquid

CONS

• Involves significant financial risk

• Values are highly volatile because of the leverage involved

Certificates come in two styles:

• Allocated (fully reserved) certificates set aside a specific quantity of Bullion that is stored in your name

• Unallocated (pooled) certificates don’t correspond to specific Bullion – when you redeem your certificate Bullion is pulled from the mint’s operating supply of metal

Some investors buy certificates because they cut down on the burden of owning physical Bullion (storage and insurance costs, risk of theft, etc.). However, certificates are not risk-free: as glorified IOUs, they are not legal tender and they are only redeemable at the issuing mint. Additionally, Bullion banks don’t always have enough Bullion on hand to back their certificates. 

PROS

• No responsibility to arrange storage and insurance

• Lower markups to acquire metal

• Provide another pathway to physical Bullion ownership

CONS

• Bullion banks don’t always keep promised Bullion on hand

• If the bank goes bankrupt, you may not recover your Investment

• Banks may charge premiums over the spot price

• May be required to purchase large minimum amounts

• No direct ownership prior to certificate redemption

Several online marketplaces now permit investors to securely buy, sell, and redeem digital assets backed by Gold and other Precious metals. They strive to marry Precious metal fundamentals with the ease and modernity of blockchain-based technology.

PROS

• Portrayed as convenient and easy to access

• Brings the Gold standard into the modern age

• The blockchain is typically touted as incredibly secure

CONS

• Some investors think Bullion-backed tokens defeat the purpose of metal ownership

• Blockchains have been hacked before

• Can’t exchange your tokens for physical metals

We believe the best way to invest in Gold and Silver is to have a little bit on hand and then trade some of your paper retirement assets (Stocks, Bonds, Mutual funds) for the security of physical metal.

You can purchase physical metal at your local Coin shop and this is the method that we prefer. Develop a personal relationship with the store and they will take good care of you. You can also purchase Precious metals online from Bullion dealers like APMEX or JM Bullion.

There is only one way to purchase and hold Silver and Gold using your tax-advantaged savings: a self-directed Precious metals IRA.

With a Gold and Silver IRA, you can invest in physical Precious metals using your tax-advantaged savings. Although you can’t touch the Bullion in your IRA until retirement, you can rest easy knowing it’s pure and safe in an IRS-approved Depository.

Related articles:

I want to invest in Gold and Silver

Will Silver be worth more than Gold

How does a Gold and Silver IRA work

Related links:

Satori Traders LLC

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San Diego, CA 92107

Phone: (619) 320-1900

Website: https://satoritraders.com/precious-metals/gold/ira/way 

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