Many investors turn to physical gold bullion as an insurance policy against economic unpredictability, yet before making this investment, you should learn more. Here are three facts you need to keep in mind before purchasing this asset class.
First of all, home storage of physical gold can be dangerous if the economy declines significantly. An alternative would be depositing it with a depository facility – this will cost more due to storage fees but could provide peace of mind during an uncertain time.
No Dependence on a Government or Financial System
Gold differs from stocks and real estate investments in that it doesn’t generate interest or dividend payments; in the long run, this may help keep its price steady in times of volatility.
Physical gold can be costly to own due to manufacturing, storage and insurance fees. Furthermore, it requires a secure place for storage purposes and cannot be quickly sold like many financial assets.
Gold can be an excellent way to diversify your portfolio, as its value remains consistent throughout its existence. Gold’s timeless nature makes it a powerful wealth preservation strategy; unlike stocks or real estate investments which may experience value decrease over time. As part of your diversification plan, consider keeping some gold outside your jurisdiction through professional vault storage; this could protect its value should any oppressive political regime arise that threatens it.
Confidential Transactions
Physical gold makes an invaluable and secure investment, unlike paper financial instruments like gold ETFs or SGBs that only exist as pieces of an unreal contract. Furthermore, its ownership cannot easily be stolen or compromised in any way.
Gold bullion can help mitigate risk in your investment portfolio by providing diversification from assets that are highly linked to the economy and financial markets, or act as a hedge against political or economic uncertainty.
Physical gold offers another advantage over other financial assets: It doesn’t carry the liabilities that other investments might. Since gold doesn’t owe anyone else anything, its owners don’t risk going bankrupt if it goes into default; and giving heirs access directly without tax ramifications from bank accounts can also have tax repercussions. Although storage fees for physical gold might be expensive compared to property or IRA storage fees; in addition, international storage could provide further protection from governments engaging in any aggressive political actions against it.
Inheritance
Veterans (and anyone else with significant holdings of precious metals) who want to pass them down more easily should develop an estate plan and will, keeping a detailed inventory and finding secure storage (in their home, vault or otherwise). It may seem more tempting to bury gold than find secure locations that allow quick access during an emergency situation; even though this might sound better.
Physical gold differs from paper investments such as stocks and shares by being tangible and free of counterparty risk. Institutions holding paper gold may find it hard to meet their obligations during times of economic turbulence; investors who own physical gold do not assume those risks.
If you inherit an enormous amount of gold, it is wise to work with a dealer who can provide invoices and serial numbers for both bullion and coins, as this will give a clear picture of their value when the time comes to sell it, which will also aid with inheritance tax purposes.
Taxes
Gold in many countries is not taxed; however, ETFs of gold may be subject to higher tax rates; in particular ETFs considered collectibles have an maximum tax rate of 28%. Furthermore, their physical backing may diminish over time due to management fees being applied against its actual holdings.
Conspiracy theorists or not, governments tend to overreach in times of economic or financial unrest. They can freeze bank accounts, garnish wages or confiscate assets.
Gold can help lower the risk of loss from these events because it has low to negative correlations with stock market volatility. However, owning physical gold requires additional costs such as storage and insurance costs that should be factored into your plans for investing in physical gold. Although these fees tend to be relatively modest in comparison with the overall costs involved with owning physical gold assets, you should remember to plan ahead for their secure storage expenses so as to be adequately covered financially in case something should arise that requires professional storage services.
