submitted by jwithrow.
Investing in gold and silver bullion is, believe it or not, much easier than investing in stocks, mutual funds, exchange-traded funds, or bonds.
If the concept of investing in gold and silver seems strange to you, it is only because the financial media has marginalized the precious metals in order to sell more paper equities and the mainstream media has associated the precious metals with paranoid dooms-dayers. And apparently you haven’t been reading our little blog here.
You see, gold is money. It has been for all of recorded history.
You can’t pay your taxes with gold because your government knows that no one would want government currency if you could. And then your government would be in big trouble.
We talk about the ‘why’ in more detail here and here so now let’s look at the ‘how’.
Gold and silver bullion is available in the form of coins and bars of varying weights and measures and purchases can be made either in person at a reputable coin dealer or online through an internet dealer.
The advantage of buying from a local coin dealer is that you can pay in cash anonymously and you can potentially develop a working relationship with the dealer. The downside is that you will have to pay your state sales tax on all bullion purchases made at a local dealer.
The advantage of buying online is that you don’t have to leave your home and you can avoid the state sales tax (for the time being, anyway). The downside is that you cannot purchase anonymously and there is a delay between purchase and delivery.
Gold and silver bullion can also be sold back to the same dealers – be sure to research their individual policy.
The IRS currently classifies precious metal bullion as a collectible and thus taxes the gain on sale at the collectible rate which is 28%. Keep this in mind if you choose to invest in gold and silver bullion, especially if you sacrifice anonymity and purchase online. Also, be sure to stay updated on the current tax laws regarding gold and silver bullion as they could change at any given time.
There are many strategies when it comes to investing in gold and silver but a general rule of thumb is to stay away from unique collectibles (numismatics) unless you are very knowledgeable in the field. The reason being is that numismatics carry a much higher premium than standard bullion from well-known mints but there is a much smaller market for these rare coins and thus they are much less liquid.
Our favorite strategy is to dollar-cost-average into both gold and silver periodically at the ratio of one American Gold Eagle to twenty American Silver Eagles.
