What does one do with real gold?

[Jim Nickerson]

http://www.forbes.com/global/2006/0619/049.html

Jim

[Jim Nickerson]

]http://www.forbes.com/global/2006/0619/049.html (http://%5Dhttp://www.forbes.com/global/2006/0619/049.html)

Jim
The above url is to comments by James Grant, Interest Rate Observer, whose comments, when I chance upon them, I find thoughtful and out of the mainstream.

He is not the only one whom I see that recommends owning physical gold or silver. One fellow, http://sitekreator.com/Optimist/commentary.html, in one of his writings suggests owning silver dimes also.

My question is: rather much as an average American, i.e. not a zillionaire, how can a Krugerand or 50 or 10,000 real silver dimes help me?

Were I to have a pocketfull of gold coins or silver dimes or quarters, and go to the super market or gas station when inflation is 10-20%, how would these real monies help me?

The problem, as I see it with owning physical gold or silver is that there is no ready way to liquidate them except to take them to the nearest coin shop and see for how much it would pay for them. This strikes me as a high pain in the butt and impractical, but perhaps I am missing something or a lot.

Owning physical gold or silver, regardless of whatever price to which they may ascend is to me similar to owning stocks. If everyone figures how much they were worth at the heights of the markets in early 2000, very few people were worth whatever the number, unless they liquidated the stocks. For certain, not everyone could have liquidated their holdings at the top--there had to be some losers along the line, but on most days one could have liquidated most of one's stocks or mutual funds in a minute.

For average people who own real gold or silver to gain instuments of commerce (here it is the US $'s) at some point the PM's must be liquidated, and from what little I know, PM's are not what I consider higly liquid.

What do you think?

Jim

[EJ]

Jim, physical gold, silver and platinum are highly liquid. The Internet has lowered transaction costs considerably. You can sell to dozens of sites, such as:

http://www.scpm.com/index_flash.php

Buy/Sell spread is 3%.

Note that they will now buy for $574 while spot price is $565.

[Alfredo Dominguez]

For average people who own real gold or silver to gain instuments of commerce (here it is the US $'s) at some point the PM's must be liquidated, and from what little I know, PM's are not what I consider higly liquid.


Agree with Eric, not sure why you think PMs are illiquid. Look up a coin dealer in your area and conduct a transaction or two and you will find they are about as illiquid as a megacap stock and the effort is hardly a pain at all. (But then I do live three blocks from my coin dealer.)

[Jim Nickerson]

Agree with Eric, not sure why you think PMs are illiquid. Look up a coin dealer in your area and conduct a transaction or two and you will find they are about as illiquid as a megacap stock and the effort is hardly a pain at all. (But then I do live three blocks from my coin dealer.)
My reason for asking the question was that I had no experience whatsoever with holding physical gold. If one buys physical gold, what is the most efficient form to own? Little 1oz. bars, or coins such Mapleleafs, Krugerrands, or some other coin? Why is one form to be preferred over another?

[EJ]

Buy 1 oz bullion coins (don't fall for the pre-1933 dates confiscation crap) with the lowest premium. Back when I bought in 2001, that used to mean Krugerrand cheapest (politically unpopular and fully amortized marketing cost), U.S. Eagle second (buy USA), and Chinese Panda most expensive. Just noticed this is no longer true:

U.S. Eagle: $582 (live)
Panda: $563 (live)
Krugerrand $563 (live)

Interesting that U.S. Eagles now carry such a premium over Pandas and Pandas are at parity with Krugs. Not sure why this is the case.

No matter. They all have the same amount of gold, except the Krugs and Eagles are gold/silver alloys while the Pandas are pure.

Hope that helps.

[qwerty]

I always thought that the premium on Eagles in the US was because they are offcially US currency, and as such forgers would go to jail for a very long time in the US. Whereas forging Pandas might just be considered a crime that the Feds wouldn't be able to rouse themselves for.

Anyway, in all of this bear in mind also that the capital gains tax on physical precious metals has a high rate (25%, 28%). Compared to 10/15% for the GLD ETF.

[Jim Nickerson]

I always thought that the premium on Eagles in the US was because they are offcially US currency, and as such forgers would go to jail for a very long time in the US. Whereas forging Pandas might just be considered a crime that the Feds wouldn't be able to rouse themselves for.

Anyway, in all of this bear in mind also that the capital gains tax on physical precious metals has a high rate (25%, 28%). Compared to 10/15% for the GLD ETF.
If one sells GLD, there is a brokerage record and report to the IRS, if one goes into a coin store and buys or sells $3000 worth of 1oz. coins, is there any kind of reporting to the IRS? Are all buys and sells reported regardless of amounts, are there no reports, are there reports if only exceeding some limit?

[JD_]

Anyway, in all of this bear in mind also that the capital gains tax on physical precious metals has a high rate (25%, 28%). Compared to 10/15% for the GLD ETF.

While looking into the GLD ETF I came across this information in their FAQ.

5. How is GLD treated from a tax standpoint?
The United States Internal Revenue Service (IRS) treats gold as a collectible for long-term capital gains tax purposes. As such, gains recognized by individuals from the sale of streetTRACKS Gold Shares are subject to a capital gains rate of 28% if held for more than one year. This rule extends to all gold held by the Trust. Although there are some restrictions applicable to retirement plans such as IRAs and 401ks investing in collectibles, streetTRACKS Gold received a private letter ruling permitting investment by such retirement plans.

It seems at least this specific ETF is taxed at the collectibles long term capital gains rate of 28%.

[JD_]

If one sells GLD, there is a brokerage record and report to the IRS, if one goes into a coin store and buys or sells $3000 worth of 1oz. coins, is there any kind of reporting to the IRS? Are all buys and sells reported regardless of amounts, are there no reports, are there reports if only exceeding some limit?

This is what in is the FAQ for one of the precious metals dealers in Chicago.

Q. Why do you need personal information such as Social Security Number and Driver's Licence Number for some orders?
A. This information is needed to comply with federal regulations. All sales or purchases for more than $1000 require a Social Security Number, Driver's License number, State ID number or a Passport number for verification.

I guess you could skirt the issue by buying/selling in amounts lower than $1,000...until gold hits $1,000 an oz then you're out of luck!

[Jim Nickerson]

Thanks JD_

[javacat97]

From my (limited) understanding, there is no specific requirment for reporting gold sales, but there is the $10,000 monetary transaction report. Maybe the FAQ is missing a zero?

[metalman]

This is what in is the FAQ for one of the precious metals dealers in Chicago.

Q. Why do you need personal information such as Social Security Number and Driver's Licence Number for some orders?
A. This information is needed to comply with federal regulations. All sales or purchases for more than $1000 require a Social Security Number, Driver's License number, State ID number or a Passport number for verification.

I guess you could skirt the issue by buying/selling in amounts lower than $1,000...until gold hits $1,000 an oz then you're out of luck!

don't know if this applies to reporting gold sales but if you withdraw $10K or more from the bank it's also reported to the Feds, it's against the law for the bank to not report it... AND if you make several smaller withdrawls over a period of time soas to avoid getting reported, that's against the law, too!

[hayfield]

http://www.forbes.com/global/2006/0619/049.html

Jim

Anyone know if GLD is allocated or unallocated? In other words, can GLD loan out their stocks to a bunch of reckless shorts, and when the shorts get squeezed, GLD holds the empty bag, and shareholders lose?

[PeterM]

I don't hold gold yet, but from what I have read Kitco does not charge tax (don't ask me how that is organised :confused: but look at their website).
https://online.kitco.com/sellprice/Ordr_Faq.htm see bottom under miscellaneous

Alternatively if you are ever in Holland you can buy 'investment gold' here VAT-free (may be there are other countries too).
Investment gold means, non-numismatic coins and bullion that can be used as legal tender.

From what I understand from the tax laws you can legally cross international borders with gold without paying taxes as long as the cold is in legal tender coin form. Probably with a max, but you should consult your tax advisor on that.

Of course this info should not be construed as encouragement to do something illegal, or to try to obtain gold without the goverment knowing about it. :rolleyes:

[Jim Nickerson]

I don't hold gold yet, but from what I have read Kitco does not charge tax (don't ask me how that is organised :confused: but look at their website).
https://online.kitco.com/sellprice/Ordr_Faq.htm see bottom under miscellaneous

Alternatively if you are ever in Holland you can buy 'investment gold' here VAT-free (may be there are other countries too).
Investment gold means, non-numismatic coins and bullion that can be used as legal tender.

From what I understand from the tax laws you can legally cross international borders with gold without paying taxes as long as the gold is in legal tender coin form. Probably with a max, but you should consult your tax advisor on that.

Of course this info should not be construed as encouragement to do something illegal, or to try to obtain gold without the goverment knowing about it. :rolleyes:

Kitco says it does not report its sales transactions to the IRS. I personally find that difficult to believe.

[Finster]

Kitco says it does not report its sales transactions to the IRS. I personally find that difficult to believe.

It's when they buy that the IRS is interested in. That is, when you sell. Your purchase is not a taxable event for you.

[Jim Nickerson]

It's when they buy that the IRS is interested in. That is, when you sell. Your purchase is not a taxable event for you.

Thanks, Finster, I too often see but do not comprehend.

There is interesting chart perspective on gold pullbacks at http://www.financialsense.com/editorials/griess/2006/0919.html using 300 day moving average. Were this to continue to be valid, then target for current pullback could be 547.

[Finster]

Thanks, Finster, I too often see but do not comprehend.

I saw the same thing when I first read that ... took me some thought to figure that one out, too ... ;)

There is interesting chart perspective on gold pullbacks at http://www.financialsense.com/editorials/griess/2006/0919.html using 300 day moving average. Were this to continue to be valid, then target for current pullback could be 545.

A fall to that area wouldn't be especially surprising. Not inconsistent with the current FFF - it shows a low around 560 but does not capture intraweek extremes. FWIW, regardless if I were low on gold, I wouldn't try to game bottom tick to to pick some up. Anything in the 500-600 zone is an easy call to accumulate...

[Jim Nickerson]

I saw the same thing when I first read that ... took me some thought to figure that one out, too ... ;)



A fall to that area wouldn't be especially surprising. Not inconsistent with the current FFF - it shows a low around 560 but does not capture intraweek extremes. FWIW, regardless if I were low on gold, I wouldn't try to game bottom tick to to pick some up. Anything in the 500-600 zone is an easy call to accumulate...

I should have put 547USB, and I wondered what it would be on the FDI.
http://users.zoominternet.net/~fwuthering/FFF/FinsterFinancialForecast.htm

So is your number of 560 taken from your projection, or did you get it from putting in a 300 DMA? (http://<a href=)

[jk]

It's when they buy that the IRS is interested in. That is, when you sell. Your purchase is not a taxable event for you.
they might be interested in purchases as part of money laundering, financing terrorism, whatever. i'm sure uncle sam would be curious. for example, note that on your taxes you have to disclose whether you have a foreign investment account.

[Finster]

they might be interested in purchases as part of money laundering, financing terrorism, whatever. i'm sure uncle sam would be curious. for example, note that on your taxes you have to disclose whether you have a foreign investment account.

Correct me if I'm wrong, but I think that's where the $10,000 limit kicks in, and at that point it's the DHS, not the IRS, that gets notified.