http://finance.yahoo.com/banking-budget ... buy-silver
What do you guys think? Do other precious metals (silver, platinum) ever cross your mind? Wouldn't that give you more diversication within some very legitimate precious metals. Note, I'm not talking about oil/copper here, but metals that have a more monetary nature to them?
Silver Article
Moderator: Global Moderator
Silver Article
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Silver Article
Bought several junk bags of silver about 1.5yrs ago @ $13/oz, for the specific purpose of acting as a means of barter if the meltdown evers comes. I will never sell it. I don't plan on buying more, but since I do have an asset that has doubled in value, I am considering including its value in the 25% Gold part of the PP. What would Harry say?
Re: Silver Article
Harry was a pragmatist. I think he'd see your silver as "close enough." In fact, when I actually build up enough savings to diversify the gold portion of my PP, I think making a silver/gold split is worth while. I still am skeptical of precious metals, let alone using only one as a hedge. I realize the history and qualities of gold, but I still feel that diversifying into other precious metals has few drawbacks. I've always based my purchases on value added: Does this item improve my cash flows or have some value that improves my life.
Gold doesn't change my cash flows (unless its price rises and I sell, of course), nor do I see it as adding any value to my life. I find one ounce of the heavy yellow metal to have nowhere near the value that can be purchased with $1,300 today.
That said, I feel very comfortable making it a large part of my portfolio, given its undeniable historical protection to extremely scary macro-economic events.
Gold doesn't change my cash flows (unless its price rises and I sell, of course), nor do I see it as adding any value to my life. I find one ounce of the heavy yellow metal to have nowhere near the value that can be purchased with $1,300 today.
That said, I feel very comfortable making it a large part of my portfolio, given its undeniable historical protection to extremely scary macro-economic events.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Silver Article
How do you hold your Gold? ETF or physical? If all physical, then I suppose there remains a hassle factor in selling one or two coins when rebalancing if Gold is up. Do you have to pay the 28% collector's tax when selling physical bullion or coin?
Re: Silver Article
I do the ETF's since I don't have a very large portfolio... someday I may hold gold or silver physically.
The 28% gains is a problem whether you own an ETF or physical gold. You can avoid it, somewhat, with the following strategy.
1) Keep track of your purchase dates, amounts, etc.
2) Avoid selling if possible. If you can avoid hitting a rebalance band by continuing to contribute to other funds, it is arguably reasonable to do so... some don't like this as it artificially keeps assets close to the 35% band year after year, potentially.
3) If you DO have to sell:
a) Find the most expensive shares/ounces you bought, and instead of calculating basis on the FIFO method, use the individual purchase method. Treat the sale as if you're selling the most expensive shares.
b) If you have some unrealized losses you can take in your taxable account with LT bonds or stocks, take them to the degree you need to in order to offset your gold gains, and invest in something similar. For instance, if you have some VTI (stocks) that could show you some tax losses if you sold, then sell them and invest in the Vanguard S&P 500 index instead, so you avoid the wash-sale rule. That should help you get through a lot more years without realizing a 28% gain, or a large one at least.
The 28% gains is a problem whether you own an ETF or physical gold. You can avoid it, somewhat, with the following strategy.
1) Keep track of your purchase dates, amounts, etc.
2) Avoid selling if possible. If you can avoid hitting a rebalance band by continuing to contribute to other funds, it is arguably reasonable to do so... some don't like this as it artificially keeps assets close to the 35% band year after year, potentially.
3) If you DO have to sell:
a) Find the most expensive shares/ounces you bought, and instead of calculating basis on the FIFO method, use the individual purchase method. Treat the sale as if you're selling the most expensive shares.
b) If you have some unrealized losses you can take in your taxable account with LT bonds or stocks, take them to the degree you need to in order to offset your gold gains, and invest in something similar. For instance, if you have some VTI (stocks) that could show you some tax losses if you sold, then sell them and invest in the Vanguard S&P 500 index instead, so you avoid the wash-sale rule. That should help you get through a lot more years without realizing a 28% gain, or a large one at least.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Silver Article
10-4 thanks Moda
Re: Silver Article
... to expand on my previous post, this strategy not only defers your 28% gain, but basically "moves" some of it over to stocks, which will most likely continue to have a favorable tax treatment for atleast some years to come. This will allow you to pay an eventual capital gains tax at 15% instead of 28% now.
Huge gains to be had with some simple planning.. but this obviously becomes more and more difficult later in years when you have more unrealized gains as a proportion of your portfolio. We can always hope that the IRS' tyrranical view of precious metals is reversed by then, right?
Huge gains to be had with some simple planning.. but this obviously becomes more and more difficult later in years when you have more unrealized gains as a proportion of your portfolio. We can always hope that the IRS' tyrranical view of precious metals is reversed by then, right?
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Silver Article
This is really the wrong thread for this, but another way to get better tax treatment on gold is to buy GTU rather than the ETFs (e.g. GLD or IAU). GTU apparently qualifies under US tax law as a passive foreign investment corporation, so as long as you file a form 8621 each year you own it (this is not a form Turbo Tax knows about) you end up paying long term capital gains rather than the collectibles tax when you sell it. Standard disclaimer applies (I am not a tax attorney, please consult your own tax professional).
Re: Silver Article
I am a tax accountant, and haven't heard of this. Very interesting. I am more on the business side of thing and have not seen one sale of collectibles, much less precious metals, in my time preparing tax returns.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Silver Article
See http://www.rpifs.com/offshoretax/otpfic.htm.
Regarding paying tax on selling coins, if you pay cash for a gold coin and some years later sell it at a profit (for cash) you don't get a 1099 or any other statement - i.e. you're basically on your honor to pay the appropriate tax. I'm certainly not condoning this, but I'd guess most people either don't realize they have to pay tax on the profit or figure they won't ever get caught.
Regarding paying tax on selling coins, if you pay cash for a gold coin and some years later sell it at a profit (for cash) you don't get a 1099 or any other statement - i.e. you're basically on your honor to pay the appropriate tax. I'm certainly not condoning this, but I'd guess most people either don't realize they have to pay tax on the profit or figure they won't ever get caught.
Re: Silver Article
Having a little silver seems relatively harmless to me but personally I wouldn't go too crazy with it. Silver is great but there are a few "biggies" with gold that make me stick with it as more or less the only PM.
We hold PM in the portfolio to defend against monetary problems. Gold is almost purely a monetary metal and just doesn't have a whole lot of industrial use. Silver does which means that its price is quite dependent on the state of the industries that use silver and the demand for silver that they generate. I have concerns that in a severe economic slowdown some of these industries could also slow down, causing a softening in demand for silver.
Likewise, if bad inflation (a monetary phenomenon) takes hold, we need a metal that'll yield a huge reaction. In situations like this, people will run to gold. Silver will benefit but it seems to me that it'd be to a lesser extent due to all the industrial uses it also has. I'm worried that a portion of silver's value is "orthogonal" to the issue of inflation. Since PM is the only true defense we have against inflation, I feel like it calls for the strongest possible medicine.
We hold PM in the portfolio to defend against monetary problems. Gold is almost purely a monetary metal and just doesn't have a whole lot of industrial use. Silver does which means that its price is quite dependent on the state of the industries that use silver and the demand for silver that they generate. I have concerns that in a severe economic slowdown some of these industries could also slow down, causing a softening in demand for silver.
Likewise, if bad inflation (a monetary phenomenon) takes hold, we need a metal that'll yield a huge reaction. In situations like this, people will run to gold. Silver will benefit but it seems to me that it'd be to a lesser extent due to all the industrial uses it also has. I'm worried that a portion of silver's value is "orthogonal" to the issue of inflation. Since PM is the only true defense we have against inflation, I feel like it calls for the strongest possible medicine.
Re: Silver Article
Thanks once again for the excellent tax advice you provide us here.moda0306 wrote: I do the ETF's since I don't have a very large portfolio... someday I may hold gold or silver physically.
The 28% gains is a problem whether you own an ETF or physical gold. You can avoid it, somewhat, with the following strategy.
Step 3b would also apply to capital losses you're "carrying over" from year to year as well right?
Re: Silver Article
Lone Wolf,
Yes, in fact, thanks for reminding me. If you DO have some carryover losses, you'll want to use them on gold or short-term capital gains (less than one year... you shouldn't have many of these but it's worth mentioning in case you're a day-trader or something with your VP), not stock/bond gains. Be careful, though. If your gold is low in it's rebalance band, then you most likely won't be selling it in the next few years, so prematurely eating up your loss when you'll be selling a lot of stocks and/or bonds and have to pay 15% + state taxes isn't ideal.
But most people probably are sitting on a high gold allocation in their PP, so any Short-Term capital gains (you shouldn't have many of these but it's worth mentioning in case you're a day-trader or something with your VP) and gold, ideally, should be used to offset your capital loss carryover.
This is all assuming no very near-term changes in capital gains & collectibles tax rates, though. I'll be sure to update you folks on how to play any upcoming changes in tax rates if there are any, though the correct path may be obvious to many.
Yes, in fact, thanks for reminding me. If you DO have some carryover losses, you'll want to use them on gold or short-term capital gains (less than one year... you shouldn't have many of these but it's worth mentioning in case you're a day-trader or something with your VP), not stock/bond gains. Be careful, though. If your gold is low in it's rebalance band, then you most likely won't be selling it in the next few years, so prematurely eating up your loss when you'll be selling a lot of stocks and/or bonds and have to pay 15% + state taxes isn't ideal.
But most people probably are sitting on a high gold allocation in their PP, so any Short-Term capital gains (you shouldn't have many of these but it's worth mentioning in case you're a day-trader or something with your VP) and gold, ideally, should be used to offset your capital loss carryover.
This is all assuming no very near-term changes in capital gains & collectibles tax rates, though. I'll be sure to update you folks on how to play any upcoming changes in tax rates if there are any, though the correct path may be obvious to many.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Silver Article
Lone Wolf,
Thanks for your view on silver... some of my feelings towards it come from the fact that it's so undervalued compared to it's usual gold-adjusted price.
I tend to feel that despite its industrial uses, it's still primarily a monetary metal, but that's completely based on assumption and my general impression, not hard facts.
What about platinum?
Thanks for your view on silver... some of my feelings towards it come from the fact that it's so undervalued compared to it's usual gold-adjusted price.
I tend to feel that despite its industrial uses, it's still primarily a monetary metal, but that's completely based on assumption and my general impression, not hard facts.
What about platinum?
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Silver Article
Platinum is an economic recovery play.moda0306 wrote: What about platinum?
There is no monetary component to platinum.
When thinking about platinum think silver with a larger speculative component.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: Silver Article
Doesn't it have all the monetary properties of gold?
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Silver Article
Platinum has none of the monetary properties of gold.moda0306 wrote: Doesn't it have all the monetary properties of gold?
It's never been used in circulating coinage (to my knowledge).
It's never been used as part of a nation's currency reserves.
It's not stockpiled by central banks and individuals for its monetary value alone.
It has never been part of a gold standard monetary system (as silver has, for example).
It's a very nice metal, but it is inferior to gold in almost every way when thinking about precious metals in a PP context.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: Silver Article
MT,
All your examples were historical. I thought the tests of a monetary metal were "portability, durability, divisibility" etc, etc. I was thinking more of the fundamentals of the metal itself rather than whether it's been used in that way.
All your examples were historical. I thought the tests of a monetary metal were "portability, durability, divisibility" etc, etc. I was thinking more of the fundamentals of the metal itself rather than whether it's been used in that way.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Silver Article
I just see no reason to consider platinum when we already have gold available.
Since the first alternative to gold is definitely silver, I think it leaves platinum with little or no role in a PP setting.
The price of platinum is also volatile for reasons that have nothing to do with political instability, etc.
It's a nice metal, but I would stick with it for jewelry only.
Since the first alternative to gold is definitely silver, I think it leaves platinum with little or no role in a PP setting.
The price of platinum is also volatile for reasons that have nothing to do with political instability, etc.
It's a nice metal, but I would stick with it for jewelry only.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: Silver Article
I think you're right that it has so very many of the characteristics that make gold a great monetary metal. Historically speaking, though, platinum never had a shot because it is exceedingly difficult to soften and work with primitive technology. Gold is very easy to work into coins and jewelry at a (relatively) low temperature. Add that to the fact that it would have been much more difficult to find and process platinum with copper age technology and you can see why gold won pretty easily.moda0306 wrote: All your examples were historical. I thought the tests of a monetary metal were "portability, durability, divisibility" etc, etc. I was thinking more of the fundamentals of the metal itself rather than whether it's been used in that way.
This is what led to all of the historical issues that MT mentioned. I especially think the incongruity between the way most central bankers speak about gold (often scoff at it) versus the way they actually behave toward it (stockpile tons and tons of it) speaks volumes.
But you are dead-on in identifying those nice "monetary" traits that platinum has. In a different gold-less universe it would have (probably) competed with silver for the grand prize!
So historical issues do come into play here. Platinum has no track record as a monetary metal (outside of Dungeons & Dragons.) It's got lots of other great attributes for a Variable Portfolio play, no question. I wouldn't be surprised to see you make a lot of money off of such a play. But if we get into a situation where inflation and\or instability gets so bad that the entire portfolio is depending on the PM allocation, I just don't want to be left wondering whether platinum will do something it's never been asked or expected to do before.