Owning and Storing Gold Bullion

Owning gold and other precious metals for investment purposes is a unique way to invest. When it comes to which type of precious metal people prefer to invest in, gold is certainly the most popular choice. When investors purchase gold, they are doing so with the belief that the price of gold will rise in the short to long-term future, allowing it to be sold at a higher price than they paid for it, resulting in profit being made.

What Affects the Price of Gold?

There are many reasons why the price of gold fluctuates, and like most other commodities people choose to invest in, the price is affected by issues of supply and demand. The main difference in the laws of supply and demand, between gold and other commodities is that gold isn’t used up like oil or gas, and can therefore return to the market at any time.

While some gold is used in electronics, dentistry, and even food and drink production, most of the gold that has ever been extracted from the Earth is still held in tradable forms such as bullion that can be put back onto the gold market at any time.

This means that while the price of gold is affected by supply, demand is the real driving force behind the fluctuations in the value of gold.

The Price of Gold

While no investment is guaranteed to return a profit, the price of gold has risen substantially in the last 10 years. While there have been dips in the price during that time, the overall price of gold is much higher than it was just 10 years ago, as seen in the chart below:

10 Year Kitco Chart

Once ‘peak gold’ is reached, the date when the maximum rate of global extraction is reached, it is expected the price of gold will go up significantly. Although the date of peak gold is not known, recent speculative calculations put it at 2025.

Storage Considerations of Gold

When purchasing gold from certain sources, such as the big online retailers and some financial institutions such as banks and large traders, customers often have the option to have the vendor handle the storage of their purchase. This service prevents the buyer from having to worry about the practicalities of taking delivery of their gold purchase and ensuring it is stored securely.

As these institutions store large amounts of their own gold alongside that of investors, making use of a storage service like this gives the investor peace of mind. While these services aren’t often free, they are usually cheaper than the expense that is incurred when attempting to securely store gold at home. Learn more about storage considerations.

Taxation Issues of Investing in Gold

Most countries apply taxation to gold and other precious metals. For the most part, this taxation takes the form of capital gains tax applied when a profit is made from selling the gold. Value added tax (VAT) can also be added to precious metal sales in some countries which includes gold purchases.

One advantage to trading gold over silver, in the European Union at least, is that gold is exempt from VAT while silver is not. This VAT on silver can be as high as 25% in some countries. For US citizens, they can be taxed between 15 and 35 percent on their gold profits, depending how they made their initial investment.

So while gold trading and investing looks to be a relatively safe way to ensure a profit on your investment, it is not without its specific issues and quirks that need to be considered such as taxation and how to store the gold as well as occasional dips in price. Learn more about tax and reporting considerations.