Alternative Ways to Invest in Precious Metals
Precious metals have been an investment option for millennia. For most of history, the only way you could invest in precious metals was to buy precious metal bars, coins, or jewelry. Therefore, investors had large quantities of gold bars in their possession.
However, in modern times, investors have many more options when it comes to investing in precious metals. Investors can purchase certificates, ETFs and closed-end bullion funds. Let’s explore this further.
Exchange Traded Funds
Exchange-Traded Funds (ETFs) are a fantastic way to invest in precious metals without the need to store them. Essentially, investors buy shares of a precious metal-backed ETF that can be bought and sold. However, remember that these shares can’t be traded for physical precious metals.
If the demand for ETFs is greater than supply, then the ETF will issue more shares. If the opposite is true, any outstanding claims will be redeemed.
It’s essential to be aware of the fact that these ETF shares are liable to about a 28% tax rate, which means a significant percentage of your gains are going to be taxed.
Closed-end Bullion Funds
These are very similar to precious metal-backed ETFs; however, they can only be purchased at initial public offerings. Moreover, the funds can cancel units through buybacks.
Since the number of units available is quite limited, these funds’ prices can be quite volatile. They usually depend upon the demand and supply of the units. Therefore, they can either be sold at a discount or a premium.
However, compared to ETFs, bullion funds have a much more favorable tax treatment for investors, making investing in them more worthwhile.
Precious Metal Certificates
Precious metal certificates are a great way to own gold or silver, without the need to have them stored. These certificates essentially are proof of ownership of a precious metal. They can be either unallocated, meaning they have been pooled together by different investors or allocated, where you are the only investor.
There is a chance of counterparty risk with precious metal certificates. If the issuer of the certificates suddenly defaults, there is a chance you might not be able to recover all of your investment.
Are you interested in knowing more about gold and silver investing options? Reach out to Orion Metal Exchange; we have a broad range of precious metals, including private vault storage. Contact us now if you’d like to get started.
