Is Gold worth owning?

[calmloki]

It is important to understand an investment as much as possible. GOLD pays no dividends. But it does appear to go up MOST but not all the time when other things go down, and some hedge against inflation-- hence providing some ballast---In a balanced portfolio. That means REBALANCING. Selling Gold when it is up, to bring the allocation back into balance. If one owns Physical Gold - selling generates a special tax burden at 28% in the US...if one owns gold via the ETF GLD, that is taxed like other investments. So if they are determined to own gold they may want to reconsider whether it is for the physical vs the asset allocation they want.


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Owning other than physical gold (by preference sewn into one's garments) seems like a misunderstanding of one of the biggest reasons to own gold: ability to bribe or do business to get out of the country in case of dire emergency (escaping Viet Nam as the US was leaving for example). It is serious sh*t going down escape protection. Yeah, yeah, lead beats gold, but there are probably more that bribed their way out of a situation than gunned their way out. Not saying that isn't wacky thinking, but if one can afford it isn't some protection against collapse of government reasonable?

Just checked - we have, by pure accident, 0.5% of our assets in gold and silver at present.

 

[sengsational]

Just checked - we have, by pure accident, 0.5% of our assets in gold and silver at present.

Mine's probably about 1% or so. Certainly not Harry Browne style.

 

[gcgang]

one owns Physical Gold - selling generates a special tax burden at 28% in the US...if one owns gold via the ETF GLD, that is taxed like other investments. So if they are determined to own gold they may want to reconsider whether it is for the physical vs the asset allocation they want.


http://www.bloomberg.com/news/artic...sellers-facing-tax-surprises-at-28-gains-rate

Don't think above quote from other poster is correct. Gold ETF sales are taxed at 28%.


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[urn2bfree]

one owns Physical Gold - selling generates a special tax burden at 28% in the US...if one owns gold via the ETF GLD, that is taxed like other investments. So if they are determined to own gold they may want to reconsider whether it is for the physical vs the asset allocation they want.


http://www.bloomberg.com/news/artic...sellers-facing-tax-surprises-at-28-gains-rate

Don't think above quote from other poster is correct. Gold ETF sales are taxed at 28%.


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Well, I guess I was misinformed.
I had always assumed any gold was taxed at 28% and had questioned the effect of this higher tax on return calculations on portfolios with gold from the guy at www.retireearlyhomepage.com[\url] w...end up in. (Edited to address GLD vs VGPMX)

 

[gcgang]

http://portfolios.morningstar.com/fund/holdings?t=VGPMX

VGPMX is a primarily a stock fund, so it's taxed like stocks. PM stocks are obviously correlated strongly with gold. Browne meant gold.

I assume that if a mutual fund had realized gains on physical gold, via etf or bullion, they'd have to pass them thru at the special 28% rate.


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[Dash man]

one owns Physical Gold - selling generates a special tax burden at 28% in the US...if one owns gold via the ETF GLD, that is taxed like other investments. So if they are determined to own gold they may want to reconsider whether it is for the physical vs the asset allocation they want.


http://www.bloomberg.com/news/artic...sellers-facing-tax-surprises-at-28-gains-rate

Don't think above quote from other poster is correct. Gold ETF sales are taxed at 28%.


Sent from my iPhone using Early Retirement Forum

The problem with an ETF is there is far more "paper" out there with claims against gold than there is actual gold. So, if the purpose of owning gold is for concerns over a global or national financial crisis, an ETF s not the way to go since the shares may prove worthless. If the purpose is for an investment where you want to get in and out of it easily, then an ETF may be the way to go.

 

[urn2bfree]

http://portfolios.morningstar.com/fund/holdings?t=VGPMX

VGPMX is a primarily a stock fund, so it's taxed like stocks. PM stocks are obviously correlated strongly with gold. Browne meant gold.

I assume that if a mutual fund had realized gains on physical gold, via etf or bullion, they'd have to pass them thru at the special 28% rate.


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The comparison of different retired guy portfolio returns from 1999-2013 on The RetireEarlyHomepage http://www.retireearlyhomepage.com/reallife14.html used VGPMX as a substitute for gold in the "Harry Browne" portfolio...and it was the best performing portfolio for a 4%SWR retirement during that time period.

...So I guess my question remains, when the real Harry Browne portfolio posts returns does it take into account the possibility that with rebalancing there could be a yearly tax obligation reducing any gold gains by 28%?


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[sengsational]

The problem with an ETF is there is far more "paper" out there with claims against gold than there is actual gold. So, if the purpose of owning gold is for concerns over a global or national financial crisis, an ETF s not the way to go since the shares may prove worthless. If the purpose is for an investment where you want to get in and out of it easily, then an ETF may be the way to go.

I, personally, wouldn't bother with a paper that says I own precious metals. It sort of defeats the purpose (that I would consider important). I think those avenues are for speculators as opposed to insurance against weathering a short storm in the financial system.

 

[Running_Man]

The comparison of different retired guy portfolio returns from 1999-2013 on The RetireEarlyHomepage 2013 Update: Real-Life Retiree Investment Returns used VGPMX as a substitute for gold in the "Harry Browne" portfolio...and it was the best performing portfolio for a 4%SWR retirement during that time period.

...So I guess my question remains, when the real Harry Browne portfolio posts returns does it take into account the possibility that with rebalancing there could be a yearly tax obligation reducing any gold gains by 28%?


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There are any number of ways to account for this in a retirement portfolio if one wishes to minimize taxes. For instance one could own half the gold in a ETF in a retirement account and another 1/2 allocation of physical gold outside the IRA post tax. Rebalancing could be managed inside the retirement account to minimize tax effects. Taking into account taxes when they are so individualized is rarely done for portfolio comparison purposes.

 

[Running_Man]

ALSO, the actual tax you will pay isn't necessarily 28% that many people lead you to believe you owe.

The rate you pay is the same rate you pay for your regular income tax as taxable income, with a maximum of 28%. Let's say you are married, with no dependent children. Your first $19,000 or so of income is tax-free, allowing you over $88,000 of income within the 15% tax bracket. So the GOLD profit to the extent you need income would get taxed at the 15% tax rate, not 28%. Managing this is not extraordinarily difficult and a good problem to have.

So for instance lets assume it's 2010 and you had a million dollars invested in the Permanent Portfolio. You would start the year with $250,000 in each asset class and end the year after a $40,000 withdrawal needing a balance of $276,187.50. The Gold returning 29.3 percent would require a reduction of $47,062.50 MM would need 19,687 added bonds 3,938 added and stocks a sale of 16,562 to get to the proper balancing for 2011. At worst assuming the stock sale is also taxed at regular income tax rates the tax expense is $6,694 or an effective tax rate of 11 percent. Obviously there are many factors that can effect the tax rate but in general your income needs to be well over $100K before the 28 percent rate comes into play.

 

[Koogie]

We have 2% of total assets in G&S. I believe strongly in diversification and it's just another facet of that for me. Besides our paid for home, it is our only real, tangible asset.
The other 82% is just numbers on a screen. It makes me feel a little better.

Self delusional ? Sure. But it's a delusion that occasionally makes me feel better.

 

[Lcountz]

Soooooo...what if someone has gold coins they got over the years from who knows

where, no receipts, what happens when you sell it, say, to APMEX?

Would they withhold 28% of it's value?

 

[Running_Man]

Owning other than physical gold (by preference sewn into one's garments) seems like a misunderstanding of one of the biggest reasons to own gold: ability to bribe or do business to get out of the country in case of dire emergency (escaping Viet Nam as the US was leaving for example). It is serious sh*t going down escape protection. Yeah, yeah, lead beats gold, but there are probably more that bribed their way out of a situation than gunned their way out. Not saying that isn't wacky thinking, but if one can afford it isn't some protection against collapse of government reasonable?

Just checked - we have, by pure accident, 0.5% of our assets in gold and silver at present.

What I like about the permanent portfolio is that you actually have a portfolio that outperforms and as a side benefit provides "wacky" insurance, the more level returns makes it a good candidate as a withdrawal portfolio than others which is why it has done so well with a 4% withdrawal since 1994

 

[sengsational]

Soooooo...what if someone has gold coins they got over the years from who knows

where, no receipts, what happens when you sell it, say, to APMEX?

Would they withhold 28% of it's value?

It would seem that an outfit that withheld and reported to the IRS would be at a disadvantage. I can't imagine that a "we buy gold" fly-by-night in the strip mall would be doing much in the way of record keeping, but then again, I've never set foot in the door of one of those places.

 

[Dash man]

Here are the reporting requirements on a dealer's site that I've used:
https://www.texmetals.com/sell-gold-coins

Basically for American Eagles there is no reporting requirement. For gold bars or some foreign coins there may be if the sale is over a certain limit, such as 25-1 ounce Canadian Maple Leafs.

 

[Koolau]

We have this discussion every year or two. I've said it before and (if I live so long) I'll say it again: Every "bad" thing you've heard about gold is true! Yet, can anyone name a store of wealth (aka currency) which has been used as currency since before recorded history? Even the most "stable?" currencies, such as the US dollar have actually morphed quite a bit in the past 150 to 200 years. The US dollar was once a "gold certificate" then a "silver certificate" and now, well, it's just a piece of paper (backed by the full faith and credit of the USA). As long as that's "good enough" for everyone, it's a good currency. When/if folks decide that's not good enough, the dollar could become virtually worthless. The point is that gold (for all its many faults) is the only universally (can I say that here on Earth?) recognized currency that has always BEEN recognized universally as currency.

More practically, I have read several articles (google the subject) suggesting that 3-5% in PM (usually gold) stabilize a portfolio. I can vouch for this during the most recent unpleasantness (2008 - ??). The value of my port didn't decline during that period, primarily because of gold (it didn't hurt that my stock portion was in the 30+% range, heh, heh.)

I really like Sengsational's treatise on the subject of gold. He explodes the "straw man" argument that gold is bought for catastrophic times only. It's true that you can't eat gold, so for the apocalypse, canned beans would be the better bet. But for situations between boom and bust (but not the end of the world), gold seems to have at least some arguable place in at least some of our portfolios. Gold also has the added potential for "local" end-of-the world "escape-clause" usage as pointed out by Running_Man.

Having said all of this, I don't recommend gold for anyone else. I just believe folks should decide for themselves, based on as much knowledge as they can gain on the subject.

Regarding UnrealizedPotential's relative, I would suggest helping him/her understand arguments for and against gold. If finances are otherwise stable and adequate, a small purchase of gold is unlikely to disrupt ER plans. If owning a little gold gives some comfort (and allows a bit of courage to invest wisely in a more typical AA) then it might well be worth $70K for "insurance" protection. As always, YMMV.

 

[haha]

No, gold is not worth owning. Please send all of yours to me; I promise to give it a good home.

Ha

 

[eta2020]

No

 

[Big_Hitter]

my gold fund has been getting it's butt kicked this year

 

[gcgang]

my gold fund has been getting it's butt kicked this year

Tax loss opportunity!!!

I have about 10 gold stocks I follow. Been interchanging them the last year or so to realize tax losses.

But someday, Alice, to the moon!


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[Big_Hitter]

well it was "only" a $10K investment a year ago....

 

[jerome len]

I own some gold and silver and gift a little to my kids each year.

My parents saved old coins, so did my DW's grandparents. They hoped these old coins would grow in value and some of them have. We still have every one of them and will give them to our kids.

My parents lived through the depression and WW2. They saw what happened to banks and the value of gold and jewelry to escape from war in Europe. Can this ever happen again? Look at how the Jews were treated by terrorists in France a couple of months agol

So, each Christmas I give my kids a little bit of gold and my grandkids an ounce of silver. I've been doing this since gold was $300 an ounce. Never.....never....would I allow gold to represent more than 1% of my net worth.....never, I tell my kids should they sell their gold......it's NOT a good investment.....it's part of my and their heritage.

Overall would my money be better placed in a good mutual fund.....you bet.....but we live in a crazy world.....ISIS.....sending our kids in battle......just averting another depression in 2009.....who knows what can happen in the future.

So, if I needed the cash for a comfortable retirement I wouldn't buy gold.....it's not a good investment. But I have it, love it, love sharing it with my kids and hope I never need it.

 

[Ticker]

gold is the ultimate form of money. that's why countries and central banks around the world buy it. China owns tons and tons of it, India prizes it above any other possession. it is recognized around the world as a currency of exchange.

own it as a currency. don't expect dividends, do expect volatility. until you've held a gold coin in your hand, you won't experience the feel of real money.

 

[REWahoo]

gold is the ultimate form of money.

Or the international equivalent of Beanie Babies.

 

[Ticker]

yes, but central banks don't buy beanie babies......nor was our fiat ever backed by them....
but maybe we should go on the beanie baby standard.

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