Investing in Precious Metals

Investors invest in precious metals first for their potential appreciation of its price. The appreciation of price happens when the net price of sales is higher than the net price of the buy, and this appreciation is attributed as gain of capital. The commissions that sell and buy precious metals and the transaction costs that are charged for their gathering, reduces the potential returns.

Of all the precious metals gold is the most popular investment as store of value.

Although this discussion is limited to gold, the same information can be applied to silver and other precious metals.

Gold investments fans believe that this metal is the best defense against inflation and the declination of  the stock market. Historically, gold has had a good performance through periods of high rates of inflation, but since the years 1979-1980 when inflation as well as gold were in a high level. Inflation and gold price have declined in the first four years of the twenty-first century.

When the price of gold goes up above the buying prices, investors make gains of capital at selling. The opposite is a loss of capital when investors sell when buying prices are higher than the sales price. Gold is classified as a taxable collectible by the Internal Revenue Service (IRS), so gains of capital at long-term (held more than one year) are subject to the highest taxable rate of 28%.

Gold investors totally depend on the market prices to earn returns position of their investments due to the fact that they do not receive interest payments nor dividends.

There are different ways for a gold ownership mainly gold bullion, gold coins, gold mining stocks, gold mutual funds, gold options, and gold futures.

Gold bullion or gold bars are bought and sold through the brokerage firms and the gold dealers. Gold bars are negotiated at premium (varies from 1 to 7 percent) of the price of gold in the market. After bought gold bullions generally remain under custody of the brokerage firm or dealers for which it incurs in storage and insurance expenses. If you take possession of gold bars to avoid incurring in these expenses, there are a determined number of factors that have to be considered.

First one must store the gold bars in a safe place. Secondly, when one buys gold bars, the broker or the dealer should issue a numbered certificate that is correlative to the bar numbers. When you want to sell the bars a certificate is shown along with gold bars, what does not always avoids having the gold being examined to determine its quality. These costs are assumed by the seller. You can avoid storage and the exam of gold expenses through investment in gold coins instead of gold bullion.

Although gold coins are negotiated at premium of the price of gold this way has more effective cost for small gold investors. Two primary considerations to invest in gold coins are the numismatic value of coins and the other is the content of gold in the same.

The numismatic value of a coin is related with the value of the collection piece. For example, South Africa?s krugerrand and Canada?s maple leaf are very much negotiated coins, while the oldest and rarest coins such as the French Napoleon are negotiated multiple times above the value of gold is contains. The content of gold is the second consideration . The Canadian maple leaf consists of an ounce of fine  troy gold, making out of it an extremely negotiable piece with respect to other gold coins that contain less than an ounce of fine troy gold.