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What Do You Need To Know About Taxes When Investing In Precious Metals?

Gold is generally exempt from VAT, provided that it is investment gold in accordance with the directive. The purchase of historical coins or old gold, for example, is then subject to VAT.

When buying silver and other precious metals, 19 per cent VAT applies. However, there is one special feature here: With silver coins and silver coin bars, differential taxation applies, which significantly reduces the tax surcharge for the buyer. The full VAT rate usually applies to platinum, palladium and rhodium.

To avoid VAT, precious metals can be kept in bonded warehouses. However, this incurs costs and the safekeeping takes place abroad, which can limit the access options in case of doubt.

Profits from the sale of bars and coins made of gold, silver, platinum, palladium and rhodium are all treated equally: They are tax-free, provided that the holding period was at least one year. This rule applies to both scrap gold and investment gold. Otherwise, they are taxable in income tax at the personal tax rate. There is an exemption limit of $600 per year.

Investing in Precious Metals – Gold

Gold is the most stable store of value in the world and, in contrast to paper money, has reliably maintained its purchasing power in times of crisis. The global expansion of the money supply has taken on a new dimension as a result of the rescue programs set up by central banks and governments and is driving the price of the yellow precious metal up further.

The Fed’s total assets increased by almost 50 per cent in April 2020 alone. Central banks can increase the amount of paper money indefinitely, but not global gold production. That makes gold unbeatable as a store of value. Since an end to the expansionary monetary policy is not in sight, gold prices should continue to rise in the long term.

After the financial crisis, gold threatened to slip into insignificance, and critics had already pronounced the yellow precious metal dead. But that has now changed. In 2020 the price of gold reached a new all-time high. And the gold rally may not be over yet. Even if the gold price fluctuates, gold should mainly serve as a hedge and not as an object of return.

We recommend investing around 10 to 15 per cent of your assets in gold and other precious metals such as silver or platinum to achieve a good diversification effect.

Five good reasons to invest in gold

  • Worldwide over-indebtedness and uncontrolled increase in money
  • Increasing loss of confidence in the paper money system
  • In contrast to paper money, gold cannot be increased at will
  • In the past, precious metals have always retained their purchasing power and are both a store of value and a means of payment
  • Gold often moves in the opposite direction to other asset classes

Invest in precious metals – silver

Silver is also valued as a store of value and, because of its smaller denominations, is especially popular with private investors. However, since industrial demand accounts for more than half of the total demand for silver, the price of silver can fluctuate more with economic development than gold. Here the demand for industrial purposes is just 10-15 per cent.

In the long term, the silver price will develop in line with the gold price. However, investors have to be prepared for higher fluctuations and, above all, a higher correlation with the stock markets.

Five good reasons to invest in silver

  • Increasing loss of confidence in the paper money system
  • Alternative investment for asset diversification
  • Lower price and more manageable denominations than gold
  • In contrast to paper money, silver cannot be increased at will
  • Additional price opportunities (and risks) due to higher economic demand

Investing in Precious Metals – Platinum

A largely unknown way of investing in precious metals is to invest in platinum. In terms of its rarity, platinum is even more valuable than gold. It is considered the most precious metal in the jewellery industry.

However, its course is subject to significantly higher fluctuations and additional influencing factors. In contrast to gold, platinum is also a much-needed industrial raw material. Only 35 per cent of the demand comes from the jewellery industry. The metal is used, for example, in catalysts and microchips. The diesel scandal, for example, kept the price of platinum iron down, even though gold was soaring.

The interesting fact that the platinum price was generally above the gold price in the past speaks in favour of a long-term investment. However, for 6 years – and that is the longest period since 1900 – this relation has been reversed. Historically, this price anomaly could eventually resolve itself and bring investors decent price gains.

Five good reasons to invest in platinum

  • Platinum is even rarer than gold
  • A useful addition to the precious metal portfolio
  • A decline in production causes supply bottlenecks
  • Potential returns through high economic demand
  • Industry 4.0 creates additional demand

Investing in precious metals – conclusion

There are a few points to keep in mind when investing in precious metals. From the right selection of the metal, through taxation, identification obligations, to the decision on processing.

As an investor, you should generally ask yourself how willing you are to take risks and what storage options you have. Subsequently, the choice of the precious metal is a question of diversification. As a guideline, 10 to 15 per cent of the assets are suitable.

What Do You Need To Know About Taxes When Investing In Precious Metals?
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