Benefits of Precious Metals in Portfolios & Taxes
Published on 5th August, 2024
Precious metals such as gold and silver have been revered for centuries for their intrinsic value and rarity. Today, they remain a cornerstone of savvy investment strategies. The role of precious metals in a portfolio extends way beyond diversification. These assets can act as a safeguard against inflation, currency devaluation, and market downturns while offering robust returns in the long-term.
Precious Metals Performance in 2024
2024 has been a year of historic highs for gold. In March, it hit a new high of $2,160 per ounce. In April, it hit a record high of $2,265 per ounce. On the whole, gold has risen by 12% year-to-date and has outperformed several other asset classes. With central banks continuing to accumulate gold reserves at a rapid pace, gold is expected to perform well for the remainder of the year. Experts believe that it could hit $2,500 per ounce in the fourth quarter.
Silver prices have risen by 22% year-to-date, outperforming gold by a significant margin. While silver prices have not reached the historic highs that gold has, it’s expected to perform well due to robust industrial demand and persistent undersupply.
While other precious metals like platinum and palladium have been volatile this year, many experts believe that these metals are poised for strong growth in the long term due to consistent demand from industrial sources (the automotive sector in particular) and undersupply.
Benefits of Adding Precious Metals to Your Investment Portfolio
Low Volatility: Precious metals often exhibit lower volatility compared to stocks and other financial assets. Their value tends to fluctuate less dramatically, which can help stabilize your portfolio during periods of market turbulence. This reduced volatility can provide a cushion against the erratic swings of other investments.
Stable Returns: Historically, precious metals have demonstrated a capacity for maintaining value over time, even in uncertain economic conditions and during times of high inflation and high costs which has been the norm in recent times. Unlike equities, which are influenced by company performance and broader market dynamics, precious metals often retain intrinsic value, contributing to more stable returns.
True Ownership of Assets: Investing in physical precious metals means you have direct ownership of a tangible asset. Unlike digital or paper assets, owning physical gold or silver means you possess something that is both real and valuable. This direct ownership can offer a sense of security and control over your investment.
Diversified Market Exposure: By investing in different types of precious metals, you can gain exposure to various sectors and market trends. For instance, gold is often considered a safe haven asset, while silver is more closely tied to industrial demand.
Long-Term Value Preservation: Precious metals have historically maintained their purchasing power over the long term. Unlike paper assets that may depreciate or become worthless, precious metals have been valued throughout history, making them a strong choice for long-term wealth preservation.
Easy Access to Your Wealth: When stored in offshore storage facilities, precious metals offer unparalleled accessibility. Unlike funds held in banks or financial exchanges, which can be subject to lengthy processing times, especially for large amounts, precious metals in secure storage can be accessed easily. This ensures that you have the flexibility to access your wealth promptly when needed, without the delays typically associated with traditional financial institutions.
Portfolio Insurance: In times of geopolitical instability or financial crises, precious metals can act as a form of portfolio insurance. Their ability to preserve value during such events makes them a reliable safeguard for your investment strategy.
Tax Benefits of Adding Precious Metals to Your Portfolio
Precious metals are considered capital assets and are subject to capital gains when sold. The tax rate on long-term capital gains for physical gold and silver in the US is capped at 28%, even for individuals who are in the 33%, 35%, and 39.6% tax brackets. As a result, adding precious metals to your portfolio can provide a tax advantage when compared to other forms of assets, which are taxed at much higher rates.
Why Singapore and Hong Kong are Considered Precious Metal Hubs?
Singapore and Hong Kong are global financial centers with advanced infrastructure for trading, storage, and logistics of precious metals. They have a supportive regulatory framework for precious metals trading. They also offer several tax benefits regarding the purchase and sale of precious metals compared to most other countries.
Goods and Services Tax, Sales Tax, and Value Added Tax
Singapore does not impose Goods and Services Tax (GST) on the sale of investment-grade precious metals. This exemption significantly reduces the cost of purchasing precious metals.
Similarly, Hong Kong does not charge Value Added Tax (VAT) or sales tax on the purchase of investment-grade precious metals. This zero-tax policy makes Hong Kong an attractive location for investors looking to avoid additional costs associated with their purchases.
Capital Gains Tax
Singapore does not levy any capital gains tax on the sale of precious metals. As a result, any profits from selling precious metals are not subject to capital gains tax, which is a significant advantage compared to most other countries where capital gains on precious metals are taxable.
Similarly, Hong Kong does not impose capital gains tax on the sale of precious metals. Investors can benefit from tax-free capital gains, which is one of the main reasons why it remains a global hub for precious metals investments.
Invest in Precious Metals Today with J. Rotbart & Co.
If you are looking to add precious metals to your portfolio or looking to expand your precious metals portfolio, J. Rotbart & Co has got you covered. We offer an extensive range of the highest quality gold, silver, platinum, and palladium bars and coins. This wide choice ensures that you can find the ideal precious metal to match your investment goals.
In addition to this, we also offer a comprehensive range of services including expert advice on investing in precious metals, lending and financing, precious metals storage and shipping, and more. Simply put, whatever your precious metals needs are, we can take care of them. Get in touch with us today using our online contact form or email us at [email protected] to find out how we can help you with your precious metals investments.
Get in touch with us today using our online contact form to schedule a free consultation with one of our precious metals experts.
