It is all about how one holds on to gold according to the chief executive of The Pure Gold Company even as gold’s role as a ‘safe haven’ asset in times of uncertainty is widely acknowledged.
Highlighting its security and tax benefits, Josh Saul said that physical stores of the precious yellow metal could prove far superior to the other growing varieties of gold holdings.
“Physical gold is motivated by people who want long term protection. The benefit of having physical gold is that you have a physical store of wealth, plus there are also several tax advantages,” Saul said.
However, where you store it and who you are the determinants.
U.K. residents do not have to pay tax on any appreciation in the price of their stash because in the U.K., investment grade gold coins are not subject to capital gains tax. This applies to some of Britain’s most popular coins such as Britannias and Sovereigns, which are produced by the U.K.’s Royal Mint.
But, in the U.S., gold is subject to capital gains tax as it is treated as a capital asset and a collectible. This is also true of parts of Europe.
“Given what we’ve seen in Europe with regards to Brexit implications, a lot of our (British) customers are getting their money out of Germany, France and Italy, for example, and into gold, whether they’re living in the U.K. or not,” Saul said.
A hedge against unpredictable monetary policies, economic risks and cyber-attacks, as gold is looked at was also noted by him.
However, gold has evolved from the somewhat antiquated bullion vaults of old to an extent by these benefits. And including electronically and via exchange-traded commodity funds (ETCs), it is now available in various forms.
Gold ETCs can mitigate some of the associated costs of storing physical gold, noted Townsend Lansing, head of ETCs at ETF Securities. The cost of buying physical gold can be added 3-5 per cent dur to storage costs.
“Gold Exchange Traded Commodities (ETCs) supersede the inefficiencies of holding physical gold by their low costs, transparency and liquidity. ETCs are easier to manage, and are a cost effective way for investors to gain exposure to a commodity that would usually be expensive and risky to store,” Lansing said.
For short term investors looking to “buy today and perhaps sell in a few weeks’ time.”such vehicles can sometimes be more cost efficient, Saul acknowledged.
It had successfully returned over 50,000 gold bars to its vaults in Frankfurt, Germany’s central bank this week announced
As a hedge against political and currency risks, the Federal Reserve in New York and France’s central bank, Banque de France, in Paris is where the $27.9 billion dollar stash had been being stored. But Germany was prompted to launch a “thorough and exhaustive” operation to return the bars to the country due to improved domestic politics following the end of the Cold War.
“I believe there is a reliance on them (Germany) having some sort of physical, tangible store of wealth, rather than relying on paper money that can be manipulated, created and devalued over time,” Saul noted
(Adapted from CNBC)