Gold is one of the hot new investments today.

People invest in this asset by purchasing gold bars, gold company stocks or gold electronic trading funds.  These electronic trading funds, commonly called ETFs, have proliferated as evidenced by the ETF with the symbol GLD.  This is a fund that started in 2005 and now has over 64 billion dollars of investors money under management.  This ETF, as all precious metal ETFs do, purchase the metal for the investor so the investor doesn’t have to worry about storing or purchasing it.  These ETFs can allow the investor to have a position in metals like gold, silver, copper or platinum.

 But there’s a catch when investing in these, and many people don’t realize this until after their positions are sold or maybe even have calculated wrong on their tax returns.  Capital gains on these precious metal ETFs, and also physical holdings of gold, silver or any other precious metal, are taxed at a rate of 28%, significantly higher than most other capital assets,  including most stocks which are taxed at a rate of 15%.  So assuming that you have a $1,000 gain on the sale of GLD you will have a tax of $280.  In contrast, if you have a $1,000 gain from the sale of Newmont Mining Corp., a company that primarily mines gold, your tax will be $150.  This is a significant tax burden that can come unexpectedly from investing in precious metal ETFs like GLD.  When deciding whether to invest in precious metals or precious metal ETFs this higher tax rate should come into consideration.