Gold – Hidden Costs

Hidden costs are practically everywhere, most people get suckered into what is seemingly good buy or deal until they are slapped in the face with hidden costs and by that time it is often too late. From airlines, to retail stores and even banks and insurance companies, the ‘hidden cost’ factor is indeed a legal, powerful tool that businesses use to improve their margins. The concept is actually quite simple but extremely effective. Businesses do it by making a product or service ‘look cheap’ when it is actually not and off lately this tactic has found its way into the [precious metals market where there is a lot of talk about gold’s positive performance and how gold bugs are cashing it in.

Besides the fact that gold has over the last decade increased by approximately 400 dollars per ounce, it does not mean they are cashing it in, because 400 dollars these days were only worth 300 dollars a decade ago and if we take in all the other costs that most people tend to overlook, most of them are not actually making much at all. Three of the most common stocks that investors overlook include the higher taxes that have been imposed, ownership / storage costs and zero revenue generation (not including the more obvious fact that gold could lose value due to market forces that forces gold prices downward). The way how the Feds tax gold hoarders differs based on the brackets that you fall into, therefore, the higher the profit you make, the higher the tax bracket that you fall into based on the profits, this definitely does not make gold seem as a bunker investment.

Therefore, if you do not want to fall prey to the taxman, deal with physical gold, on a cash term basis within circles that you trust. Another often overlooked cost when people buy precious metals is the cost of ownership or storage of storage and insurance that could erode profits substantial, if there is a profit in the first place, but if prices were to fall, gold bugs lose on two ends. However, creative accounting practices could offset these costs and actually lower taxes significantly, however some people interpret ‘creative accounting’ as a crime, how you interpret it is entirely up to you.

Another method that the government ‘steals’ from your profit is via sales tax, thus, selling your gold to a private individual behind closed doors is certainly better for the buyer and seller as the profit that is supposed to go to the government will land in your pocket. This is not a loophole that you are exploiting, this is actually your right, who you want to sell to, and the taxman has no say in private person to person dealings.

Finally comes the storage, safe deposit boxes are not free and the cost of keeping them in a safe deposit box may run up a substantial bill over a year on top of the fear that the government would issue an executive order that your gold is their property out of nowhere – Solution, keep your gold at home and buy a few Rottweiler’s.

 

Further reading: http://www.thestreet.com/story/10871461/1/beware-golds-hidden-costs.html

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