Many investors choose to put their financial faith in precious metals, especially during times of economic unrest and political instability. The logic behind doing so is simple: precious metals have had value since the dawn of human civilization, and they continue to have value in the 21st century.
Their prices surge in times of trouble, when the value of government paper is in doubt, and drift downward in good times, making them good purchasing opportunities. This makes them very solid long-term investments, especially since they can counteract the usual downward swing inherent in a recession.
So why doesn’t everyone invest heavily in precious metals? Firstly, they are a very small yield investment, due to the fact that the amount of gold on the market is very static. Gold is very hard to find and very expensive, so used gold is invariably recycles. New gold is hard to come by, and so the amount of gold on the market does not change noticeably from year to year. Therefore investors must wait for someone willing to sell, and even then the high prices and slow rate of income generation make it only attractive as a long term investment.
This means that you, as the average investor, should only invest in gold for the long term. While mining companies like Lynas Corporation Ltd. are experiencing success in the fluctuating prices of gold and the riches they might bring from acquiring the precious metal, the vast majority of investors cannot create or obtain “new” gold, and can only buy what is on the market. Since the current market is very tight and very high due to global economic problems, there are few people willing to sell gold, and they are generally only willing to sell it at very high prices.
So what is the average investor to do? Since gold is a long-term investment, the best option right now is to wait. Gold prices will deflate once the global currency market stabilizes, making them good investments. Investors can then take advantage of gold purchasing programs through their IRA or other retirement funds to purchase gold while avoiding most of the potential taxes on them.
This enables investors to get the most financial value out of the gold while neither personally possessing it (thus eliminating theft) or paying taxes on it (thus decreasing the value of the investment). Those who do want gold for personal reasons can purchase coins or small bars, but the high tax rate on the sale of such assets makes them less than ideal investments for retirement.
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