Gold $2,333.90   $-2.80  Silver $30.37   $0.06  Platinum $1,026.20   $-1.20  Palladium $982.00   $0.80

Gold is an asset that can provide a sense of security for investors looking to supplement their existing portfolios or explore alternatives to other investment options. Still, there are some potential downsides with any type of investment, and this includes physical gold. Keep reading to learn about some of the possible disadvantages associated with investing in gold.

There’s a Markup with Dealer Purchases

This isn’t necessarily a disadvantage, but it can come as a surprise if you only expect to pay the current market value for physical gold, or bullion. Dealers have to make a profit on what they sell, so a markup is to be expected. The most important thing is to work with a reputable firm such as First National Bullion. Scottsdale residents should also be prepared before they invest by doing some homework first to get a better understanding of:

• The state of the current gold market
• The average price for the type of gold they wish to invest in
• A typically fair dealer markup

There Are Storage & Insurance Costs

If you invest in physical gold, you’ll need a place to safely store it. Insurance is also recommended due to the value associated with this precious metal. Depending on how much gold you invest in, storage and insurance may be on the expensive side for you.

However, you may be able to make storage less of a burden by opting to keep your gold in a safety deposit box at your local bank or a secure place in your own home. With insurance, you may be able to save money by talking to your insurance provider to determine if physical gold can be included in coverage you already have.

Price Appreciation Potential Isn’t Clear

Gold is generally considered a stable investment because its value typically remains steady. But the price appreciation of this investment isn’t a sure thing because of the many factors that can affect gold prices. Again, this isn’t necessarily a true disadvantage. Still, it’s something you should be aware of as you prepare to invest in gold.

Liquidity May Not Be Immediate

You can’t grab some of your gold bullion to buy a new car or home. It needs to be converted to currency first to be used for making such purchases, and it can take a while to complete this process. One way around this is to set up an online storage account. What this does is allow you to sell your gold during normal trading hours, as you would with stocks. You’ll also get instant liquidity with bullion exchange traded funds (ETFs).

You’ll Have to Pay Taxes

The IRS classifies gold and silver bullion as “collectibles.” If you hold on to your precious metal investments for more than a year, you’ll have to pay capital gains taxes that are typically higher than what you would pay for other types of long-term capital gains.

Verification Can Be Difficult for Older Gold Coins

There’s nothing wrong with buying old or rare gold coins as an investment. However, the potential drawback is that it’s not always easy to verify the value of bullion of this nature. Mitigate this risk by looking for older or rare coins with reliable documentation. 

If they’re building their investment portfolios and looking for the best place to purchase precious metals, including silver bars and gold coins, Scottsdale collectors should reach out to the trustworthy professionals at First National Bullion. We can answer all your questions and help you find all the information you need on how precious metals can be great investments. Give one of our experienced dealers a call today at 480-546-8928.

The statements made in this blog are opinions, and past performance is not indicative of future returns. Precious metals, like all investments, carry risk. Precious metals and coins may appreciate, depreciate, or stay the same in cash value depending on a variety of factors. First National Bullion does not guarantee, and its website and employees make no representation, that any metals for sale will appreciate sufficiently to earn the customers a profit. The decision to buy, sell, or borrow precious metals and which precious metals to purchase, borrow, or sell are made at the customer’s sole discretion.

By |2020-10-22T03:09:09-07:00October 22nd, 2020|Miscellaneous|0 Comments