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5 Risks Of Gold Investing

By    |   Tuesday, 30 June 2015 05:18 PM

Gold as an investment can look highly attractive — and be risky in part because of its allure and mystique. When words like "rush" and “fever" crop up in an investment instrument's history, that's a sign to proceed with caution.

Here are some of the risks of gold investing.

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1. Scams
Investment fraud is not limited to precious metals, but something about gold seems to bring out the fraudsters. Beware of pushy gold telemarketers who promise big returns on investments but get fuzzy when asked to explain.

"Before investing in precious metals, ask, ask, and ask some more!" the U.S. Commodity Futures Trading Commission urges in its fraud advisory.

2. Downturns
Gold has tumbled back to earth after a dizzying run-up in 2006-2012. A look at gold trading prices since late 2012 is instructive: The direction has been mostly downward, with steep spikes and plunges along the way. There is no guarantee the trend won't continue in 2015.

3. Hoarding
Gold is prone to being hoarded by big investors, and sometimes those investors happen to be entire countries — Russia, for example, as writer L. Todd Wood recently noted on Newsmax TV. If large-scale hoarders decide to dump their holdings, leaving the gold market suddenly awash, that's a blow for investors who depended on a constrained supply to keep the price of gold high.

4. Government Seizure
It happened once, during the Great Depression, when President Franklin D. Roosevelt in 1933 ordered all U.S. gold holders to turn in their stores and accept less than $21 per ounce in return. The chance of another mass confiscation seems remote today. But, as Jeff Thomas writes at Casey Research, "Those who own gold would prefer to think that this cannot happen, but they have quite a lot riding on that hope and precious little evidence to support it."

5. Tax Hit. The IRS classifies precious metals as "collectibles" and subjects the proceeds from their sale to a higher tax rate (28 percent) than you'd pay on capital gains from selling stocks and bonds (15 percent).


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Gold as an investment can look highly attractive - and be risky in part because of its allure and mystique. When words like rush and "fever crop up in an investment instrument's history, that's a sign to proceed with caution.
gold, investing, risks
389
2015-18-30
Tuesday, 30 June 2015 05:18 PM
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