Precious metal investments
Why precious metals belong in every investment strategy
For German investors, we provide a selection of the most popular gold and silver bullions and coins in the TASS Precious Metals Shop. Precious metals have been used for thousands of years as a means of payment or exchange. The current high prices of precious metals make clear that the popularity of precious metals remains unbroken. In view of immense national debt, investors all over the world continue to lose confidence in paper currency. When faced with negative headlines, they tend to pull out of traditional investment products and invest instead in precious metals.
The dwindling trust in the ability of the government to pay back the national debt, the fear of further bank or institutional collapses, threat of world economic ruin, terrorist attacks and a huge increase of the money supply through the Central Banks are driving cautious investors to stable valued investments like precious metals.
Due to the tax advantages of precious metals, they can be a suitable investment not only for safety oriented investors, but rather for all other investor types as well.
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Taxes on precious metals
After observance of the mandatory minimum holding period of currently one year profits from private sales of precious metals can be collected tax free. In this way physical precious metals, as opposed to gold ETFs and certificates, are not subject to the flat rate withholding tax. By investment coins and bars from silver, a reduced value added tax of 7 % is due, whereby a value added tax of 19 % is due by silver bars.
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Preservation of value with precious metals
Especially gold has proven itself as a protection from inflation and as a method of payment. There are many arguments which speak for precious metals as a money and capital investment:
- More and more Central Banks are investing a portion of their currency reserves in precious metals.
- At the same time the quality and output of many mines is decreasing
- Rising prices of raw materials have caused higher mining costs. This results in higher prices for precious metals so the investor can profit from the increase in value of his portfolio.
- Physical precious metals, unlike paper money, cannot be infinitely duplicated.
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Precious metals: Material assets without loss of purchasing power
Many private consumers notice the loss of purchasing power during their everyday shopping. That is why the possibility of inflation should be taken into consideration when investing. Precious metals are, as opposed to paper currency, real material assets. Even alternative precious metal investments do not always protect from investment risks. Moreover, certificates always hold a certain default risk through the issuer. For example all precious metal certificates that were issued by Lehmann Brothers became worthless during the financial crisis of 2008.
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Gold versus paper currency
Since the middle ages it has been possible to buy a good suit for an ounce of gold. Why does the real purchasing power of gold remain unchanged when paper currency has been reformed many times or even devaluated? The key to this lies in the natural scarcity of gold: a cube of the worldwide mined amount of about 160,000 tons of gold would have a length of about only 20 meters.
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The gold standard
Until the seventies the gold standard shaped the money politics of many countries including Germany. At this time coins and bills could be directly exchanged for gold. For this reason only the same amount of paper currency could be in circulation as the existing amount of gold reserves. During the time of the gold standard the price levels were relatively stable and government debt remained low. Germany is far removed from this now: at the end of the third quarter of 2010 a massive debt of around 1,847 billion euro is offset by gold reserves valued at only about 105 billion euro.
*Source: Deutsche Bundesbank -
Silver as the perfect addition to your investment
Silver is more strongly connected to economic processes than gold and develops more dynamically in times of economic upswing. In this way silver profits from a growing demand for industrial uses. Silver is used for example in superconductors, plasma screens, for environmentally friendly insect repellents, in solar technologies and for long-term data storage, to name just a few industrial applications of silver. Gold on the other hand is known as an ideal conservation of value and as a guarantee for the preservation of purchasing power.
Gold as well as silver have been experiencing growing demand for several years. Many investors are pulling their assets out of savings accounts, certificates, call money and term deposits and investing in silver and gold. ‘Real hard money’ can not be artificially reproduced and is preferred by many private investors over the unsecured paper currencies of over-indebted governments.
