Investing: 3 pitfalls to avoid when investing in gold

As a result of the current geopolitical tensions, the price of the yellow metal is reaching record levels. Our advice for investing in the yellow metal with total peace of mind.

Gold was one of this year’s 2023 winners, when it hit an all-time high above the symbolic $2,050 per ounce mark earlier this December, driven mainly by geopolitical tensions in the Middle East. As Laurent Schwartz, president of the Comptoir National de l’Or, points out, the metal acts as a refuge par excellence in phases of serious geopolitical crises.

Beware of fees associated with physical gold purchases

Despite the current enthusiasm of investors, however, we must remember that it is an asset that does not return anything to its owner. Care must therefore be taken to limit all costs associated with his detention as much as possible. If you want to buy physical gold (coins and bars) from your bank or from a specialist dealer, you have to pay a commission, usually between 2% and 5% of the amount of the transaction, the purchase, but also the resale. Any storage costs are added to this if you decide, for example, to rent a safe at your bank branch to avoid the risk of theft.

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Prioritize purchases of paper gold

To reduce the bill, Christopher Gannatti, head of research for WisdomTree Investments, recommends that investors turn to paper gold and in particular ETFs, those investment funds continuously listed on the stock exchange, as stocks that track almost identically to the evolution of the price of the yellow metal.

These products are easy to use and display annual management fees averaging no more than 0.5%, offering the opportunity to invest in the yellow metal at a lower cost. However, in order to trade them, you must have a securities account that allows access to the stock markets.

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Another solution is to invest in a SICAV or a stock mutual fund specialized in precious metals. There are currently around ten funds implementing this type of investment strategy available on the French market.

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The only disadvantage is that these funds are invested in gold companies listed on the stock exchange, the valuation of which of course depends on the price of the yellow metal, but also on other external factors that may have an adverse impact on the price of their shares, the image, the development of their financial situation or locating their mines in politically unstable countries.

Consider taxation

In any case, the ETF or gold fund is subject to transferable securities taxation in the event of a profit. The net profit from the sale is thus subject to income tax at a flat rate of 12.80% or optionally at a progressive income tax rate to which social security contributions of 17.20% are added.

For physical gold, capital gains are taxed at 36.2%, including social security contributions, after a reduction of 5% per year from the third year of ownership. It is clear that twenty-two years of withholding is necessary for a person to enjoy complete exemption from his gains.

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