gold as an inflation-hedge after tax

chocolatebarchocolatebar Posts: 9 Tin ✭
edited November 11 in About Gold
I was thinking about this recently. If say currency is debased 50% and gold is up 100%, you really are just barely protecting your wealth. Fiat holder is down 50%, but since your 'tax' is calculated based on fiat you're taxed on imaginary earnings. Let's say you bought gold at $1k and now it's at $2k (tracking the 50% drop in fiat money) so you'll pay tax on the $1k imaginary gain. Meaning with a conservative estimate of 30% capital gains tax, you're actually down 15% not taking into account storage costs.

Seems like it really is just something you should buy in a very very small quantity as 'insurance' of some kind, but unfortunately under the fiat regime it cannot really protect your wealth. I guess it really is just 'insurance' in worst-case scenarios and even then there's no guarantee and not something you really want to put much of your wealth in.

Thoughts?

Comments

  • RocketDogRocketDog Posts: 823 Silver ✭✭✭✭
    1. Well, we need to encourage the government to stop stealing our stored wealth in the form of "gains" whenever they debase their currency. Some countries don't do that.
    2. Can they really track all your gold? They could track your Goldmoney purchases and sales, but not your physical metals.
    3. Long term capital gains are 0, 15, and 20% for 2019...so hold it for a year.
    4. You are right, it has its downsides.
    5. But if currency falls to zero, you will want gold and silver, and I think at that time (if it comes) we won't be worried about paying our taxes.

    Good topic! Other thoughts?
  • IrishGuyIrishGuy Posts: 206 Bronze ✭✭✭
    The answer is in question.

    If you keep the $1000 in a bank as gold goes to $2k from $1k then the $1000 in the bank goes to $500 in Purchasing value. I.e you can only now by a 1/2oz of gold with the $1000 where originally you could have bought 1oz Au.
    Yes you pay capitol gains of say 15% of the gain or $150 so you get $1850 if you sell the Oz.

    The question I would have is why move the gold back to fiat unless needed?
    People should think of gold in oz accumulated rather than in dollar value.
    It is hard and I struggle also!!!

    If you do take the profit the assumption would have to be that you put the $ to work on a better investment. i.e you buy property /assets that you expect will beat gold in the long run or has more value to you.

    Just my thoughts
    @IrishGuy
  • chocolatebarchocolatebar Posts: 9 Tin ✭
    The question I would have is why move the gold back to fiat unless needed?
    People should think of gold in oz accumulated rather than in dollar value.

    Because at some point you'd want to consume. What's the point of saving for saving's sake? There's no guarantee of fiat collapse at a time that suits you and there's no guarantee that the government will not confiscate it anyway, hence the advice to diversify. It's a mistake to think of it in oz terms unless you're a superhuman who plans to live 1,000 years. Since we are humans with lifespans of less than 100 years and we need to consume, better to think of it in dollar value - since that's how its priced.



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