A Tax-Free Way to Play Gold


"If one can take advantage of this, the benefits are huge."

There are many different investment vehicles to play this gold market, each with advantages and disadvantages. However, one vehicle appears to be slipping under most investor's radar; that is, financial spread betting.

For those unfamiliar with the concept, it involves betting a certain amount per point on various financial instruments (i.e., one could go long and bet $10 per point on gold, and so for every dollar that gold goes up, the bettor's position increases in value by $10). The bettor also can set a stop and limits, at which their bet will be automatically closed.

Many would view financial spread betting as simply a trading vehicle, but it doesn't have to be limited to just that. What if you placed the stop at gold being $0.01 and placed enough capital in your account to cover that bet? One would effectively be getting a 1:1 ratio with gold, similar to returns offered by GLD and other 1:1 ETFs/ETNs.

Some may argue that in order to get that amount of coverage from the broker, a huge amount capital would have to be deposited to cover the potential loss. But this is not the case; the minimum bets at some brokers are as low as 1.00 per point. So with gold at around $1,080, one would only need to deposit 1080 to cover the bet, and one is getting a 1:1 return on gold, for every $1 gold goes up, one gains 1, and the position will only be closed if gold falls to 1 cent.

The large tax advantage here is that spread betting is free from capital gains tax (18%) in the UK, so there is another great advantage of this situation. If one can take advantage of this, the benefits are huge. Considering investing $100,000 in gold and gold doubled. You would have made $100,000 but would have to pay $18,000 in capital gains tax leaving you with just $82,000 profit. With financial spread betting, there would be no tax and you would pocket the full $100,000, increasing your profits by 22%!

We know this may not apply to all investors, but for those it does this opportunity is definitely worth looking into.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe