Five Hidden Costs of Gold

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"Looking at gold's numbers on paper doesn't tell the whole story."

Gold has steep hidden costs, and that looking at the numbers on paper doesn't tell the whole story. Here are big costs many investors overlook.

Higher taxes: The IRS taxes precious metal investments as collectibles. That means a long-term capital gains tax of 28% compared with 15% for equities.

Zero income: Many long-term investors can't afford to stash their savings in the back yard for 20 years. Income is a very valuable feature of many investments and gold simply doesn't provide that.

Gold scams: Gold coin scams include false grading on the quality of the coins, the use of cheaper alloys instead of pure gold and even brazen scams where you don't actually even own the gold that you buy. Scams abound in pawn shops and "cash for gold" enterprises that refuse to give you a true value for your jewelry or other gold items.

High ownership and storage costs: It's not like you mined the gold yourself—and all those middlemen between the ore and you want to get paid. Gold carries sales tax, high transaction costs and commissions. And then there's the additional cost of storing your gold.

Yes, gold can lose value: While gold may never become worthless, it is foolish to think it will never lose value. Gold is an investment, period. And no matter how gold bugs spin the metal as a hedge against inflation and a sure thing that will only go up, gold can lose its value—sometimes in a hurry.

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