Can You Own Gold? A Review of Laws, Forms, and Taxes

Gold, a precious metal, has held significant value across civilizations for centuries. It has served as a medium of exchange, a symbol of wealth, and a tangible asset. This enduring appeal stems from its rarity, durability, and resistance to corrosion, making it a reliable store of value. Investors often consider gold as a hedge against inflation and economic uncertainty.

Legality of Gold Ownership

Private ownership of gold is legal in the United States. Gold ownership was restricted for a period in U.S. history. In 1933, President Franklin D. Roosevelt issued an executive order prohibiting the hoarding of gold coin, bullion, and certificates, requiring citizens to turn them over to the Federal Reserve.

This ban remained in effect for over four decades as part of a strategy to manage the economy during the Great Depression. President Gerald Ford repealed these restrictions in 1974, restoring Americans’ right to own gold. Today, there are no federal limits on the amount of gold an individual can own, whether as bullion, coins, or jewelry.

Forms of Gold Ownership

Individuals can own gold in several ways, broadly categorized into physical and non-physical forms. Physical gold involves direct possession of the metal, while non-physical forms represent a claim or exposure to gold’s price without direct ownership.

Physical gold commonly includes bullion and jewelry. Gold bullion refers to investment-grade gold with a minimum purity of 99.5%, typically found as bars, rounds, or coins. Gold bars are rectangular, often with markings indicating purity and weight, and are available in various weights. Gold rounds are similar to coins but are produced by private mints and do not carry legal tender status. Gold coins are minted by government facilities and often have a legal tender face value, though their market value is based on their gold content.

Non-physical forms of gold offer exposure to the gold market without the need for physical storage. Gold Exchange Traded Funds (ETFs) are financial instruments that track the price of gold, with some holding physical gold bullion in vaults. Investors can trade shares of gold ETFs on stock exchanges, providing liquidity. Gold mining stocks represent ownership in companies involved in gold exploration, mining, and production, with their value tied to company performance. Gold certificates or accounts represent a claim on a specific amount of gold held by a third party.

Acquiring Gold

The process of acquiring gold varies depending on whether one seeks physical or non-physical forms.

Physical gold can be purchased from various reputable sources. Bullion dealers, both online and local, are common avenues, offering a range of bars, rounds, and coins. Mints sell their official bullion coins. Coin shops also provide options for purchasing physical gold. When buying physical gold, it is important to verify the dealer’s reputation, understand pricing, and ensure the product’s authenticity.

Non-physical forms of gold, such as Gold ETFs and gold mining stocks, are typically acquired through a brokerage account. An individual opens and funds an investment account with a brokerage firm, then uses its platform to buy shares of the desired ETF or stock. This method offers convenience and liquidity, as these assets can be bought and sold electronically during market hours.

Storing Physical Gold

Safeguarding physical gold involves practical considerations to protect the asset from theft or damage. Several storage options exist, each with its own advantages and disadvantages concerning security, accessibility, and cost.

Storing gold at home offers immediate access to the metal. However, home storage carries security risks, as physical metals are susceptible to theft or accidental loss. Homeowners’ insurance policies often have limitations on coverage for high-value items like precious metals, and comprehensive insurance can be costly.

Bank safe deposit boxes provide a relatively secure off-site storage option. These boxes offer protection against theft and fire within a bank’s vault. However, access is limited to bank operating hours, and the contents of safe deposit boxes are not insured by the Federal Deposit Insurance Corporation (FDIC).

Third-party vaults or depositories offer the highest level of security for physical gold. These professional facilities specialize in storing precious metals and employ advanced security measures. Many third-party depositories also offer comprehensive insurance options for the stored gold. While these services provide enhanced security, they incur fees for storage and may offer limited direct access compared to home storage.

Tax Implications of Gold Ownership

Profits realized from selling gold are subject to capital gains tax in the United States. The specific tax rate depends on how the gold is classified by the Internal Revenue Service (IRS) and the duration of ownership.

Physical gold, including bullion and coins, is generally classified as a “collectible” by the IRS. Long-term capital gains from the sale of physical gold, held for more than one year, are subject to a maximum tax rate of 28%. This rate is typically higher than the long-term capital gains rates applied to many other investment assets, which can be up to 20%. Short-term gains, from gold held for one year or less, are taxed at an individual’s ordinary income tax rates.

Sales tax on gold purchases varies by jurisdiction. Many states do not levy sales tax on investment-grade precious metals. However, some states may impose sales tax on gold transactions. Certain gold sales may also trigger reporting requirements to the IRS. Consulting with a tax professional is advisable to understand the tax implications for individual situations.