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CNBC
01-05-2025
- Business
- CNBC
Gold ETF investors may be surprised by their tax bill on profits
Gold returns are shining — but investors holding gold exchange-traded funds may get hit with an unexpectedly high tax bill on their profits. The Internal Revenue Service considers gold and other precious metals to be "collectibles," similar to other physical property like art, antiques, stamps, coins, wine, cars and rare comic books. That's also true of ETFs that are physically backed by precious metals, according to tax experts. Here's why that matters: Collectibles generally carry a 28% top federal tax rate on long-term capital gains. (That rate applies to profits on assets held for longer than one year.) By comparison, stocks and other assets like real estate are generally subject to a lower — 20% — maximum rate on long-term capital gains. Investors in popular gold funds — including SPDR Gold Shares (GLD), iShares Gold Trust (IAU), and abrdn Physical Gold Shares ETF (SGOL) — may be surprised to learn they face a 28% top tax rate on long-term capital gains, tax experts explain. "The IRS treats such ETFs the same as an investment in the metal itself, which would be considered an investment in collectibles," wrote Emily Doak, director of ETF and index fund research at the Schwab Center for Financial Research. The collectibles capital-gains tax rate only applies to ETFs structured as trusts. Investors have racked up big profits on gold over the past year. Spot gold prices hit an all-time high above $3,500 per ounce last week, up from roughly $2,200 to $2,300 a year ago. Gold futures prices are up about 23% in 2025 and 36% over the past year. A barrage of tariffs announced by President Donald Trump in early April fueled concern that a global trade war will push the U.S. economy into recession. Investors typically see gold as a safe haven during times of fear. Investors who hold stocks, stock funds and other traditional financial assets generally pay one of three tax rates on their long-term capital gains: 0%, 15% or a maximum rate of 20%. The rate depends on their annual income. However, collectibles are different from stocks. Their long-term capital-gains tax rates align with the seven marginal income-tax rates, capped at a 28% maximum. (These marginal rates — 10%, 12%, 22%, 24%, 32%, 35% and 37% — are the same ones employees pays on wages earned at work, for example.) More from Personal Finance:What experts say about selling gold jewelry for cashRoth conversions are popular when the stock market dipsWhat typically happens to stocks after periods of high volatility Here's an example: An investor whose annual income places them in the 12% marginal income-tax bracket would pay a 12% tax rate on their long-term collectibles profits. An investor in the 37% tax bracket would have theirs capped at 28%. Meanwhile, investors who hold stocks or collectibles for one year or less pay a different tax rate on their profits, known as short-term capital-gains. They generally are taxed at the same rate as their ordinary income, anywhere from 10% to 37%. Taxpayers might also owe a 3.8% net investment income tax or state and local taxes in additional to federal taxes.
Yahoo
18-03-2025
- Business
- Yahoo
Gold ETFs at All-Time High as Bullion Surges Past $3000
Gold reached a milestone by topping $3,000 per ounce for the first time. The economic uncertainties triggered by U.S. President Donald Trump's trade tariff war have led to a safe haven demand. With the record bullion prices, ETFs linked to the spot gold price or futures also reached all-time highs. Some of these include SPDR Gold Trust ETF GLD, iShares Gold Trust IAU, SPDR Gold MiniShares Trust GLDM, abrdn Physical Gold Shares ETF SGOL, iShares Gold Trust Micro IAUM, Vaneck Merk Gold ETF OUNZ and GraniteShares Gold Trust BAR. All these funds are popular options and have a Zacks ETF Rank #3 (Hold) each. These have risen nearly 14% each since the start of 2025. Gold has been on the rise since the start of the year. It gained strong momentum in recent weeks as the economic uncertainty intensified and the stock market experienced a sharp pullback. The S&P 500 officially entered correction territory, sliding 10% from its high set on Feb. 19 in just 16 trading sessions. This marks the seventh-fastest correction since 1929, according to Bloomberg (read: Wall Street in Correction: Tap High-Income ETFs).Trump's trade policies are expected to harm the economy and profitability of companies, worsening fears of an economic slowdown. Meanwhile, the barrage of recent data related to surveys and sentiment indicators point to a downturn in the economy. Many Wall Street analysts have raised concerns about stagflation, wherein growth stagnates, inflation remains high and unemployment is often used to preserve wealth during financial and political uncertainty, and usually does well when other asset classes struggle. Additionally, the inflationary pressure caused by new tariffs will benefit the precious metal's status as a hedge against rising are now pricing in the possibility that the Fed will cut interest rates several times this year amid a tariff-driven U.S. economic slowdown, signs of a cooling labor market and softer inflation. Lower interest rates will continue to support gold prices as these raise the yellow metal's attractiveness compared with fixed-income assets such as bonds. Notably, gold is highly sensitive to rising U.S. interest rates, as these increase opportunity costs of holding non-yielding bullion. Apart from these, central banks are among the major drivers of gold prices. The banks are dominant buyers of gold as they seek to diversify their reserves away from the U.S. dollar. In particular, China extended its purchases for a fourth consecutive month in February. According to the latest report from the World Gold Council, global gold demand reached a record high in 2024, driven by sustained central bank buying and growth in investment demand. Central banks accumulated more than 1,000 tons of gold for the third consecutive year. Global investment demand increased 25% year over year. Gold ETFs pulled in nearly $8 billion in capital since the start of 2025, per GLD and IAU alone attracted $3.3 billion and $2.6 billion, respectively. The cheapest funds (by expense ratio) — GLDM and IAUM gathered $1.3 billion and $311 million, respectively. SGOL, OUNZ and BAR saw inflows of $228.4 million, $91.3 million and $42.1 million, respectively (read: Gold Mining ETFs Shine Amid Market Rout). With economic uncertainty showing no signs of abating, investor interest in gold ETFs is likely to remain strong in the months ahead. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPDR Gold Shares (GLD): ETF Research Reports iShares Gold Trust (IAU): ETF Research Reports abrdn Physical Gold Shares ETF (SGOL): ETF Research Reports SPDR Gold MiniShares Trust (GLDM): ETF Research Reports This article originally published on Zacks Investment Research ( Zacks Investment Research Sign in to access your portfolio
