Increased taxation is only one of the methods that lawmakers are currently considering as they attempt to bolster steadily dwindling public coffers. It’s no wonder that savvy investors often pour over current and prospective future tax codes to determine the safety and viability of their probable investments.
Of course, those with dollars to invest are always the first likely target of tax reform intended to generate government income, particularly in the face of current global economic woes. Confiscation of private wealth is a right of government, during times of economic hardship, as declared by the US Securities and Exchange Commission. Aside from retirement and educational funds, where can investors put their money to avoid being taxed out of their investment earned income?
A new .25% investment transaction tax, while creating little initial effect on investor dollars, is not likely to be the last step in mending our growing monetary deficit. Although this comparably minor tax may soon be enacted on stocks and funds traded in public exchanges, precious metals, like silver, will not be taxed.
Precious metals in the physical forms of bullion coins, rounds and bars will be exempt from the tax, while precious metals instruments, traded on the open market will be subject to this additional tax. Anticipation of the new tax could be a way for early investors in precious metals markets to hold on to a little more of their investment, but physical precious metals investment may soon be their only protection. Tax hikes seem inevitable in the coming months, as the real fallout of the deepening worldwide financial crisis becomes apparent.
The volatility of silver in today’s marketplace has caused some to shy away from investing in it, despite its recent stellar investment performance. However, those who view silver as an investment just too risky to contemplate, are starting to look at the recent evolution of silver supplies and their meaning for future silver values.
Scarcity is one of the characteristics that imparts value to precious metals, in general. It wasn’t long ago, that the amount of silver existing above ground far exceeded that of gold. However, the last half century has seen silver being utilized for industry and technology, while nearly all the gold that has ever left the ground is still in existence. Largely hoarded in above-ground stores, industrial uses for gold are reasonably rare, when compared with silver. This is because silver is currently much less expensive and, at current prices, unequaled for characteristics that make it industrially valuable. This has led to the present above-ground gold supply exceeding that of silver by approximately four times.
As the economy withers, the demand for mined commodities may decrease, slowing mining activities. If this happens, the effect on silver supplies could be significant, since silver is rarely recycled or even mined. Most silver is the by-product of mining for other metals.
In the interim, industrial and technological uses for silver are continually being discovered. Silver demand could soon outstrip supply, as it already has outpaced mining and recycling. The result could be rising silver premiums and dwindling supplies, eventually leading to delivery delays.
This “perfect storm” of possibilities, along with the fact that silver is intrinsically valuable, could create a truly viable investment opportunity now. Today’s bargain silver prices may not last.
According to Rahul Khullar, India’s commerce minister, his country’s demand for precious metals seems to be slipping. Analysis from the third quarter of 2011 indicates that exports of gold and silver are currently outpacing imports, when measured against data taken earlier in the year. Indian gold retailers speculate that surging prices for precious metals are what is causing their demand to decrease, resulting in a mid-year trade deficit of more than half a billion dollars.
During an ordinary market cycle, India’s precious metals traders would currently be busily importing greater quantities of silver and gold to fulfill the accelerated demand during the traditional marriage and peak festival seasons. However, large import surges in the Spring of 2011 seem to indicate that Western financial chaos is beginning to affect the Indian market. Precious metals hoarders purchasing silver and gold for survival purposes, positively influenced the market early in the year, but are now pulling back as gold values reach historic highs.
The Bombay Bullion Association’s president, Prithviraj Kothari believes that stable prices will exacerbate the downturn in buying, but if pricing falters, increased demand will likely follow. The government continues to observe policy that it hopes will stimulate demand.
Investors in precious metals would do well to watch for any fallback of precious metals prices, to alert them to potential buying opportunities. Demand for silver and gold, though still spurred by jewelry and industrial sectors is increasingly being purchased by safe haven investors. India’s import numbers could signal an eminent price drop, due to lessening demand.
Market and government reactions to a compression in demand from other quarters remains to be seen, but reserving some bullion for the proverbial rainy day could soon be an even wiser decision.
The buzz created by recent fluctuating precious metals prices has many wondering if they too, should consider bullion purchases, like silver, for their investment portfolio. If silver is the commodity of choice, many are asking why an investment in the white metal might be better than a pocketful of gold. Below are some of the reasons that so-called “poor man’s gold” could be a useful and profitable investment when considering a physical acquisition of precious metals.
1.) Silver has been considered a precious metal and tangible monetary form for thousands of years.
2.) Tangible silver is not only valuable as a form of money, but is also one of the most useful materials known to modern mankind. Used for water purification, medicine manufacturing, and technology, silver is a superior conductor that is also used to create exquisite and valuable art objects.
3.) Silver retains its value during difficult economic periods. When paper currencies lose their value, silver does not.
4.) There is much more silver than gold still lying underground, but gold is usually stored, while silver is mostly utilized for industrial purposes. Currently, although silver production has increased, its consumption is still outstripping the rate at which it is mined. It is generally believed that the underground silver supply is diminishing more rapidly than underground gold, making silver recovery more difficult. Silver that is above ground and available for recycling is also diminishing. These silver supply issues will increase the value of silver in the future.
5.) Silver is still inexpensive, relative to gold, making it easier to purchase larger amounts at lower premiums.
6.) Physical silver is anonymous to purchase and convenient to store and use, due to its availability in small amounts which are suitable and accepted for virtually any form of barter.
Can we trust the sovereignty of the US dollar? This is a question that many investors in US currency, or any fiat currency, for that matter, may be asking themselves in the wake of current global monetary upheaval. Even that venerable investment news source, the Wall Street Journal, reported early in 2011 about the possibility of the US dollar being replaced by another currency, for the purpose of worldwide reserve accumulations.
How certain can we really be that the heretofore noble greenback is a secure investment in the current financial climate? The short answer is “We can’t.” Poor national policy making and the whims of unscrupulous lawmakers continue to threaten our badly constructed monetary system, just as they did when goals of our country were to make certain that our money was backed by tangible stores of precious metals.
The first US president, George Washington commented on the possibility of worthless currency and its likely outcomes when he said, “Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest and open the door to every species of fraud and injustice.”
President Washington, like others before him, saw the writing on the wall. History tells the tale of the many ultimate failures of all paper currencies, yet history’s lessons are perpetually wasted by the decades that lead to each successive fiscal disaster. Never has any plan, devised for the construction of an operating paper currency system succeeded for the benefit of its government or people.
No real education or savvy is needed to hypothesize that paper money, un-backed by precious metals, will bring about the demise of an empire, no matter how strong.