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While gold is at new highs, gold-miners have lot of catching up to do.
I'll say.
I'm finally in the green with USAGX for the first time since I bought it in August 2011. I don't plan to stick around much longer. I'm watching GDX like a hawk.
Post-GFC, gold rallied hard and both gold and gold-miners peaked in 2011. Yep, people who bought then are still looking to get even.
Then both were trashed.
For years, it looked as if 2,000-2,100 was a ceiling for gold, but it broke out of that in March 2024. Factors contributing to the gold rally include Middle East tensions, Russia-Ukraine war, global moves away from dollar due to aggressive US dollar-diplomacy, central bank gold purchases, rapidly rising US debt, etc.
But as gold has rallied to new highs, gold-miners are still priced as if gold was around 2,000 - check 2010-11, 2020 and 2022.
So, either gold-bullion is overvalued now, or gold-miners are undervalued. I am betting on the latter. Watch $XAU around 164 bow; its 2010-11 peak was 225+.
Gold and the pms can be a “rags to riches” story, but at times have also been good at converting “riches to rags”. Prone to multi-year periods of outperformance followed by sharp multi-year sell-offs. As I probably said earlier in the thread, it goes down easier if held inside a more broadly diversified fund (like PRPFX). Similar to cutting your Cuddy with some water.
So, either gold-bullion is overvalued now, or gold-miners are undervalued. I am betting on the latter. Watch $XAU around 164 bow; its 2010-11 peak was 225+.
@yogibearbull, which ETFs do you suggest I look at for gold-miners?
At the time I viewed USAGX as a break-glass investment, as in to trigger the alarm, break the glass. In 2011RMDs were not concretely on my mind. It was too small a position to begin with, and it has never compounded well.
If it gets to the price I paid in 2012, when I figured it couldn't go much lower, I'll be a happy camper. But it better get there soon.
Speaking of things I bought at their peak, I think I'll be luckier with XBI (bio-tech) than I have been with miners.
@Derf - Good question. I was aware collectibles like rare coins and precious metals are subject to a higher (28%) tax. I hadn’t considered what happens when those assets appreciate within a fund. So I did a quick read.
Relevant excerpt #1: The final category of capital gains is collectibles. Collectible gains, the focus of this article, are subject to a maximum rate of 28%.
Relevant excerpt #2: Sec. 408(m)(2) defines a collectible as:
Any work of art; Any rug or antique; Any metal or gem; Any stamp or coin; Any alcoholic beverage; or Any other tangible personal property specified by Treasury. Prop. Regs. Sec. 1.408-10(b)5 expands the Sec. 408(m)(2) definition of a collectible to also include: Any musical instrument; and Any historical objects (documents, clothes, etc.).6
Relevant Excerpt #3: While it is clear that gold and silver coins are collectibles, what about bullion-backed precious metal exchange-traded funds (precious metal ETFs)? Are they also considered collectibles? Because precious metal ETFs (e.g., gold, silver, platinum, and palladium) are physically backed by precious metals such that each precious metal ETF share represents ownership in the underlying precious metal, precious metal ETF shares are considered to be collectibles. Examples of common gold ETFs include SPDR Gold Shares (GLD), iShares Gold Trust (IAU), and ETFS Physical Swiss Gold Shares (SGOL).
In brief, the article appears to say that yes, if held inside an etf (gains on) collectibles / precious metals would be taxed at 28%. There is a direct proportional relationship between a share of an etf and an underlying asset.
But PRPFX is a mutual fund (OEF) and that direct proportional relationship between fund shares and underlying assets does not exist. So shares of PRPFX should not be subject to any of the 28% tax on collectibles / precious metals. Of course, if held inside an IRA it shouldn’t make any difference anyway. In that case, a gold backed etf would not be taxed any differently.
Warning: I am not a competent tax advisor. Be sure to consult one when doing your taxes.
I owned GLD in the past and SGOL now, but do not remember how any gains were characterized by Schwab. I am not sure Schwab has a separate "28%" capital gain section
Interesting day, as gold (represented by GLD) is higher, but the miners at mid-day (represented by GDX) were down around 4%.
While PRPFX always gets a lot of attention when precious metals are on the rise, its actual allocation to gold and silver (in bullion form) is only 25%. Additionally, PRPFX has a substantial allocation to natural resource stocks which, no doubt, includes some miners.
The mining stocks tend to be much more volatile than the underlying metals. They are affected by many other factors than just the price of metals. (ie energy costs, labor issues, environmental / health & safety issues and regulations, and to some extent FX / geopolitical considerations as many are in foreign countries).
As others have noted, the mining stocks appear undervalued relative to the price of gold. That’s been the case for many years (based on regular reading of Bill Fleckenstein, highly knowledgable long-time gold bull).
warning : the potential complexity of most gold ETFs is a mess for taxes.
if not each year, then certainly the manual collection and calculation of data of all years past when you sell. repeat for each subsequent sell, and hope you did it roughly right. there is no hand-holding or even hints in turbotax.
it is for this very reason i abandoned k1s in the past, and will never be adding new buys in this space.
warning : the potential complexity of most gold ETFs is a mess for taxes.
if not each year, then certainly the manual collection and calculation of data of all years past when you sell. repeat for each subsequent sell, and hope you did it roughly right. there is no hand-holding or even hints in turbotax.
it is for this very reason i abandoned k1s in the past, and will never be adding new buys in this space.
+1 / Sounds like it. Best held in tax exempt / tax sheltered accounts. As Yogi noted above the 28% tax on collectibles does not apply to etfs that invest only in mining companies.
Comments
I'm finally in the green with USAGX for the first time since I bought it in August 2011. I don't plan to stick around much longer. I'm watching GDX like a hawk.
Post-GFC, gold rallied hard and both gold and gold-miners peaked in 2011. Yep, people who bought then are still looking to get even.
Then both were trashed.
For years, it looked as if 2,000-2,100 was a ceiling for gold, but it broke out of that in March 2024. Factors contributing to the gold rally include Middle East tensions, Russia-Ukraine war, global moves away from dollar due to aggressive US dollar-diplomacy, central bank gold purchases, rapidly rising US debt, etc.
But as gold has rallied to new highs, gold-miners are still priced as if gold was around 2,000 - check 2010-11, 2020 and 2022.
So, either gold-bullion is overvalued now, or gold-miners are undervalued. I am betting on the latter. Watch $XAU around 164 bow; its 2010-11 peak was 225+.
$XAU is an index with a long history, so I just watch it.
If it gets to the price I paid in 2012, when I figured it couldn't go much lower, I'll be a happy camper. But it better get there soon.
Speaking of things I bought at their peak, I think I'll be luckier with XBI (bio-tech) than I have been with miners.
Relevant excerpt #1: The final category of capital gains is collectibles. Collectible gains, the focus of this article, are subject to a maximum rate of 28%.
Relevant excerpt #2: Sec. 408(m)(2) defines a collectible as:
Any work of art;
Any rug or antique;
Any metal or gem;
Any stamp or coin;
Any alcoholic beverage; or
Any other tangible personal property specified by Treasury.
Prop. Regs. Sec. 1.408-10(b)5 expands the Sec. 408(m)(2) definition of a collectible to also include:
Any musical instrument; and
Any historical objects (documents, clothes, etc.).6
Relevant Excerpt #3: While it is clear that gold and silver coins are collectibles, what about bullion-backed precious metal exchange-traded funds (precious metal ETFs)? Are they also considered collectibles? Because precious metal ETFs (e.g., gold, silver, platinum, and palladium) are physically backed by precious metals such that each precious metal ETF share represents ownership in the underlying precious metal, precious metal ETF shares are considered to be collectibles. Examples of common gold ETFs include SPDR Gold Shares (GLD), iShares Gold Trust (IAU), and ETFS Physical Swiss Gold Shares (SGOL).
In brief, the article appears to say that yes, if held inside an etf (gains on) collectibles / precious metals would be taxed at 28%. There is a direct proportional relationship between a share of an etf and an underlying asset.
But PRPFX is a mutual fund (OEF) and that direct proportional relationship between fund shares and underlying assets does not exist. So shares of PRPFX should not be subject to any of the 28% tax on collectibles / precious metals. Of course, if held inside an IRA it shouldn’t make any difference anyway. In that case, a gold backed etf would not be taxed any differently.
Warning: I am not a competent tax advisor. Be sure to consult one when doing your taxes.
While PRPFX always gets a lot of attention when precious metals are on the rise, its actual allocation to gold and silver (in bullion form) is only 25%. Additionally, PRPFX has a substantial allocation to natural resource stocks which, no doubt, includes some miners.
The mining stocks tend to be much more volatile than the underlying metals. They are affected by many other factors than just the price of metals. (ie energy costs, labor issues, environmental / health & safety issues and regulations, and to some extent FX / geopolitical considerations as many are in foreign countries).
As others have noted, the mining stocks appear undervalued relative to the price of gold. That’s been the case for many years (based on regular reading of Bill Fleckenstein, highly knowledgable long-time gold bull).
if not each year, then certainly the manual collection and calculation of data of all years past when you sell. repeat for each subsequent sell, and hope you did it roughly right. there is no hand-holding or even hints in turbotax.
it is for this very reason i abandoned k1s in the past, and will never be adding new buys in this space.