Precious Metals FAQs
The recent growth in the precious metal market has attracted both new investors and new suppliers (businesses) without prior knowledge and experience in the industry. The businesses are well aware of the fact that many investors have zero experience in this industry and may not fully understand industry norms or terminology. This is why it is extremely important to read all information VERY carefully, and find a dealer with an established reputation who can and will answer your questions honestly and with knowledge. As a new investor in any market, it is natural that you will have many questions. You should always feel comfortable with any investment decision you make and believe that all of your questions and concerns have been addressed to your satisfaction. Any reputable dealer will give you the time you need and answer your questions. I have listed a few of the most commonly asked questions that I receive from both new and experienced precious metal investors.
What does the term ‘dealer cost’ or ‘dealer premium’ mean?
The ‘dealer premium’ (‘premium’ when used in the context of a DEALER transaction with his/her supplier) states the percentage or fixed dollar amount over the ‘spot price’ that a dealer pays a large wholesaler, financial institution, or federal government on each specific precious metal product. Therefore, the ‘dealer cost’ is the total cost to the dealer including the ‘spot price’ plus the ‘dealer premium’. Essentially the ‘dealer premium’ is the markup that the dealer must pay.
What does the term ‘premium’ mean?
The ‘premium’ is the additional cost over the ‘spot price’ for a precious metal bullion product. On this website and in our literature, the term includes: dealer premiums and commissions, and all shipping/handling and insurance costs.
What is the difference between the terms ‘dealer cost’ and ‘premium’?
This is important to note as some dealers quote prices as ‘premium over spot price’ and others quotes prices as ‘percentages over dealer costs’. The dealer costs will be higher than the spot price as it contains the spot price of the metal plus the premium/markup it pays to the supplier.
Why are the premiums different between the metals and amongst varying products of the same metal?
Can I take physical possession of any metals that are in a Precious Metal IRA?
No, the IRS requires that the precious metals be stored in a third party depository. You can take physical possession of the metals at any time, however, these deliveries are treated as distributions and are subject to early withdrawal penalties and tax liabilities similar to other IRA products. Remember that the IRS has not taxed the value of the metals in the Precious Metals IRA and thus has an interest in it.
What does a fungible product mean?
In a fungible precious metal certificate program, banks issue certificates for a precious metal which is unallocated. The investor does not take physical possession of the metals, instead he/she buys into an inventory of large bars and coins.
Are dealers required to report the sale of Gold American Eagles?
No. Gold American Eagles do not have CFTC-approved contracts. Therefore, these coins in any size are coins that do not have to be reported when a client sells. Note: We are not an accounting firm, registered accountants, attorneys, or tax experts. This information is intended to assist you and is not intended to be used as sole guidance for complying with these regulations. You should always contact your accountant, CPA or attorney with any tax questions, issues or concerns.
Am I required to report when I purchase precious metals?
The only reporting requirement when purchasing Precious Metals currently involves cash and money orders. You can purchase up to a maximum of $9999 in cash or money order without having to fill out the form 8300 to report the transaction to the IRS. If you write a personal check or wire funds there are no reporting requirements regardless of your purchase size. Note: We are not an accounting firm, registered accountants, attorneys, or tax experts. This information is intended to assist you and is not intended to be used as sole guidance for complying with these regulations. You should always contact your accountant, CPA or attorney with any tax questions, issues or concerns.
Am I required to report when I liquidate precious metals?
This is where the 1099-B form may apply when liquidating certain items. The question involves the type and quantity of product that you are liquidating. Note: We are not an accounting firm, registered accountants, attorneys, or tax experts. This information is intended to assist you and is not intended to be used as sole guidance for complying with these regulations. You should always contact your accountant, CPA or attorney with any tax questions, issues or concerns.
What do I do when I am ready to sell my precious metals?
When and if you decide to liquidate your metals, there are a few simple steps to follow that will assure the most accurate and timely transaction. The instructions are similar, but have a few differences if you have physical metals or if you hold a certificate.