Gold & Silver bullion outperform mining stocks again in 2023

As the Christmas holiday approaches, bulls are celebrating some continued strength in gold and silver markets.

The monetary metal has a chance of finishing out the year next Friday at a new all-time high. But trading volumes are likely to be light in the holiday-shortened week.

And the big institutions that hold short positions on futures exchanges will not want to see gold post a headline-grabbing close above $2,100 an ounce for 2023.  When gold surged above that level in overseas futures trading two weeks ago, it got abruptly slammed back down before U.S. markets opened.

Once this formidable resistance is broken, though, the path could be cleared for a very significant advance through uncharted territory in 2024.

With just a few days left on the calendar before 2024, now is the time to consider any moves you might be able to make to save on taxes for 2023.

One strategy investors often employ is tax-loss selling. This entails selling assets that have gone down in value to offset any capital gains incurred on other assets.

Precious metals markets as well as conventional financial markets have rallied strongly over the past few weeks on expectations of a more dovish Federal Reserve. In fact, the Dow Jones Industrials rose to a new nominal all-time high this week. So, the typical investor is likely to be sitting on more gains than losses.

But some gold and silver bugs also choose to speculate on mining stocks. Many names in this volatile sector remain down for the year.

A shareholder of an underperforming miner could harvest that loss for tax purposes and then immediately reinvest the proceeds into a more solid precious metals asset – namely bullion itself. 

While mining equities do have the potential to turn around and deliver huge returns for a while, history has shown that they can also collapse spectacularly. 

And as a group, gold stocks have dramatically underperformed gold bullion itself. Gold is now trading at essentially the very top of its historical range. Meanwhile, the benchmark HUI gold miners index is still languishing at under half of its former high. 

Those who prefer to own an asset that looks cheap versus gold but doesn’t carry the risk of going bankrupt like a mining company might do well to opt for physical silver instead.

Another tax strategy worth weighing ahead of 2024 is to fully fund tax-deferred savings vehicles such as IRAs, 401(k)s, and Health Savings Accounts. 

For 2023, you can contribute up to $6,500 to an IRA. If you’re over age 50, you can contribute an additional $1,000.  In 2024, those limits increase to $7,000 and $8,000 respectively.

If you want to enjoy maximum tax deferral, it’s a good idea to make retirement account contributions for 2024 as early as possible in the New Year.

And if you want to enjoy tax-deferred inflation protection in hard assets, then consider investing your IRA in physical precious metals. It’s a wealth protection double play.

Not only can you purchase, hold, and sell real precious metals inside a tax-advantaged Self-Directed Precious Metals IRA, but also you can withdraw your bullion and take direct physical possession of it under normal IRA distribution rules.

The IRS does impose certain restrictions on size and purity, but a wide variety of bullion coins, rounds, and bars are eligible. In addition to gold and silver, you can even hold physical platinum and palladium within an IRA.

To get started in funding a Self-Directed Precious Metals IRA, choose a reputable account trustee then arrange for a bullion dealer such as Money Metals Exchange to ship your IRA-eligible bullion to your designated depository. (Money Metals Depository is approved by several IRA trustees such as New Direction and Mountain West.)

What if you have an existing IRA but don’t want to make new cash contributions to fund a precious metals purchase?

A conventional IRA, whether Roth or traditional, can be converted to a Self-Directed Precious Metals IRA. Switching is easy. Most providers can enroll you right online and work directly with your existing IRA custodian to transfer funds.

Your broker may have never told you about these fantastic options for obvious reasons. But they are totally legitimate.

That said, as every individual’s tax situation is unique, we urge clients to consult with their own tax advisor to determine their best course of action.