How to Invest in Gold and Other Precious Metals: Every Way to Own It, the Costs and the Taxes
You can own gold six ways: coins and bars you hold yourself, an ETF that holds the metal for you, shares of mining companies, futures, a commodity fund, or a self-directed IRA. The cheapest and simplest for most people is a physically backed gold ETF, which charges 0.10% to 0.40% a year and sells in seconds. Physical coins add a dealer markup when you buy and a discount when you sell. Whatever the wrapper, profits on the metal itself are taxed as collectibles, at up to 28% rather than the 15% or 20% most stock gains pay.
This page covers how to buy it and what to expect. Whether gold belongs in your portfolio at all is covered in is gold a good investment?
The Short Answer
- Easiest route: a gold ETF that holds bullion in a vault. Annual fees on the three largest U.S. ones are 0.40% (GLD), 0.25% (IAU) and 0.10% (GLDM).
- If you want metal in hand: buy common bullion coins or bars from an established dealer, compare the price with the spot price, and plan for safe storage and insurance. Dealers always sell above spot and buy back below it.
- Long-run return: from the start of 1975, when Americans could legally own bullion again, through 2025, gold returned 6.4% a year (2.6% after inflation). The S&P 500 with dividends returned 12.4% (8.4% after inflation).
- Big, long falls happen. Gold dropped 70% from its January 1980 high and did not get back to that price until January 2008. In 2026 it fell 21% from a record $5,405 in January to $4,261 in late September.
- Taxes are higher: long-term gains on coins, bars and most gold ETFs are collectibles gains, taxed at your ordinary rate up to a 28% cap.
- Be wary of gold IRA cold calls. The CFTC and FINRA warn that some dealers charge spreads of more than 300%, and that some victims lost one third to one half of their savings to markups and fees.
Six Ways to Own Gold, Compared
| Way to own it | What you pay | Selling | Tax on long-term gains | Main risk |
|---|---|---|---|---|
| Bullion coins and bars | Dealer markup over spot when you buy, plus storage and insurance | Dealer buys back below spot | Collectibles, up to 28% | Theft, fakes, wide spreads on small or "collectible" coins |
| Physically backed gold ETF | 0.10% to 0.40% a year on the big three, plus any trading cost | Any trading day, at market price | Collectibles, up to 28% (the trust is treated as owning the metal) | Gold's price; small tracking cost |
| Gold mining stocks or funds | Normal stock or fund costs | Any trading day | Regular capital gains rates | Company risk: costs, debt, mine problems; usually swing more than gold |
| Gold futures | Commissions; margin deposit | Any trading session; contracts expire | 60% long-term, 40% short-term, taxed every year (section 1256) | Leverage can wipe out more than you put in |
| Commodity futures fund | Fund fee plus the cost of rolling contracts | Any trading day | Varies; many send a Schedule K-1 | Roll costs can drag returns below the metal's price change |
| Self-directed "gold IRA" | Dealer markup, plus custodian and storage fees | Through the custodian and a dealer | Tax-deferred inside the IRA; withdrawals taxed as ordinary income | High markups and pressure sales; the CFTC has brought fraud cases |
Coins and bars. The U.S. Mint does not sell its American Eagle gold bullion coins to the public; it sells them through a network of authorized purchasers, and you buy from a dealer. American Eagles are 22-karat gold (91.67%), and each contains its stated weight of pure gold. Before you buy, check the day's spot price, which the CFTC describes as the cash price for immediate delivery, quoted in dollars per troy ounce. Then compare what you pay per ounce of pure gold with that number, across dealers and products. The CFTC warns that a push toward higher-priced collectible or "semi-numismatic" coins is a common sign of a scam.
ETFs. A physically backed gold ETF owns bars in a vault and its shares track the gold price, minus the yearly fee. You buy it in any brokerage account, including an ordinary IRA, with no storage to arrange. We compare the big funds in GLD vs IAU and GLDM vs IAU.
Mining stocks. Miners are businesses. Their profits can jump when gold rises, because their costs stay roughly the same, and slump when it falls, so their shares tend to swing more than the metal. You also take on each company's debt, management and mine risk. They are not taxed as collectibles. A related option is a royalty and streaming company, which funds mines in exchange for a share of their output instead of running them; see how to invest in royalties.
Futures. A futures contract is a leveraged promise to buy or sell gold at a set price on a future date. You put down a margin deposit, so a small price move can mean a large gain or loss, including more than you deposited. They suit experienced traders, not savers.
Hypothetical cost example. Put $10,000 into gold two ways. With a one-ounce coin bought at 4% over spot and later sold back at 1% under spot, gold has to rise about 5% before you break even, before storage. With an ETF charging 0.10% a year, the yearly cost is about $10, and you can sell for close to the market price. The markups here are illustrative; real ones vary by dealer, product and day, which is why the CFTC suggests shopping around.
What Gold Returned Since 1975
We start in 1975 for a reason. From 1933 until the end of 1974, Americans generally could not own gold bullion. Public Law 93-373 (August 14, 1974) lifted the ban, and President Ford's Executive Order 11825 revoked the remaining gold orders effective December 31, 1974. Until 1971 the dollar was also convertible into gold at an official price; President Nixon suspended that convertibility on August 15, 1971.
| Asset, 1975 to 2025 | Return a year | After inflation | $10,000 became | Down years (of 51) |
|---|---|---|---|---|
| Gold | 6.4% | 2.6% | $234,000 | 19 |
| S&P 500 with dividends | 12.4% | 8.4% | $3,827,000 | 9 |
| 10-year Treasury notes | 6.1% | 2.3% | $203,000 | - |
| 3-month Treasury bills | 4.3% | 0.7% | $87,000 | - |
| Inflation (CPI) | 3.7% | - | prices rose 6.3 times | - |
The starting point changes the story a lot:
- 2001 to 2025: gold returned 11.7% a year against 8.7% for the S&P 500, because it began near a 20-year low.
- 2016 to 2025: 15.2% for gold, 14.7% for stocks.
- 1971 to 2025: 9.0% for gold, helped by the jump from the old fixed price, against 11.1% for stocks.
Gold also swings more than people expect. The standard deviation of its yearly returns since 1975 was 24.7 percentage points, against 16.0 for the S&P 500 and 9.9 for 10-year Treasuries. Its best years were +126.5% (1979) and +67.4% (2025); its worst were −32.6% (1981) and −27.3% (2013). Over the 42 ten-year periods starting 1975 to 2016, gold lost purchasing power in 19; stocks did in 3.
Inflation hedge? Only loosely. In the nine years since 1975 when inflation topped 5%, gold averaged a 15.2% gain, but that average leans on 1979. Gold beat inflation in just four of those nine years, and in 2022, with inflation at 6.5%, it gained 0.4%. For a direct inflation hedge, I bonds and TIPS are tied to the CPI by design.
How Gold Did When Stocks Crashed
Gold's main selling point is that it does not move with stocks. Since 1975 the correlation between their yearly returns is about zero (−0.02). In the eight S&P 500 bear markets since 1975, gold rose in five and fell in three:
| S&P 500 bear market | S&P 500 | Gold, same dates |
|---|---|---|
| Nov 1980 to Aug 1982 | −27.1% | −46.0% |
| Aug to Dec 1987 | −33.5% | +6.2% |
| Mar 2000 to Sep 2001 | −36.8% | +2.7% |
| Jan to Jul 2002 | −32.0% | +15.1% |
| Oct 2007 to Nov 2008 | −51.9% | +0.3% |
| Jan to Mar 2009 | −27.6% | +8.9% |
| Feb to Mar 2020 | −33.9% | −4.9% |
| Jan to Oct 2022 | −25.4% | −7.5% |
Even in 2008, when gold ended the year up 4.3%, it fell 29.5% between March 17 ($1,011.25) and October 24 ($712.50) as investors sold whatever they could to raise cash. In March 2020 it dropped 12.4% in two weeks before recovering. Gold has cushioned many crashes, but not on a schedule you can count on.
Gold's Own Crashes
| Peak | Low | Fall | Back to the peak price |
|---|---|---|---|
| $850.00, Jan 21, 1980 | $252.80, Jul 20, 1999 | −70.3% | Jan 3, 2008 (28 years) |
| $1,895.00, Sep 5, 2011 | $1,049.40, Dec 17, 2015 | −44.6% | Jul 24, 2020 (9 years) |
| $5,405.00, Jan 29, 2026 | $4,261.05, Sep 25, 2026 (latest in our data) | −21.2% so far | Not yet |
After inflation the 1980 peak was even harder to get back to. Measured from year-end 1980 to year-end 2001, gold lost about 77% of its purchasing power, and it did not regain its 1980 year-end level in real terms until 2012. Anyone who bought at a peak needed decades of patience.
How Gold Is Taxed
- Coins, bars and physically backed ETFs: the IRS says net capital gains from selling collectibles, such as coins, are taxed at a maximum 28% rate. The tax code counts "any metal" as a collectible, and for this rate it ignores the IRA exception for certain coins and bullion, so even American Eagles and IRA-grade bars are collectibles when you sell them in a taxable account. Grantor-trust ETFs like GLD and IAU pass this treatment through to you, as their prospectuses explain. Short-term gains (one year or less) are taxed as ordinary income either way.
- Mining stocks and funds that hold mining stocks: regular capital gains rates, 0%, 15% or 20% on long-term gains.
- Futures (section 1256 contracts): gains and losses count as 60% long-term and 40% short-term no matter how long you held them, and open contracts are marked to market at year end, so you can owe tax on paper gains.
- Commodity futures funds: many, such as the Invesco DB funds, are treated as partnerships and send you a Schedule K-1 (and K-3); some of their futures gains are taxed each year whether or not you sell.
Hypothetical tax example. You sell after more than a year with a $10,000 gain, and your ordinary income tax rate is 32%. On a gold coin or a gold ETF, the collectibles rate caps the tax at 28%: $2,800. On a stock fund, at the 15% long-term rate most people in that bracket pay: $1,500. On gold futures under the 60/40 rule: 60% at 15% plus 40% at 32%, or $2,180. If your ordinary rate is below 28%, a collectibles gain is taxed at that lower rate instead. State taxes and the 3.8% net investment income tax (IRC section 1411), where they apply, come on top. Our capital gains tax calculator covers the stock side.
Gold IRAs and the Sales Pitch to Watch For
An IRA that buys a collectible is treated as if it paid that money out to you, which would trigger tax. The tax code makes two exceptions: certain U.S. gold, silver and platinum coins (such as American Eagles) and state-issued coins, and gold, silver, platinum or palladium bullion at least as pure as a futures exchange requires for delivery, but only while a qualified trustee physically holds it. That is why a "gold IRA" needs a self-directed IRA custodian and an approved depository, and why keeping the coins at home is not allowed.
The CFTC and FINRA issued a joint bulletin on these accounts. Its main points:
- Dealers "will always sell metal above the spot price and buy it back below," and some fraudulent dealers have charged spreads of more than 300%.
- Some gold or silver IRA fraud victims had one third to one half of their savings drained by markups, fees and commissions.
- Once money is in a self-directed IRA, you are on your own: no fiduciaries or advisers there to guard against bad investments. Salespeople who call themselves "IRA experts" may not be registered at all; check them on FINRA BrokerCheck and NFA BASIC.
- A push toward collectible or "semi-numismatic" coins at a higher price is a common sign of trouble.
One real case: in April 2024 a federal court ordered Red Rock Secured, a California dealer, and two of its people to pay more than $56 million. According to the CFTC, they persuaded at least 950 people, most using retirement savings, to pay over $69 million for coins worth only $30 million, with undisclosed markups of 91.89% to 129.97%.
If you want gold inside a retirement account, a gold ETF bought in an ordinary traditional or Roth IRA at a regular broker avoids the custodian, storage and dealer markup. For more on spotting investment fraud, see how to spot crypto scams; the pressure tactics are the same.
Silver, Platinum and Broad Commodity Funds
Silver has been even more volatile than gold. Its LBMA price hit $49.45 an ounce on January 18, 1980, ended that year at $15.50, and reached $48.70 again only on April 28, 2011. We cover it in is silver a good investment? Platinum and palladium bullion also qualify for IRAs under the same purity rule as gold and silver, and are taxed as collectibles too.
Broad commodity funds (energy, metals, farm products) usually hold futures rather than the goods themselves, because you cannot store a tanker of oil. Before contracts expire, the fund sells them and buys later ones, known as rolling. When later contracts cost more than nearer ones, a market the CFTC calls contango, each roll buys less, and the fund can lag the commodity's price. The opposite, backwardation, helps. Read a fund's prospectus for its roll method and tax form before buying, since many send a K-1 rather than a 1099.
How Much to Own
Gold pays no interest or dividends, so its whole return depends on someone paying more later. Its value in a portfolio is as a diversifier. In our backtest from 1975 to 2025, rebalanced once a year:
| Mix | Return a year | Worst year |
|---|---|---|
| 100% S&P 500 | 12.4% | −36.6% |
| 90% stocks, 10% gold | 12.1% | −32.5% |
| 60% stocks, 40% Treasuries | 10.3% | −18.0% |
| 60% stocks, 30% Treasuries, 10% gold | 10.5% | −16.1% |
In this history a 10% slice trimmed the worst year a little at a small cost in return. A large slice adds a volatile asset with long dry spells. If you add gold, decide the share in advance, hold it in the cheapest wrapper, and rebalance back to it instead of buying more after a run-up. Our guide to asset allocation covers setting the rest of the mix.
FAQ
What is the cheapest way to invest in gold?
For most people, a physically backed gold ETF. The lowest-fee large U.S. fund, GLDM, charges 0.10% a year, about $10 on $10,000, with no storage or dealer spread. Coins and bars add a markup when you buy and a discount when you sell.
Is gold taxed differently from stocks?
Yes. Long-term gains on gold coins, bars and physically backed gold ETFs are collectibles gains, taxed at your ordinary rate up to 28%. Most long-term stock gains are taxed at 0%, 15% or 20%.
Can I hold gold in my IRA?
Yes, in two ways: buy a gold ETF in a normal IRA, or open a self-directed IRA that holds approved coins or bullion at a depository through a trustee. The second route costs more and is where the CFTC and FINRA see most precious metals fraud. You cannot keep IRA gold at home.
How much did gold return over the long run?
From 1975 to 2025, 6.4% a year before inflation and 2.6% after, by our calculation from LBMA prices. The S&P 500 with dividends returned 12.4% and 8.4%.
Does gold go up when stocks crash?
Often, not always. It rose in five of the eight S&P 500 bear markets since 1975 and fell in three, including a 46% drop during the 1980 to 1982 bear market. In 2008 it fell about 30% from March to October before ending the year higher.
Should I buy gold coins or bars?
If you want physical metal, common one-ounce bullion coins and bars from a reputable dealer are usually priced closest to the metal's value. Avoid coins sold at a premium for rarity unless you are a collector, and check the spread the dealer will pay you back.
Sources
- LBMA Gold Price PM and LBMA Silver Price, daily history (read via the Internet Archive copy of September 28, 2026, latest gold fixing September 25, 2026)
- Aswath Damodaran, NYU Stern, Historical Returns on Stocks, Bonds and Bills: 1928-2025 (January 2026 update; S&P 500, Treasuries, bills and CPI inflation)
- IRS Topic 409, Capital gains and losses (collectibles taxed at a maximum 28% rate)
- 26 U.S.C. 1(h)(4) and (5), 26 U.S.C. 408(m) and 26 U.S.C. 1256
- CFTC and FINRA, 10 Things to Ask Before Buying Physical Gold, Silver, or Other Metals
- CFTC, Federal Court Orders Red Rock Secured to Pay Over $56 Million (April 25, 2024)
- CFTC Glossary (contango, backwardation)
- Invesco ETF Tax Center (DB funds treated as partnerships, Schedule K-1 and K-3)
- U.S. Mint, Bullion Authorized Purchasers and American Eagle program
- Public Law 93-373 (S.2665, 1974) and Executive Order 11825; President Nixon, address of August 15, 1971
This article is for general information and is not investment or tax advice. Returns are calculated from index and benchmark prices you cannot buy directly; they exclude fees, dealer spreads and taxes, and past performance does not predict future results. Worked examples are hypothetical.
