Is there any way to avoid the following situation?
- As the government destroys the dollar's value, John buys PMs to retain his wealth.
- As the dollar collapses, gold's price increases. John's wealth is retained.
- The government, which orchestrated the dollar's demise, ignores that demise and views John's wealth retention as newly created wealth (a.k.a. taxable "gains" - even though no new wealth was created).
- The government imposes heavy taxes on John's "gains".
- The paradox - whether or not John invests in PM's, the government takes a vast portion of his wealth. The more "gains" John accumulates, the more real wealth he loses via taxes on phantom wealth.
With turbulent times ahead we would not rule out such a scenario. At first it seems that there's not much that one can do about it. At the second thought, though, it appears that they are ways to deal with the situation, however none of them is perfect.
One idea is to take physical delivery of the metal now, and sell it to someone without notifying anyone else. Of course, we have to stress that you will need to be sure to follow the applicable laws in your jurisdiction.
Another idea is to prepare for this situation and diversify geographically. The best way would be to buy physical gold and store it with independent storage services around the world. That's the most difficult way.
There is also somewhat middle way - purchasing some of your metals in the physical form, and spreading the rest of it in several funds that hold the real metal (no pool accounts nor "unallocated" gold/silver whatsoever here) might be a good way to go. The important part here is that these funds are governed by different jurisdictions. It will be likely that such a tax would not be imposed in all jurisdictions at the same time. Probably, it would not be imposed in all of them at all.
Generally, there is a trade-off between security and convenience. The more risk-averse you are, the more diversified and more difficult-to-implement approach you should take.
Please go to our Key Insights section for more information about purchasing bullion and diversification.
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