Silver, Gold, and (Not Paying) Taxes

Regular readers are familiar with my position on precious metals and (capital gains) taxation. Those individuals who swap their (soon-to-be-worthless) paper currencies for legal tender gold and silver coins for the purpose of spending their gold and silver currency should not/will not be exposed to any (supposed) capital gains when they spend their gold and silver.

This is based on both the principles of our taxation system, as well as simple common sense. To begin with; if we swap one paper currency for another paper currency in order to spend the new currency (perhaps for business or travel) there is never any “capital gain” (or capital loss) assessed should the value of the new currency appreciate (or depreciate).

The reason for this is simple. When we swap currencies for the purpose of spending the new currency, our reason for acquiring that new currency is not to sell it for the profit (the basis of all capital gains taxation). Thus a currency-trader is always subject to capital gains when those currencies fluctuate in value, because the currency-trader’s purpose in acquiring that new currency was to sell it for a profit (which does fall squarely within the principle of capital gains taxation).

When a vacationer acquires a new currency, it’s for the purpose of going on a trip, not to make a profit. When we acquire our new gold and silver currencies (legal tender coins), it’s for the purpose of protecting our wealth from the banksters’ currency-dilution scam – not to make a profit.

Regular visitors to my site over the past 5 ½ years will have heard (exclusively) one message: we are “playing defense”. Understand that the rise in the (paper) price of gold and/or silver is largely illusory. It is simply a reflection of the deterioration in value of those paper currencies; the ounce of gold (or silver) has not changed, and cannot change.

Recall what readers have often heard from myself and other commentators: gold (and/or silver) preserves its value (our wealth) over time. A holder of a one ounce gold coin in ancient Rome could buy a fine toga, belt, and sandals with that coin (the standard accouterments of that era for a gentleman). In more recent centuries; that same holder of a one-ounce gold coin could buy a fine suit and accessories (the standard accouterments for a gentleman of our era).

Where is the (supposed) capital gain? The gold-holder is not able to buy more and more suits of clothing over time with his one ounce coin – not even over a span of thousands of years. Gold (and silver) preserve wealth, they don’t magically conjure new wealth.

Even if some precious metals novice did acquire legal tender gold and silver coins with the thought that this was some “get rich quick scheme”, the only possible way that such a holder of gold/silver could be exposed to any capital gains taxation would be if the gold/silver appreciated in value (versus other assets), because it was previously undervalued.

However, it is our governments (and the bankers, and the media) who insist again that gold and silver are – if anything – presently overvalued. It is our governments who assign miniscule face-values for their legal tender gold and silver coins, clearly implying the metals are presently overvalued in price. Where, then, is there any place for them to argue that the holders of gold/silver have made or are making “capital gains”?

Indeed, recent representations made by the Royal Canadian Mint (in its official advertising) clearly support my own interpretation of capital gains law with respect to those who acquire legal tender gold or silver coins. This comes at the same time that the Mint is endeavouring to scam investors with a sleazy, sales gimmick with respect to a new “limited edition” silver coin it has issued.