According to tax code, gold, silver and precious metals receive special treatment – the IRS views them as “collectibles” rather than capital assets. They don’t qualify for the maximum 15% tax rate on long-term capital gains. (Will the gold rally last?)

Bob Carlson for Barron’s reports that gains on the sale of gold and silver investments, including gold- and silver-backed ETFs, and gold bullion and coins (except certain U.S.-issued coins), are taxed at a maximum rate of 28% when such investments have been held for more than a year. When they are held for less than one year, gains are taxed as regular income.(Other metals to play besides gold and silver.)

Here are some other facts about precious metals ETFs that Carlson notes:

• Precious metals ETFs are organized as grantor trusts. Investors in an ETF are treated as owning undivided interests in the metal owned by the fund. When an investor sells shares in the ETF, the tax code treats that investor as having sold a share of the metal backing the fund. Thus, the investor is subject to the maximum tax on collectibles.
• If the ETF sells some of its gold or silver, as funds typically do to pay expenses, including management fees, then gains or losses on such sales flow through to the fund’s investors, though they receive no cash distribution.
• Investors aren’t allowed to own collectibles in Individual Retirement Arrangements, or IRAs, and other self-directed retirement accounts, including 401(k) plans. When gold and silver are purchased for such accounts, an amount equal to the cost of acquiring the collectible is treated as a distribution to the owner. Rather, it is included in gross income and taxed at ordinary rates, although an additional 10% penalty might apply if the owner is under age 59½.
• Evidently, these rules do not apply when gold or silver is bought for a retirement account through an ETF. Retirement accounts are treated as having purchased fund shares, not the collectibles held by a fund. It is not treated as a distribution to the owner.

Note that we’re not tax professionals, and you should call your tax consultant for specific advice.

For more stories about precious metals, visit our precious metals category. To get prepared for April 15, visit our tax category.

Gold futures hit new record highs in trading today, soaring above $1,150 an ounce on weakness in the dollar and gold’s appeal as an “alternative currency.” Matt Whittaker for The Wall Street Journal says that in additional to seasonal jewelry buying, gold’s demand is feeding on itself. As the price goes higher, it entices more investors to buy bars and coins for themselves. (Read about the new gold miners ETF).

Where gold goes from here is anyone’s prediction.

The case for a correction: some analysts think gold is overbought, and that a correction could be just around the corner. At the moment, says Rediff Business, gold is getting support from a weak dollar.

The case for more: John Wasiliev for The Age reports that there are numerous near-term factors supporting the price of gold, he says, all underpinned by a volatile but generally depreciating U.S. dollar. Chinese and Indian investors are also creating plenty of demand for the precious metal. (Other reasons gold prices could inch higher yet.)

For now, investors are still cautious about another market pullback. This trepidation is giving  reinforcement to related gold investments. But if a correction shows up anytime soon, have an exit strategy at the ready. Our strategy is to use the 200-day moving average; if gold dips below this line, it’s a sell signal.  (How to follow trends).

The largest gold ETF, SPDR Gold Shares (NTSEArca: GLD) now has holdings at 1,113.833 tonnes, down from a record 1,134.03 tonnes in June, reports Chikako Mogi for Reuters.

For more stories about gold, visit our gold category.

• iShares COMEX Gold Trust (NYSEArca: IAU): up 29.3% year-to-date

• ETFS Physical Swiss Gold Trust (NYSEArca:SGOL): up 15.3% since inception

• SPDR Gold Shares (NYSEArca: GLD): up 29.4% year-to-date

For full disclosure, Tom Lydon’s clients own shares of GLD.

Equities slid on Wednesday morning as an unexpected drop in home construction raised concerns about the pace of the economy’s recovery, say Stephen Bernard and Tim Paradis for the Associated Press. The U.S. Commerce Department reported that the construction of homes and apartments as well as building permits, a key gauge of future activity, fell well short of expectations held by economists. The puts into question Wall Street’s belief in a V-shaped recovery. iShares Dow Jones U.S. Home Construction Index (NYSEArca: ITB) is trading flat this morning.

Inflation figures were also a bit of a surprise to the markets. U.S. inflation accelerated in October as energy prices rose again and car prices rose at the fastest pace since the early 1980s, reports Rex Nutting for MarketWatch. The consumer price index (CPI) rose a seasonally adjusted 0.3% in October, while the core CPI rate, which excludes food and energy, rose by 0.2%.

Meanwhile, gold hit another fresh record high – near $1150 an ounce – in trading today. Another dip in the value of the U.S. dollar added to momentum buying as prices broke through key technical resistance levels, says Jan Harvey for Reuters. The gold market is being underpinned by fresh interest in gold from central banks after a recent major bullion purchase from India and smaller purchases by the central banks of Sri Lanka and Mauritius. The SPDR Gold Shares Trust ETF (NYSE: GLD) is currently trading up by a half percent at $112.50 a share. (For more stories on gold, see our gold category).

In an interesting development, Goldman Sachs (NYSE: GS) is attempting to spruce up their image and generate some goodwill in this holiday season. Goldman is trying a new tack to improve its public image, writes Graham Bowley for The New York Times. The company is apologizing for past mistakes and sharing some of its riches. It will spend $500 million to help thousands of small businesses recover from the recession. (For more stories on the financial sector, visit our financial category).

Tony D’Altorio contributed to this article.

Reasons for gold’s climb to record prices haven’t changed: a weaker dollar, inflation worries and mixed investor sentiment seem to rule the markets lately. But as gold marches forward, other metals have hitched a ride on its coattails. Platinum and palladium have hit 12-month highs, and analysts think it could continue if gold remains strong. (Copper should also enjoy higher prices despite the overstock supply).

Devon Maylie for The Wall Street Journal reports that platinum and palladium are both industrial and precious metals. As a result, they’re benefiting from hedging as well as hopes that industrial activity will take off in 2010. (Learn about the “other” metals). Silver, another precious metal with industrial applications, has also been gaining strength, handily outperforming gold year-to-date. (Six benefits of silver investing).

Copper prices have also rallied to a 13-month high on a sliding dollar and Japan’s economic expansion. Copper made up 54% of the total value of Chile’s exports last month, up from 42% the same time last year, reports Drew Benson for Bloomberg.

Spot gold hit a record high of $1,134.55 a troy ounce Monday, building on the gains it has posted over the past weeks.

For more stories about commodity ETFs, visit our commodity ETFs category.

If you don’t want gold, where can you look? Among the growing number of options include:

• iShares Silver Trust (NYSEArca: SLV): up 53.1% year-to-date

• E-TRACS UBS Long Platinum ETN (NYSEArca: PTM): up 47.6% year-to-date

http://online.wsj.com/article/SB10001424052748704431804574539160726487446.html

• ETFS Physical Silver Shares (NYSEArca: SIVR): up 15.9% in the last three months

• iPath DJ AIG Copper TR Sub-Index ETN (NYSEArca: JJC): up 109.3% year-to-date

Van Eck,

Junior Gold Miners ETF (NYSEArca: GDXJ) is the latest fund from Van Eck. The index gives exposure to small- and mid-cap companies that derive at least 50% of their revenues from gold or silver. The smaller mining companies that are featured in the index may have greater volatility and risk because of their size. On the flip side, there’s plenty of potential for growth in these smaller companies. It’s also worth noting that small- and mid-caps tend to do better in recovery periods, since they’re more nimble and quick to adapt as economic conditions shift. (Is the timing right for small-caps?)

Top country weighting are Canada, United States, Australia, South Africa, China and the United Kingdom. This ETF gives an alternative approach to investing in smaller or junior sized companies that have lots of growth potential while giving exposure to a dynamic subset of the gold mining industry. The ETF holds 38 junior mining companies and has an expense ratio of 0.60%.

Van Eck also offers the Market Vectors Gold Miners (NYSEArca: GDX), which is up 45.5% year-to-date, and has had a great 2009. (Other ways to play gold).

Gold has been a hit with investors this year due to the looming threat of inflation and the weakening if the U.S. dollar. (Other reasons gold prices could go higher). This week, gold has hit a record price of $1100 per troy ounce. (Read about gold pushing through the threshold here).

For more stories about gold, visit our gold category.

The markets were mainly lifted by a pledge from the Group of 20 to keep their stimulus measures in place. Traders saw the announcement as a signal the interest rates would stay low for the time being, report Ieva M. Augstums and Tim Paradis for the Associated Press.

Tropical Storm Ida is making its way through the Gulf of Mexico, and oil companies have begun evacuating their workers. The storm was downgraded from a Category 1 earlier today, says Chris Kahn for the Associated Press. The path would put the storm east of New Orleans and away from most oil and gas facilities in the Gulf, but companies want to be prepared if things change. Oil fields in the Gulf make up about 25% of U.S. crude production and 15% of natural gas production.

Oil prices are hovering around $80 a barrel this morning on concerns about Ida as well as a weaker dollar. United States Oil (NYSEArca: USO) is up nearly 3% this morning.

The weakness of the dollar sent gold prices to a new record trading high of $1,109.90. It continues last week’s rally, when gold gained 5% on speculation that central banks would begin buying more of it as an alternative to the dollar. SPDR Gold Shares (NYSEArca: GLD) is up about 1% this morning.

Cadbury (NYSE: CBY) has rejected the latest bid from Kraft Foods (NYSE: KFT). The hostile bid of $16.4 billion was turned down after Kraft refused to improve its last offer. PowerShares Dynamic Food & Beverage (NYSEArca: PBJ) is up about 1% this morning.

Investors were driven into gold’s safe arms by a disappointing unemployment report that was the country’s worst in 26 years. (The unemployment report).

Allen Sykora for The Wall Street Journal reports that December gold peaked at $1,101.90 an ounce, a fresh record for a most-active contract on Comex. December gold eventually settled at $1,097.70 an ounce, while silver was up 11 cents to $17.52. (Can gold ETFs and prices go higher?)

Who’s going to drive gold prices? Although gold is typically driven by economic factors, these days  investors and traders are in the driver’s seat. Many analysts expect the uptrend to stick around for the time being. Eric Lam for Financial Post reports that the seasonal impact that drives gold is also a factor, as September to December has guided gold higher over the past decade. (Gold’s use as an inflation hedge).

Before investing in gold or other commodities, be sure you have a stop loss in place that you can execute when the trend winds down. (How to employ a stop loss).

For more stories about gold, visit our gold category.

• SPDR Gold Shares (NYSEArca: GLD): up 23.7% year-to-date

• PowerShares DB Gold (NYSEArca: DGL): up 21.9% year-to-date

• iShares COMEX Gold (NYSEArca: IAU): up 23.5% year-to-date

• ETFS Physical Swiss Gold (NYSEArca: SGOL): up 7.3% since inception

The 10.2% unemployment figure is far worse than what economists had expected, and they don’t see any sign of relief until next year. While the pace of layoffs has slowed, the unemployment rate is continuing to climb, reports Javier C. Hernandez for The New York Times.

Unemployment isn’t just as issue here, either; millions around the world don’t expect to see relief in the form of jobs anytime soon. The European Union forecast unemployment in the eurozone to rise to 10.7% in 2010, up from 9.5% this year. Unemployment ranges from 3.5% in the Netherlands to 18.3% in Spain, reports Greg Keller for the Associated Press. In China, the official urban unemployment rate is 4.3% in the third quarter. Brazil’s unemployment was 8.1% in August, almost unchanged from the previous month.

Gold futures have soared to a record $1,100 an ounce today. While some profit-taking briefly sent gold lower, it resumed its course and analysts expect it to continue to move higher, reports Allen Sykora for The Wall Street Journal. SPDR Gold Shares (NYSEArca: GLD) is up about 0.4% year-to-date. (More on gold can be found here).

Businesses slashed inventories for a record 13th straight month in September, although sales rose for the sixth consecutive time. Many hope that improving sales figures will encourage businesses to start lifting production, although a rising jobless rate heightens fears that consumers won’t start spending anytime soon, reports Martin Crutsinger for the Associated Press. (An ETF to play holiday shopping).

The world’s largest insurer, AIG (NYSE: AIG) reported that it was profitable for the second consecutive quarter. Although things have stabilized, the company’s CEO said that earnings will remain choppy while they restructure.  SPDR KBW Insurance (NYSEArca: KIE) is up about 0.6% this morning.

G20 Finance Ministers are meeting this week to discuss financial reform and economic recovery. While these economies have put in place certain policies in order to push along a recovery, they’re not policies anyone wants to keep in place forever. The general consensus is that it’s too soon to reverse the measures, but it’s not too soon to begin talking about when and how it would happen. Government debt in developed G20 countries is likely to reach 118% of annual national income in 2014, reports Andrew Walker for the BBC.

For more stories on the global economy, visit our global ETF page.

Van Eck

Van Eck now manages about $9.7 billion in assets. Their varied lineup includes about 20 funds that range from gambling companies to alternative energy to the Persian Gulf, reports Ian Salisbury for The Wall Street Journal.

Their strategy involves “nibbling at the edges”  which enables them to offer products that dabble in niche markets that generally aren’t available elsewhere. While both Van Eck and the fund industry giants with which it competes offer narrowly focused funds, the giants tend to offer slates of ETFs that, taken together, cover the entire market. (ETF portfolio basics).

Van Eck’s offerings don’t cover the spectrum, though. They have funds that cover steel, Russia and the gold mining industry, but you won’t find funds aimed at Japan or Western Europe. What most of their ETFs do have, as the company says, is some kind of relationship to “hard assets.” (The benefits of hard assets).

For more stories about ETFs, visit our ETF 101 category.

• Market Vectors Russia (NYSEArca: RSX): up 116.6% year-to-date

• Market Vectors Gold Miners (NYSEArca: GDX): up 36.3% year-to-date

• Market Vectors Agribusiness (NYSEArca: MOO): up 38.9% year-to-date

The Central Bank will keep rates unchanged, but the widening yield spreads between mortgage-backed securities (MBS) and federal agency debt against Treasuries may be an essential factor in determining the Fed’s stance on the direction of interest rates, reports Julie Haviv for Reuters. The Fed will buy $1.25 trillion allotted for its MBS program by the end of the first quarter of 2010. (ETFs to shelter against a weak dollar).

Purchase programs have inflated some securities to the point that investors are beginning to turn to the risk/reward of alternative spread products like corporate bonds. For instance, the yield spread on the 30-year Fannie Mae 4.5% current coupon stood at 1.47% over the 5- and 10-year Treasury blend, says Arthur Frank, director and head of MBS research at Deutsche Bank Securities.

The Fed’s decision ultimately could keep the dollar weak for the time being. To capitalize on continued weakness in our currency, consider some of the following ETFs:

• PowerShares DB U.S. Dollar Bearish (NYSEArca: UDN). UDN is up 7.2% year-to-date. This ETF seeks to reflect the performance of the short side of U.S. dollar – basically, the dollar goes down the fund goes up. (More on UDN and a weaker dollar).

• CurrencyShares Euro Trust (NYSEArca: FXE). FXE is up 5.4% year-to-date. A straight forex play on the appreciating euro. As the dollar depreciates against the euro, the euro gains in strength. FXE tries to reflect those gains. (More on FXE and the euro)

• iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM). EEM is up 54.1 % year-to-date. By holding non-dollar-denominated assets, such as emerging market equities, investors  can hedge against weakness. Emerging market investments get the benefit of the “dollar kicker” since assets denominated in foreign currencies are eventually converted back to weaker U.S. dollars. (More on EEM and emerging markets).

• iShares S&P GSCI Commodity-Indexed Trust (NYSEArca: GSG). GSG is up 12.5% for the year. This fund, like other commodity funds, can be a weak dollar hedge. GSG owns futures for 24 different commodities. (More on GSG and commodities).

• SPDR Gold Shares (NYSEArca: GLD). GLD is up 23.1% year-to-date. Gold is another weak dollar hedge because it’s considered a store of value. The current high supply of the dollar in the economy can result in high inflation and many investors have turned to gold as a way to protect against inflation. (More on GLD and gold).

For full disclosure, Tom Lydon’s clients own shares of EEM and GLD.

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

Max Chen contributed to this article.