Exchange traded funds (ETFs) give individuals a handy, liquid way to invest in precious metals such as gold and silver. Yet what may get lost amid the historic rally in metals is that these ETFs can be taxed at a higher rate than funds that invest in stocks.

The prospectus for the $60.7 billion SPDR Gold Shares (NYSEArca: GLD) provides details on the ETF’s tax treatment. With about 1,230 metric tons of bullion, it holds more gold than most central banks.

“Under current law, gains recognized by individuals from the sale of ‘collectibles,’ including gold bullion, held for more than one year are taxed at a maximum rate of 28%, rather than the 15% rate applicable to most other long-term capital gains,” according to the prospectus.

Yes, gold held in an ETF’s vault is considered a collectible by the IRS. The prospectus for iShares Silver Trust (NYSEArca: SLV) contains similar language.

Full disclosure: Tom Lydon’s clients own GLD and SLV.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.