Precious Metals Sell-Off Provides ETF Tax-Loss Harvesting Opportunities

Investors who were unfortunate enough to be swept along the recent sell-off in precious metals may look to exchange traded funds to implement a tax-loss harvesting strategy to help reduce their bill come tax season.

“The correction in commodities since 2011 highs may provide opportunities for investors to harvest some of those losses for tax purposes and potentially reinvest into a basket of precious metals,’ Maxwell Gold, Director of Investment Strategy at ETF Securities, said in a research note.

ETF Strategist Gold pointed out that silver, platinum and palladium have all declined to the lowest level relative to production costs in a decade or more while gold prices have fallen over 14% over the past three months.

“Declines in asset values might have a silver lining, as they present the opportunity for investors to exercise effective tax management and make prudent use of unrealized losses,” Gold said.

Tax loss harvesting describes the strategy where investors sell stocks or an ETF at a loss to help offset any capital gains tax liability. Thus, recognition of short term capital gains, which are taxed at a higher rate, will be limited. This can help limit the amount an investor will owe and can preserve capital in the end.