As bond yields and the US dollar have sunk and stocks have bounced around this year, many investors have taken refuge in gold and silver. Those alternative investments have proven to be attractive as gold prices soared more than 30% as of August, topping $2,000 an ounce before pulling back…and silver gained more than 55%, to $29. The method you choose for investing in these precious metals can have a big effect on the taxes you pay on profits. 

Here’s how to factor taxes into your investment choices…

American Eagles, Canadian Gold Maple Leafs and other coins. Their value closely mirrors the daily price of gold or silver. The IRS considers them “collectibles,” which means that any gains when they are sold are taxed at your marginal income tax rate but no higher than the 28% bracket if held more than one year.

Exchange-traded funds (ETFs) trade like stocks and track the daily price of gold and silver, with each ETF share typically reflecting the price of one-tenth of an ounce of the metal. These precious metal ETFs are more convenient to own than physical forms but, like coins and unlike stocks and most other kinds of ETFs, are considered collectibles for tax purposes. 

Mining-company stocks get the same tax treatment as most stocks. If they are held for one year or less, their gains are taxed at ordinary income tax rates…more than one year, at 0%, 15% or 20%, depending on your income tax bracket. That means you get more favorable tax treatment than with the coins or ETFs. Mining-stock shares fluctuate based on various factors in addition to precious-metal prices, including company ­performance. 

Smart tax moves

In taxable accounts, use any investment losses, including losses on gold and silver, to offset gains on collectibles, stocks and bonds. If you have no capital gains, you can use the losses to offset ordinary income up to $3,000. Any leftover losses can be rolled over for use in subsequent years. 

In tax-advantaged accounts, favor gold and silver ETFs or mining stocks. Reason: Most 401(k) plans don’t allow you to invest in physical metal, and the IRS makes it difficult and expensive to do so in IRAs. Gold and silver investments in tax-advantaged accounts grow tax-free, and you pay ordinary income tax rates on any distributions from a traditional IRA or 401(k) and no taxes on Roth distributions.