What are the risks of Transactional Gold and Silver?
A plain-language, balanced guide to the real risks of TGS accounts — and the protections that address each one.
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Transactional Gold and Silver is state legislation that lets you own real gold and silver in a secure vault and spend it anywhere with a debit card — voluntarily, without replacing the dollar, and with nothing to do with crypto or government digital currencies. It is Just Another Way to Pay. |
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Direct answer Transactional Gold and Silver carries real risks that every account holder should understand before opening an account. The primary risk is gold price volatility — your balance fluctuates in dollar terms as gold prices move, and if gold prices fall significantly, your purchasing power decreases. Additional risks include custodial risk at the depository, payment system limitations, and currently unsettled federal tax treatment on gold transactions. TGS legislation addresses custodial risk through allocated ownership requirements, independent audits, and insurance mandates. Price risk is the responsibility of the account holder. Plain-English summary: The biggest risk is simple: if gold goes down in price, your TGS account is worth less in dollar terms. If you put $1,000 in and gold falls 20%, your account is worth $800. Gold has historically maintained its long-term value and has never been worth zero — but it does fluctuate, sometimes significantly, in the short term. Know this going in. |
What are the risks of Transactional Gold and Silver?
Transactional Gold and Silver carries real risks that every account holder should understand before opening an account. A TGS account is not a bank savings account. It is not FDIC insured in the way a bank deposit is. Its value in dollar terms fluctuates with the market price of gold or silver. These are genuine risks — and presenting them honestly is part of building the trust that TGS needs to earn at scale.
The risks of TGS fall into four categories: price risk, custodial risk, payment system risk, and tax and regulatory risk. Each category has a different profile in terms of likelihood, severity, and the degree to which it is mitigated by TGS legislation and depository design.
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This article is a balanced risk assessment — not a discouragement Understanding the risks of TGS is the foundation of making an informed decision about whether it is right for you. This article covers all four risk categories honestly. It also covers the protections that TGS legislation and depository design provide — because risk assessment that only lists downside without discussing mitigation is not balanced analysis. Readers who understand both the risks and the protections are best positioned to use TGS wisely. |
TGS risk summary — at a glance
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Risk |
Level |
How to manage it |
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Gold price volatility |
High — real |
Hold TGS as a portion of savings alongside dollars — not as a replacement for all savings. Understand that short-term fluctuations are normal for gold and that TGS is designed for long-term inflation protection. |
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Silver price volatility |
High — real |
Silver is more volatile than gold. Account holders choosing silver should understand this and size their position accordingly. |
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Depository custodial risk |
Low — mitigated |
Allocated custody, independent audits, and all-risk insurance at 100% replacement value reduce this risk significantly. The Texas Bullion Depository has operated since 2018 with no reported custody failures. |
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Payment system failure |
Low — mitigated |
Standard payment network reliability applies — same as any debit card. Provider bankruptcy risk is a consideration; use state-authorized, regulated providers. |
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Federal tax treatment |
Medium — unresolved |
The IRS currently treats gold as property — spending it may be a taxable event at the federal level. Consult a qualified tax professional before using TGS for significant spending. State-enacted TGS laws address state and local tax treatment. |
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Liquidity limits |
Low — manageable |
A TGS balance cannot be spent beyond its current value. Maintain a sufficient balance for anticipated purchases or supplement with your regular bank account. |
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Provider failure |
Low — mitigated |
Because deposits are in allocated custody, they are not part of the provider's assets in insolvency. Choose state-authorized, regulated providers with independent audit requirements. |
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Regulatory change |
Low-Medium |
State TGS laws are statutes subject to amendment or repeal. The constitutional foundation in Article I, Section 10 is more durable — but specific enabling legislation could change. Voluntary participation means account holders can exit at any time. |
What is the biggest risk of a TGS account — and how real is it?
The biggest risk of a TGS account is gold price volatility. Gold prices fluctuate — sometimes significantly — in response to global economic conditions, interest rate changes, currency movements, geopolitical events, and investor sentiment. A TGS account holder who deposits $1,000 when gold is at $4,500 per ounce is holding approximately 0.222 troy ounces. If gold falls to $3,600 per ounce — a 20% drop — their balance is worth approximately $800 in dollar terms. They have not lost any gold. They have lost 20% of the dollar value of their gold.
This risk is real and should not be minimized. Gold experienced significant price declines in 2013 (approximately 28%), in 2014-2015 (approximately 20%), and in various shorter periods throughout its history. An account holder who opened a TGS account at a price peak and then needed to spend their balance during a price trough would experience meaningful purchasing power loss compared to holding dollars.
The long-term context matters — and so does the comparison. The U.S. dollar has lost approximately 90% of its purchasing power since 1971. Gold, over the same period, has maintained its value. The short-term volatility of gold is real. The long-term erosion of the dollar's purchasing power is also real. Account holders who understand both can make an informed choice about how much of their savings to hold in gold versus dollars.
What is custodial risk — and how does TGS address it?
Custodial risk is the risk that the depository holding your gold fails, mismanages assets, commits fraud, or becomes insolvent in a way that puts your holdings at risk. This is the risk that has historically made precious metals storage a concern for individual investors — if the entity holding your gold fails, what happens to your metal?
TGS legislation addresses custodial risk through three specific structural requirements. First, allocated custody — your gold is legally owned by you and held in your name, not pooled into the depository's general assets. In a depository insolvency, allocated account holders' metal is not part of the bankruptcy estate — it belongs to them. Second, independent audits — TGS depositories are required to maintain independent audits verifying that physical holdings match account records. The Texas Bullion Depository undergoes annual independent audits with results submitted to the Texas Comptroller. Third, all-risk insurance — TGS legislation requires deposits to be insured at 100% replacement value. Even if the physical metal were somehow lost or destroyed, account holders would be made whole through insurance.
No custody system is entirely risk-free — but the combination of allocated ownership, independent auditing, and full-replacement insurance provides a strong protection framework. The Texas Bullion Depository has operated since 2018 with no reported custody failures, serving as the proof of concept that this framework is operationally sound.
What is the federal tax risk — and what should account holders know?
The federal tax treatment of TGS transactions is currently the most complex and least resolved risk category. The IRS treats gold and silver as property for federal tax purposes — meaning that any gain in the dollar value of gold since it was purchased is theoretically a taxable capital gain when the gold is spent or sold.
In practice, this means that if an account holder bought gold at $4,000 per ounce and later spent it when gold was at $4,500 per ounce, the $500 per ounce gain could theoretically be treated as a taxable capital gain event — even though the account holder was simply buying groceries, not making an investment sale.
This tax treatment is precisely why TGS advocates are pushing for federal-level clarification that recognizes gold and silver as money rather than property for tax purposes. Every enacted state TGS law addresses state and local tax treatment — exempting qualifying transactions from state and local taxation. Federal tax treatment remains a separate legislative frontier.
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Federal tax disclaimer — required Tax treatment of gold and silver transactions may vary based on individual circumstances. Account holders should consult a qualified tax professional for advice specific to their situation before using TGS accounts for significant spending. This article provides general educational information — not tax advice. |
Is a TGS account safe from theft or fraud?
TGS depositories are required to maintain state-of-the-art physical security. The Texas Bullion Depository, for example, is guarded by Texas State Police officers and operates to commercial vault security standards. The allocated custody model means that even in the event of a security breach, the legal ownership of the metal remains with the account holders — the depository cannot legitimately transfer or pledge account holders' metal to any other party.
Card fraud risk is the same as any debit card — if the TGS debit card details are stolen and used fraudulently, the account holder should contact their card provider immediately to report the fraud and dispute the transactions. The underlying gold balance in the depository account is separate from the card access and is not affected by card fraud unless the fraudulent transactions are processed against the balance.
Digital account security follows standard best practices: use strong unique passwords, enable two-factor authentication where available, and treat TGS account credentials with the same care as bank login credentials. The depository's online portal and mobile app should be accessed only through official channels.
What does gold price risk look like in a real scenario?
A couple in Florida opens a TGS account in January 2026 and deposits $2,000 — purchasing gold at approximately $4,800 per ounce. Their balance is approximately 0.417 troy ounces.
By March 2026, gold prices have pulled back to $4,200 per ounce — a 12.5% decline from their purchase price. Their gold balance of 0.417 troy ounces is now worth approximately $1,750 in dollar terms. They have not lost any gold — they still own 0.417 troy ounces — but the purchasing power of their TGS balance has decreased by $250 from their opening deposit.
They have three options. They can continue holding — accepting that short-term volatility is a feature of gold ownership and that their long-term inflation protection thesis remains intact. They can spend from the balance at the current lower price — their grocery budget this month costs more gold than it would have in January. Or they can convert the balance back to dollars and exit TGS — accepting the $250 loss in dollar terms and deciding the volatility is not right for their situation.
All three options are available because participation in TGS is entirely voluntary for consumers, businesses, merchants, and financial institutions. The account holder is never locked in. Understanding that this scenario is possible — and deciding in advance how they would respond — is the most important thing a prospective TGS account holder can do before opening an account.
What is the most common misunderstanding about TGS risk?
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Common misunderstanding TGS is risk-free because gold always holds its value and the Constitution protects it — there is no way to lose money in a TGS account. |
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The reality TGS accounts carry real price risk. Gold's long-term track record is strong — but its short-term price is volatile. An account holder who deposits $1,000 into a TGS account and gold falls 25% before they spend it will find their balance worth $750 in dollar terms. Gold has never been worth zero — but it has declined 20-30% in specific periods. TGS is a tool for long-term inflation protection and monetary choice, not a guaranteed store of dollar-denominated value in the short term. Account holders who treat TGS as a speculative position or who depend on their full TGS balance for short-term cash needs should understand this risk before opening an account. |
References
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Citations — required for publication Texas Bullion Depository — operational since 2018, $400M+ deposits, 1,700+ account holders | texasbulliondepository.gov Texas Government Code Chapter 2116 — allocated custody and audit requirements | statutes.capitol.texas.gov IRS — gold and silver as property for federal tax purposes | irs.gov/taxtopics/tc409 Federal Reserve Bank of St. Louis FRED — gold price history and U.S. dollar purchasing power | fred.stlouisfed.org Arkansas HB 1918 — state tax exemption provisions | arkleg.state.ar.us Florida HB 999 — state tax exemption provisions | flsenate.gov |
Related questions about TGS risks
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Related questions — with direct 2-sentence answers Is a TGS account FDIC insured like a bank account? No. TGS accounts are not FDIC insured — the FDIC insures deposits at FDIC-member banks, not precious metals held at bullion depositories. TGS depositories use a different protection structure: allocated ownership (your gold legally belongs to you and is not the depository's asset), independent audits, and all-risk insurance at 100% replacement value. These protections are different from — but designed to be comparable to — FDIC protection for a different type of asset. → What consumer protections should a TGS law include? — /blog/what-consumer-protections-should-tgs-include/ What happens to my TGS account if the depository goes bankrupt? Because TGS deposits are held in allocated custody — legally owned by the account holder and not part of the depository's balance sheet — they are not subject to the claims of the depository's creditors in bankruptcy. Account holders' metal is protected as their legal property, not as a claim against the depository. The 100% replacement value insurance provides an additional layer of protection. → What does allocated gold mean? — /blog/what-does-allocated-gold-mean/ What if gold prices fall significantly after I open a TGS account? If gold prices fall, the dollar value of your TGS balance decreases proportionally. You still own the same weight of gold — but it is worth fewer dollars at the lower price. You can continue holding (accepting the short-term loss in dollar terms), spend from the balance at current prices, or convert to dollars and exit. Participation is fully reversible at any time. → What happens if the price of gold or silver goes down? — /blog/what-happens-if-gold-price-goes-down/ Do I owe taxes every time I buy groceries with my TGS card? The federal tax treatment of gold transactions is currently unsettled — the IRS treats gold as property, which could theoretically create a taxable event each time gold is spent. State-enacted TGS laws address state and local tax treatment by exempting qualifying transactions. Consult a qualified tax professional for advice specific to your situation before making significant use of a TGS account. → Are there tax implications for spending gold and silver? — /blog/tax-implications-transactional-gold-and-silver/ Is silver riskier than gold in a TGS account? Silver is generally more price-volatile than gold — it tends to rise more in bull markets and fall more in bear markets. The same principles of risk management apply: hold silver as a portion of savings rather than all savings, understand that short-term dollar-value fluctuations are normal, and know that silver, like gold, has never been worth zero in recorded human history. → What happens if the price of gold or silver goes down? — /blog/what-happens-if-gold-price-goes-down/ |
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Read the full Transactional Gold and Silver FAQ transactionalgold.com/faq |