It’s not been widely known that the IRS allows retirement
accounts such as IRAs to
hold gold and other precious metals. That’s because most retirement accounts
are administered by bank and brokerage companies, who have no incentive to
allow client to diversify into asset classes that are not within their
expertise.
Gold and silver prices will often reflect investor concerns
over the financial system or the economy as a whole, and will thus move in a
contrary direction from stocks or cash. Less than 50 years ago, the US and
other countries backed their currencies with gold (and/or silver) and issued
coin in precious metal (‘real money’), but this may be gone for good, with no
countries offering such money any longer.
So what exactly are the other options for holding precious
metals in an IRA? Here, we’ll look at the types of metals and IRA can purchase
and in what form those metals can be.
Is silver as
attractive as Gold?
Savvy precious metals watchers have noted that silver
doesn’t entirely perform the same as gold. However, like gold, it will tend to
move contrary to stocks and publicly traded securities. There are a few points
to look at with silver:
• Silver,
traditionally, is money: It has often been silver, not gold, which is
constitutionally backing the currencies such as the U.S. Dollar, the British
pound and Chinese yuan.
• Silver, unlike gold, is not limited primarily to luxury goods), but rather is so versatile that is has proven essential for the manufacture of a vast range of products (due to its unique electrical conductivity and reflectivity, as well as remarkable anti-fungal, anti-bacterial and other attributes.) Hence, silver once used in these manufacturing applications can’t readily be recycled so more must be mined.
• According to the U.S. Mint, investors are not only continuing to purchase record amounts of Gold Eagle coins, but are spending as much in dollar terms on Silver Eagles — meaning they’re buying more than 50 times as many silver coins as gold ones.
• Precious metals prices, in particular silver, are determined by the price of futures contracts used in industry to hedge against the fluctuation of the price of the physical metal itself. However, evidence increasingly suggests that these futures contracts aren’t used to honor actual delivery of physical metal, but apparently only to suppress the price. In other words, the price of the metals are not strongly correlated with actual supply and demand fundamentals for the physical stuff — experts and researchers increasingly have formed a consensus that the price of metals is much too low to accurately reflect the scarcity and high demand for them.
• Silver, unlike gold, is not limited primarily to luxury goods), but rather is so versatile that is has proven essential for the manufacture of a vast range of products (due to its unique electrical conductivity and reflectivity, as well as remarkable anti-fungal, anti-bacterial and other attributes.) Hence, silver once used in these manufacturing applications can’t readily be recycled so more must be mined.
• According to the U.S. Mint, investors are not only continuing to purchase record amounts of Gold Eagle coins, but are spending as much in dollar terms on Silver Eagles — meaning they’re buying more than 50 times as many silver coins as gold ones.
• Precious metals prices, in particular silver, are determined by the price of futures contracts used in industry to hedge against the fluctuation of the price of the physical metal itself. However, evidence increasingly suggests that these futures contracts aren’t used to honor actual delivery of physical metal, but apparently only to suppress the price. In other words, the price of the metals are not strongly correlated with actual supply and demand fundamentals for the physical stuff — experts and researchers increasingly have formed a consensus that the price of metals is much too low to accurately reflect the scarcity and high demand for them.
If you’re considering a Gold IRA, keep in mind a few considerations
about Gold IRAs:
1) Your Gold IRA doesn’t have to be limited to gold,
or to any gold at all, but can acquire silver (not to mention platinum and palladium
as well). Silver will often perform out of sync with gold since its price seems
more subject to investor sentiment on the prospects of inflation or deflation.
And platinum and palladium have their niches too (platinum with a combination
of luxury and industrial demand uses, and palladium being vital to certain
industrial applications)
2) Your metals don’t have to be limited to
government-issue bullion coins. It’s true that government-minted Silver and
Gold coins such as the American Eagle, Canadian Maple Leaf, Austrian
Philharmonic, Australian Kookaburra and Mexican Libertad are all acceptable for
IRAs and other retirement plans). But did you know that many private mints also
offer bullion products of sufficient fineness to meet IRS stipulations? Most
bullion dealers can assist with identifying these products, which will always
be minted to show their bullion content (typically Gold and Silver bullion
state .999 fineness, and Platinum and Palladium .9995, all of which meet or
exceed IRS requirements). By choosing these private-minted bullion products
(sometimes called ‘generic rounds’ since they are typically offered in tubes of
20 one-ounce coins), an investor may benefit from purchasing at a lower premium
than the more popular government-minted coins.
3) You don’t have to worry about the safekeeping of your
metals. If you are holding a significant amount of gold or silver coins
personally, you will probably keep them in a safe, or somewhere else that is
secure, but easily accessible to you, should you need them. However, in the
case of a retirement account such as an IRA, you cannot hold the metals
yourself in any case, so the proximity of your metals to your residence is not
so pertinent. Just as you have chosen an IRA administrator to house your IRA
assets, you choose a depository to keep your IRA’s holdings secure. Here is
something that is often overlooked: at retirement, you will have the option to
distribute the coins from your IRA to yourself. You get to decide whether it is
better to sell the metals while they are still in the IRA (and take a cash
distribution) or after you distribute them to yourself.
