Gold-backed and other precious metal IRAs have been around for decades. According to federal regulations, you can opt to fund your IRA with precious metals instead of U.S. dollars – but the metals have to come from an approved list from the Federal Government. This list includes gold, silver, platinum, and palladium.
A gold-backed IRA differs from traditional IRAs in a number of ways. For one, gold-backed IRAs are self-directed. This means you make the decision as the account holder. A related difference is how you maintain assets. Stocks exist in the digital world, gold doesn’t.
You also buy metals according to certain types of restrictions, for example, gold must be in the form of 24-karat gold bullion bars with weights between 1 ounce and 400 ounces. Foreign gold coins are now accepted as are American gold coins (according to restrictions of fineness).
Finally, factors that influence the value of gold are different from – and mostly opposite of – those that impact the value of stocks. Generally, the rule seems to be that when stocks go up, gold goes down and vice-versa. In this way, gold is a hedge on stocks and the U.S. dollar. (That last part is important.)
Why Invest in Gold?
Why not just keep your money in a diversified bundle of stocks, bonds, ETFs?
First, let’s explain what gold is as an investment: Gold, unlike equity investments such as stocks and bonds, is a commodity – the owner of gold holds a distinct physical product, something of actual value. Equity investments, on the other hand, mean the investor owns a portion of the company that issued the stock.
Stockholders make money when the companies they own stock in increase profits or improve their business standing. This profit increase results in an increased demand to own the company triggering a rise in the price of the stock. Precious metal investors make money when the demand for precious metal increases, causing the “spot price” of metals to increase.
Because gold isn’t a paper asset, it isn’t subject to the kinds of dilutions and devaluations as are other investments. As the national debt ceiling rises, as it inevitably does, the dollar diminishes and gold’s value rises. Today, our government’s debt is the highest it has ever been. The truth is that the dollar can no longer be considered the storage of wealth that it once was.
Gold, on the other hand, has been a safe haven for wealth for over five thousand years. Gold has also proven itself to be a reliable hedge against inflation. There is no better form of wealth insurance. No other investment affords you the same range of benefits as gold.
Very few institutions are set up to handle the precious metals component of retirement plans. Financial advisors are only licensed to recommend publicly traded securities and as a result have no extensive training in them. While some advisors may recommend precious metal Exchange Traded Funds (ETFs) or mining stocks, which offer a limited way of taking advantage of the growth in the gold market, they can’t recommend investing in gold itself.
Investing in precious metals allows you a few different options. One of those is in choosing to purchase gold in the form of bullion or coins. One of the big differences between bars and coins is that when you sell coins typically you’ll get a few dollars over melt value, or market value. With bars, on the other hand, you get a straight spot price on a buyback.
This is the reason why most experts recommend purchasing coins instead of bars. Because of FREE Gold Guide PDF Download their additional numismatic value, coins are generally seen as the more profitable choice. Also, in many instances, if you were looking to liquidate with large bars you’ll not be able to liquidate part of the bar, you will have to liquidate the entire bar at once. That’s why when it comes to liquidation it also makes sense to have coins in your possession instead of bars.
We hope this article was able to answer some of your precious metal investing questions.
To learn much more about investing in gold and silver and how these precious metals can help you grow and diversify your wealth even in the most uncertain economic times, download our FREE e-mini course entitled “How to Invest You IRA into Gold and Get Rid of Financial Worries for Good.”
Discover why buying gold and silver is one of today’s best long-term, low-risk investment strategies.
