During periods of high inflation and weakness in the U.S. dollar, the value of gold has tended to increase, acting as a “hedge” for dollar-valued investments such as stocks, bonds, and cash. The very forces that weaken traditional investments often cause gold to rise. Gold is a good place to be in difficult times.  Gold is the most negatively correlated asset with U.S. stocks and bonds. Put simply, historically gold tends to move counter to the direction of U.S. stocks and bonds more than other investment assets. This makes gold an excellent diversifier for a portfolio made up of stocks and/or bonds.  Did you know that you can actually own gold in your IRA?   

Since the passing of the Tax Payer Relief Act in 1997, you can now include gold and other precious metals as part of your retirement portfolio holdings.  An investor with a self-directed IRA may direct that some of the funds in the IRA be invested in precious metals. IRA investments may include any gold, silver and platinum coins and gold, silver, platinum, and palladium bullion, which meet the refinement requirements of bullion traded through commodities contracts.  There are some caveats to making this work within IRS guidelines:

  1. You must have a custodian hold the precious metals in their storage.  When you take possession of the metals before retirement age, you will be responsible for any early withdrawal penalties.
  2. You can rollover an existing IRA without penalty to a custodian who can purchase precious metals and store them for your account.  However, you cannot start a gold IRA with existing gold as the account must purchase new metals for your IRA.
  3. The choice of your IRA custodian is an important one. When considering adding precious metals to your IRA, selecting a company with solid precious metals experience is key.  You should conduct a detailed evaluation of potential companies.
According to law, all gold bullion bars with a minimum pureness of 0.995% fineness and NYMEX- or COMEX- approved refiner/assayer hallmark can be added to an IRA, but only select gold bullion coins.  The United States government currently allows Gold American Eagles and Gold proof American Eagles in IRAs. Other gold coins allowed to be put into an IRA include the American Buffalo, Canadian Gold Maple Leaf, and Australian Gold Nugget.  Gold bars are ideal for IRAs, as they sell at smaller premiums than gold coins. Although the regulations that govern gold contributions to IRAs call for a minimum purity of only 0.995%, most gold bullion bars are 0.9999% pure.
 
Silver eagles are the only silver coins specifically approved for IRAs. For other forms of silver to be eligible for precious metals IRAs, they must be at least .999 fine. This requirement makes the Royal Canadian Mint’s Silver Maple Leafs also eligible. (These Canadian silver coins are .9999 fine.) However, both American Silver Eagles and Silver Maple Leafs carry high premiums that could shrink in a rising market.
 
It is important to keep in mind that Gold is at a record high price.  While gold is a good hedge against inflation, it is still an investment that can go down in price and lag for years.  At this point in time, those interested in a Gold IRA probably should not go all in at 100% but should only begin to nibble with a small portion of your IRA funds until more economic news is known about inflation and the value of the U.S. dollar.
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