IRA options: Why you should invest in physical gold

What is a gold IRA?

The term Gold IRA is often used to describe a precious metals IRA, an individual retirement account that allows the ownership of physical gold, silver, platinum and palladium. Just like other types of IRA, the Gold IRA will provide you with tax advantages. Holding physical gold in your IRA will allow you to accumulate investment growth on a tax deferred basis. The gold held inside of an IRA has benefits over gold held in normal taxable accounts. When gold is held inside of a Roth account, you pay no taxes on the gains in value when you decide to sell (which in normal accounts could be a whopping 28%), but only when you withdraw the money resulting from the sale of the gold. Not all forms of precious metals are allowed, but the list of specific forms that are allowed is pretty big.

Paper gold is not physical gold

'Paper gold' is the term used for any derivative product with gold as underlying. So this term describes futures, options, warrants, swaps, and ETF's. The total value of the physical gold that is delivered every month is less than 0.1% of the value that changes hands in the future market. No matter how it is marketed, owning a stock in a gold mining company doesn't mean you own gold, neither does owning a gold ETF does mean you own gold. Owning an ETF inherently means you bear some counterparty risk. Getting your hands on the actual physical gold is the only method to really own gold. If the financial system collapses and the gold prices shoot up it is very likely that a lot of the 'paper gold' will prove worthless.

Reasons to own gold


Investors often use precious metals as a long-term hedge against inflation, adverse stock movements or to diversify their portfolio.

This graph shows the correlation between the classes for a decade. Note that the correlation is close to zero, meaning that gold will be a excellent way of diversifying.


Now let us look at the price performance of gold versus that of the S&P500. The following graph shows the monthly correlation coefficient between the gold spot price and the S&P500 just below respective prices. The correlation coefficient is always between -1 and 1. A coefficient of +1 means the prices of the two instruments move in the exact same manner, a coefficient of -1 means they move in exactly the opposite way and 0 means no linear relation. We see that intra-year gold is a good hedge for the S&P500, they move mainly in opposite directions. If we look at a larger timeframe -let's say 10,20 or even 50 years- both the S&P500 and gold moved up a lot, where gold outpeformed S&P500 for most timeframes.

History and Future

Gold has an incredible history as currency and as a store of value. While multiple payment systems have not stood the test of time, it has proven to be an excellent currency for thousands of years. Gold is known for its value retention and experiences increased popularity in turbulent tiems. Recently the extreme inflation in Zimbabwe led to people no longer accepting their own currency, only gold and silver. The government there initiated a plan in 2018 to reintroduce a gold-backed currency. Money can be printed, gold not so much.

Another similar recent example is Venezuela, where people lost all of their savings by keeping it in fiat, the Bolivar.

These examples show that gold does not just guarantee a happy retirement, it literally saved lives. Similarly, when Saigon fell in 1975 escaping the country was almost exclusively possible for families that held physical gold. The seats on the boats were priced at more or less 10 troy ounce per adult and 5 per child. Tens of thousands of Vietnamese 'boat people', were able to escape by boat and start a new life in for example the USA, Canada and Australia because of their gold.

'Paper money eventually returns to its intrinsic value: zero.' - Voltaire

For more than a decade now, the Chinese government urges its citizens to buy gold because they anticipate where the dollar might go. In case the fiat money system would collapse (unlikely, but not impossible) we will probably fall back on gold and silver. The central banks of Brazil, China and Russia have been buying a lot of physical gold in recent years to increase their gold reserves and thus strengthen their financial position in relation to the West.


Gold is pretty scarce. The infographic below shows the total amount of gold that is currently mined. If you would melt all that gold into a solid cube, it would only be 20.5m wide. The tiny ball of gold, in front of the couch, weighs 1 metric ton exactly and would cost around 50 million dollar.


Next to the fact that most retirement plans have a very limited set of investment options and a big direct exposure to the stock market, a precious metal IRA allows you to accumulate investment growth on a tax deferred basis. Compared to holding gold in a normal account, you don't pay taxes over the increase in value when you decide to sell.

How do you start owning physical gold

Owning gold means owning your future. Below you can find a free and complete guide that will help you start. It will teach you:
- How to roll over your 401K into a Gold IRA,
- How to safely buy physical gold,
- How to convert bitcoin to gold,
- Everything about storage and delivery,
- The ins and outs of tax on gold

Can I buy & own physical Gold & Silver coins or bullion as part of my 401(k)? Traditional 401(k) plans generally offer several investment choices, but they limit the asset classes available. Although you may be able to invest in precious metals funds, gold and silver mining stocks, and other similar paper products, standard 401(k) plans do not include an option to invest in physical gold or silver. Self-directed IRAs do. Under this type of plan, you can invest in physical gold, silver, platinum, and palladium coins and bars, as long as they meet certain standards. Can I rollover from my current IRA or 401(k) retirement account? Yes, if you currently have a 401(k) or IRA, you can likely roll it over into a self directed plan. In fact, most precious metals retirement plans at SchiffGold begin with a rollover. The current law allows for transfers from IRAs, as well as rollovers from other qualified retirement plans. These include 401(k), 401(a), 403(b), 457, Thrift Savings Plan (TSP), and annuities. If you already have a 401(k) plan, the first step is to determine find if it is eligible for an “in-service rollover.” If so, this may allow you to move a portion of the funds from your current employer-provided 401(k) into a self-directed IRA. If you ever split with the employer who provided your 401(k), you will also have the option of rolling your savings into an IRA. SchiffGold precious metals specialists can help walk you through this process. Is a self-directed IRA required to add physical Gold & Silver to my 401(k) account? Self-directed IRAs including precious metals will help you meet two important retirement goals. They combine the wealth-preserving power of the ultimate safe-haven assets with the tax benefits of an IRA. But you will need to establish a self-directed IRA before you can take advantage of these benefits. Generally, conventional plans do not allow diversification into physical gold because of the special circumstances that go along with precious metal ownership. These include storage, insurance, and custodial responsibilities. Self-directed IRAs open the door for precious metals investing while retaining all of the rules pertaining to tax treatment that apply to conventional retirement plans. Once you get an account set up, you will be able to invest retirement funds directly into gold and silver coins and bullion. At that point, you can have your metals physically allocated with a third-party custodian. In order to purchase precious metals in physical form as part of your retirement planning, you will first need to establish a new account with a trustee that allows self-directed retirement plans. You can then transfers funds from your current trustee (custodian) to the new trustee that allows these special transactions.


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