What is a Gold IRA?

April 23, 2016 by Buy-Gold.Link in IRA's, Precious Metal Investing

A Gold IRA is a kind of Individual Retirement Account wherein physical gold or other IRS-approved precious metals like silver, palladium or platinum are held in trusteeship for the IRA owner’s benefit. This works in the same way as a regular IRA, only that it holds precious metal bullion bars or coins instead of paper-based assets like cash, stock or bonds. Gold IRA’s are considered as self-directed IRA’s wherein the custodian allows the account owner to put a wide range of investment products into their account.

However, not all gold bullion products qualify to be held in an IRA. Certain criteria should be met. First of all, precious metal coins or bars must meet IRS-fineness criteria. The minimum fineness for gold bullion products is 99.5%. That would normally disqualify the American Gold Eagle coins from inclusion in a Gold IRA, since they are ‘only’ made out of 91.67% pure gold. However, the IRS makes an exception here so that American Gold Eagles are indeed allowed to be a part of Gold IRA’s.

Krugerrand gold coins cannot be included in a Gold IRA

The Krugerrand dominated the gold coin market in the past but cannot be included in a Gold IRA

On the other hand, the arguably more renowned South African Gold Krugerrand coins that are also 91.67% pure, cannot be included in a Gold IRA. Regarding the other precious metals that can be included in a precious metal IRA, the minimum fineness of silver bullion is 99.9% and for both platinum and palladium it is 99.95%.

Secondly, the precious metal assets should be held by a trustee/custodian and not by the IRA owner himself. Custodians are trust companies, banks, brokerage firms, credit unions, loan or saving associations approved by the state or federal agencies to offer asset-custody services to both financial advisors and individual investors.

Moreover, the precious metal bullion must be kept in an IRS-approved depository and not in the investor’s closets or home safes. Each approved IRS trustee/custodian usually maintains a partnership with one or more depositories. This system ensures the physical separation of the precious metals (which are stored at the depository) from the entity that manages them (the trustee/custodian) for the owner. Without this separation, there would be a temptation for trustees to list precious metals in their records (as a kind of ‘paper gold’) without actually having physical possession of them.

Why should you invest in a Gold IRA?

Investors who are looking for a more diversified individual retirement account usually opt for gold. Other IRA’s that invest in mutual funds and stocks are generally at risk to inflation. Gold prices, on the other hand, usually move into the opposite direction of paper-based assets. In fact, gold has endured even the roughest economic periods – when currencies shivered and banks collapsed. During such times, the price of gold and other precious metals surges which totally makes sense. After all, gold cannot be printed and will always be valuable due to its scarcity. Therefore, adding gold to your IRA gives you an insurance against any possible inflation, making it a smart option for any retirement investments such as IRA’s. Buy-Gold.Link recommends the gold dealer Regal Assets which specializes in helping their customers every step of the way when it comes to opening and managing a Gold IRA.

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