Why Open a Gold IRA Account
There are four different precious metals which are typically purchased as an investment: silver palladium, gold and platinum. Silver is another sound investment but with a spot price of about $20 an ounce, a wealthy investor would have to buy several hundred pounds to achieve a goal of 20% in his or her portfolio. The price of storing that much silver would take a large amount of the investor’s retirement fund so while silver is quite stable, it isn’t very practical. Palladium is worth substantially more than silver but its spot price fluctuates wildly and it regularly decreases by up to $25 an ounce in a single day. Platinum is more rare than gold but it’s less stable that palladium and sometimes it’s spot price can actually drop below the spot price of gold. Therefore, gold is the most practical of all the precious metals to roll over into a gold IRA account. There are several benefits to opening a gold IRA and knowing them is essential for any wise investor.
Safe and Easy Tax Relief
Congress passed the taxpayer relief act in 1997, allowing the inclusion of the four precious metals into an IRA. A precious metals IRA is no more than a self-direct IRA except the investment can consist of gold, silver platinum and palladium. Not all gold is allowed as a precious metals IRA investment so knowing what gold is permitted is vital. Gold bullion and 24 Karat bars can be included into a precious metals IRA. However, these bars have to have an authentication hallmark from one of two different authorities: the New York Mercantile Exchange (NYMEX) or the Commodity Exchange Incorporation (COMEX).
A Variety of Options
The IRS also allows certain 24 and 22 Karat gold coins to be included into an IRA. The American Eagle, Canadian Maple Leaf and the Australian Philharmonic are the gold coins most commonly included into a precious metals IRA. The gold must also be stored at an IRS approved depository and a storage fee will be charged. Also the gold IRA account, like all self-direct IRAs, must have a custodian, such as a bank or brokerage firm. The custodian will also charge a fee so it’s best to shop around and compare prices and services.
Protection against Inflation
In the year 2008, thousands of people lost their entire life’s saving virtually overnight because they had all or most of their money invested in paper. That means they had no physical assets and all of their worth was invested in stocks and bonds. None of these assets are backed by gold and they are subject to the effects of inflation. Even when the other precious metals declined slightly in value after the 2008 economic collapse, gold actually increased in value. Gold literally is the gold standard and formerly impoverished countries such as China and India are buying every ounce of gold that they can get.
Protection against a Winter of Discontent
One of the biggest reasons for all of the inflation is the national deficit. America owes a lot of money to a lot of countries but we can simply print more money and use it to pay the bills because the US dollar is the world reserve currency. That means every country in the world holds the US dollar as the principle for the loans it grants. Therefore, the countries that the US owes have to accept the money that the treasury prints. Unfortunately, this practice causes inflation which substantially lowers the value of the dollar. Inflation causes the price of everything else to skyrocket and suddenly a lot of money isn’t a lot of money anymore. $1,000,000 seems like an astronomical amount of money but if the price for a loaf of bread was to increase to $50,000 due to inflation, that million no longer has as much value. After WWII, Germany experienced hyperinflation and the Mark crumbled. The price of groceries and other necessities went through the roof and people would have to push wheel barrels full of money to the grocery store. There are even stories of people having their wheel barrels stolen and their worthless money dumped onto the sidewalk so it didn’t slow the thief as he made off with the wheel barrel. In instances like that, people who had their money invested in gold wouldn’t have experienced the sudden loss of wealth. They would have been protected because gold can be converted into other, stronger currencies. But that kind of inflation could never happen in America, or could it?
The US Dollar may never lose its status as the world reserve currency but then again it may. The world reserve currency is exchanged all over the world and every developed country accepts it as well as their own domestic money. This is the advantage of having the world reserve currency. Unfortunately, places like the Taj Mahal in India no longer accept US dollar bills. The danger in investing in paper based assets such as stocks are evident but even having assets consisting solely of US dollars may not be safe. As more places begin to reject the US dollar, it will lose its status as the world reserve currency by default.
There’s a reason why so many financially savvy people like John Paulson are investing in Gold. In 2010, after losing billions in the weak economy, Paulson nested the majority of his fortune into gold and saw an increase of over $3 billion in that year alone. Paulson has been quoted as saying “I view gold as a currency and not a commodity”. People shouldn’t be afraid, they should just be prepared and the only dependable asset there has been for the past 5 millenniums has been gold and the only way to avoid paying outrageous taxes on that gold is to roll it into a gold IRA account.