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Kitco News Latest news on precious metals from Kitco!
- Gold Slightly Up After Big Downdraft Last Friday on June 18, 2018 at 5:19 pm
Gold prices are slightly higher in early-afternoon U.S. trading Monday. […]
- Friday’s Selloff Shakes Gold Out Of Its Doldrums on June 18, 2018 at 4:36 pm
(Kitco News) - There is a silver lining to gold’s massive selloff Friday, which is that maybe the market has been shaken out of its doldrums, according to one currency analyst. […]
Blog – SchiffGold.com Peter Schiff's Gold Company
- Peter Schiff: A Huge Wave of Inflation Is Going to Engulf the Planet by SchiffGold on June 18, 2018 at 12:40 pm
At this point, the European Central Bank isn’t nearly as keen on raising interest rates as the Federal Reserve. The ECB announced Thursday it would likely hold its interest rate steady at zero through the summer of 2019. “We decided to keep the key ECB interest rates unchanged and we expect them to remain at […] The post Peter Schiff: A Huge Wave of Inflation Is Going to Engulf the Planet appeared first on SchiffGold.com. […]
- Fed Chair Jerome Powell Is Playing with Fire by SchiffGold on June 18, 2018 at 11:42 am
Jerome Powell is like a kid playing with matches and he’s dangerously close to starting a fire he isn’t going to be able to control. The Federal Reserve nudged interest rates up again last week. It was the seventh hike since the Fed launched the current tightening cycle in December 2015. The Fed Funds Rate […] The post Fed Chair Jerome Powell Is Playing with Fire appeared first on SchiffGold.com. […]
Silver Doctors Gold, Silver, & Finance News
- Prepare For The Economic Hangover Because The Central Bank Party Is Already Over by The Doc on June 18, 2018 at 11:30 am
“about to go negative some time in the third quarter of 2018. However, when looked at from a different, more short-term perspective, the…” from Zero Hedge When looking at what is […] The post Prepare For The Economic Hangover Because The Central Bank Party Is Already Over appeared first on Silver Doctors. […]
- The June 2018 Fed Rate Hike Is Bullish For Gold by The Doc on June 18, 2018 at 10:00 am
“The key to this success is staying informed and being contrarian. That means buying low when others are scared, like…” by Adam Hamilton of Zeal LLC Gold weathered the Federal Reserve’s 7th rate […] The post The June 2018 Fed Rate Hike Is Bullish For Gold appeared first on Silver Doctors. […]
If your are considering investing in precious metals, you may have the following questions:
- Why should I invest in gold?
- What is a precious metal IRA and how does it differ from a regular IRA?
- What are the advantages of using IRAs over other methods of investing in gold?
- Is a Gold IRA suitable for me?
- Can I use my 401k to buy gold?
- What should I be looking for in a gold investment company?
Why should I invest in gold?
Intelligent investors are investing in gold for 3 main reasons:
Gold provides a safe haven and hedging component to a portfolio
The value of gold has been recognized for millennia, and it holds true to this day. With the United States money supply on a constantly increasing trend, which is normal under a fiat currency system, the dollar is at constant risk for devaluation. Inflation is a fact of life, and in today’s economic climate, people are no longer surprised if bonds default or the value of stocks go to near zero.
Gold will always hold its value, so the solidity in the price of gold is a well-known hedge against inflation.
Gold is a powerful mechanism of obtaining portfolio diversification
A diversified portfolio’s overall risk is less than the sum of its parts; this is achieved through investments that are lowly correlated with each other. The correlation of gold with stock market and bond prices has a historical range that is negative (particularly during recessions), to low positive, and usually stays lower than 40%.
Gold has demonstrated good historical returns on a long-term basis
In the last five years, the pice of gold has been somewhat volatile, and has even been on a downward trend at times. But don’t fret too much – over the longer haul of a (10 year) basis, average returns have been at 5.71% (as at Dec 2015). This number is far above 10-year US Treasury yields, for example.
What is a precious metals IRA and how does it differ from a regular IRA?
What is a self directed IRA?
A Gold IRA or Gold Backed IRA is a general term used to describe self-directed IRA accounts invested in metals. The term ‘self-directed’ means that the account owner is responsible makes all decisions related to investments in the account. These types of Individual Retirement Accounts are also know as a ‘precious metals IRA’; under IRS regulations, self directed IRAs are allowed to invest in 4 types of metals, namely gold, silver, platinum, and palladium.
Both have traditional IRA (tax-deductible contributions for the year while withdrawals during retirement have ordinary income tax rates applied) and Roth options (contributions are not tax-deductible but withdrawals typically are free from tax). These accounts also may have a flat fee, storage fee or percentage based fee attached to them.
What are the advantages of using approved IRAs over other methods of investing in gold?
The four common methods an investor can use to add gold to his or her portfolio are:
1. Gold Coins and Bullion
The direct purchase and ownership of physical gold coins and bullion. An investor may buy the gold directly from various gold IRA companies and store it in a safety deposit box with a broker, or via a Gold IRA. As IRS regulations stipulate that the IRA owner cannot physically have the gold in his or her possession, a Gold IRA custodian will be responsible for storage.
2. Gold Exchange Traded Funds (“ETFs”)
The ETF owns the gold while the investor purchases shares in the fund, which trade according to gold’s market price. Typically, ten shares would be equivalent to one ounce of gold. The shares can be purchased from the ETF directly or invested in through a normal IRA.
3. Gold Exchange Traded Notes (“ETNs”)
ETNs are debt instruments that track a benchmark such as the price of gold, with the yield being equivalent to investing in gold as a commodity. As no gold is physically owned by any party, investors take on the direct risk of the ETN issuer, which would have its issuances classified as unsecured debt obligations on its balance sheet.
4. Gold Miner Stocks
The most indirect method. It is very important to carry out specific due diligence on each gold miner company, evaluating their individual profiles such as mining reserves, production levels, and operating costs. Gold miner stocks typically exhibit higher volatility compared to gold itself; this is because the market considers gold miner stocks as a leveraged method of investing in gold.
In the opinion of many, Gold IRA investing is the most advantageous method, especially for these 2 reasons:
Ownership of High Grade Physical Gold
Simply put, direct ownership of gold allows the investor to reap the most benefits out of buying gold investments. IRS regulations also strictly cover the quality of gold that can be bought using a precious metals IRA, ensuring only 99.5% (24 karat) minimum quality; this does not apply to the other methods.
There is no guarantee on quality of gold held under ETFs and investors may face stock market redemption issues. ETNs have no principal protection as there is no actual gold involved, while gold miner stocks have the highest volatility risk and require the most research and specialized knowledge to invest successfully.
Highest Returns Post-Tax
The IRS classifies precious metals as collectibles and gains on such investments held for under a year will be taxed as ordinary income, similar to short-term capital gains. If held over a year the maximum collectibles tax rate of 28% is applicable even though such gains will be taxed as ordinary income.
By way of comparison, the long-term capital gains rates vary from 15 – 20%. If invested through a gold backed IRA, the marginal tax rate of the individual investor is applied, instead of the maximum collectibles tax rate of 28%. This case study from the Journal of Accountancy shows that annualized after-tax returns are highest when using top Gold IRA companies to invest in gold.
Is a Gold IRA investment suitable for me?
Only you, as a unique individual, can make that decision.
One notion that we would like to dispel, however, is that gold, silver, platinum and palladium is an investment only for sophisticated investors. Anyone can invest in gold, and Gold IRAs have made the process simpler than ever. Nevertheless, appropriate due diligence should be carried out prior to making any investment decisions, with a careful consideration of the benefits and risks involved. It is important that you are also aware of the risks involved such as:
Market Volatility Risk
The price of gold is still subject to market forces, and they have been significantly volatile, with speculative forces being pinpointed by analysts as the source of much of this volatility. This means that gold may not be the best for short-term investors, although historical data has shown more than adequate long-term returns on investment. Analysts are speculating that gold may be fast approaching peak production, which bodes well for long-term gold price prospects.
Risk of Theft or Fraud
As IRA owners cannot physically have the gold in their possession, they would have to go through a broker and a custodian, exposing them to risk of fraud or theft. Fortunately, this risk is easily managed by ensuring that an trustworthy gold investment company is chosen that has a proven track record. Using out website as a resource, you’ll be able to find the overall best company and evaluate them via consumer protection services such as the Better Business Bureau, Business Consumer Alliance and TrustLink.
IRS regulatory decisions can often seem highly arbitrary and vague, and sometimes appear to be made without the taxpayer in mind. Hence there is always a risk that the IRS may change its regulations pertaining to Gold IRAs. While we cannot do anything about it, many believe this risk as minimal and it would be silly to not consider investing with metal companies for this reason alone.