While there are actually four precious metals a person can purchase as an investment, gold is the better option, silver, platinum and palladium being the other three. Silver has a spot price right now of 20 dollars an ounce so while you could make a sound investment in it, you would need to purchase a large amount of it. Then you need to store it somewhere and keeping that much silver would cost you some of your funds. Platinum is rarer than gold and you would think that means it is worth more, but in fact its value is less stable and it can even drop to below that of gold. Palladium prices also fluctuate a lot and in a single day its prices can drop by as much as 25 dollars an ounce in one day. Gold’s stability makes it more desirable as an investment for your retirement to roll over into a gold IRA fund.
Reasons for opening a gold IRA account
In 1997 the taxpayer relief act was passed by Congress which meant the four precious metals mentioned above were now allowed in an IRA. Much like a self direct IRA, you will need a custodian like a brokerage firm or a bank and you will need to pay them a fee. As mentioned a precious metal IRA allows investment into palladium, platinum, silver and gold. But only certain forms of gold are allowed, for example 24 karat bars or gold bullion. It is important if you are looking to invest in gold you know which gold you can buy. The bars should have hallmark authentications on them from either the COMEX (Commodity Exchange Incorporation) or the NYMEX (New York Mercantile Exchange).
There are also certain gold coins that can be included in a gold IRA account. They need to be 22 or 24 Karats and common ones found in precious metal IRAs include Canadian Maple Leaf, The American Eagle and the Australian Philharmonic. Whatever gold you purchase must be stored in a depository that has been approved by the IRS and you will have to factor in storage fees.
Protecting your assets
In the collapse of 2008-2009 thousands of people lost their life savings. They were left with no retirement money, with their paper investments practically worthless. Those people who had no physical assets and had invested in just bonds and stocks were devastated by the markets fall. But people who had invested in gold had something to fall back on when their other investments were lost. And while the other three precious metals did suffer a very small decline in value gold held its own and actually continued to increase. For this reason now there are countries like China, India and Russia who are buying up all the gold they can.
Why you cannot rely on the US dollar
The fact is America has made some very poor choices when it comes to the debt it has with other countries as well as within its own economy. The US dollar is the currency that other countries hold as the principle for granted loans, it is the world reserve currency. This means when the US owes money to other countries to pay that debt it prints more money and the other countries have to accept it. But this causes inflation and lowers the real value of the dollar. With inflation prices go up and money no longer buys what it used to. A million dollars sounds like a lot of money but if inflation and price increases were to cause bread to cost fifty thousand a loaf, a million is suddenly really not that much anymore.
Germany saw hyperinflation occur after world war two and its currency became worthless. Grocery prices soared and in order to get any kind of necessities people were known to push wheel barrels loaded with money to the stores. Things were so bad, thieves would steal those wheelbarrows and dump the worthless money from them. When things are that bad if you have an investment in physical gold you have a backup plan for worse case scenarios. Gold could be used to barter with, it retains its value, or you could have it changed into a currency that is stronger. People think that the hyperinflation situation of Germany is something that could not happen in America. But anything is possible and that is the risk of investing in paper based assets like bonds or stocks. While the US dollar is the reserve currency around the world, there are places where it is no longer taken. If more places decide to reject the dollar that could have a very huge impact on your investments.