When it comes to making an investment in gold, there are many options to choose from. Depending on market conditions, each have their pros and cons. Physical gold can be purchased, and also “paper” gold can be invested in. We’ll cover the different types of investments that can be made and when it’s the right time for each.
Gold Bullion
Bullion is the highest purity of precious metals like gold and silver. They usually come in the form of coins or bars. They can also be held in retirement accounts. With an IRA, the IRS requires the metals to be over 99% purity.
Gold IRA
A gold IRA is simply an individual retirement account that holds physical gold in it. You can also own silver, platinum and palladium in an IRA. In order to hold precious metals in your IRA, you need to set up a self-directed IRA where the owner is responsible for the holdings with the help of a custodian like Monetary Gold.
If you already have a retirement account like a 401k or an IRA, you can either rollover or transfer the funds. In an IRA rollover, you are rolling over your funds into a self-directed IRA. You are switching the type of retirement account. With a transfer, you are just transferring funds from one IRA account to a self-directed IRA.
The rules of a precious metals IRA are the same with a traditional IRA. Whatever type of Individual Retirement Account you have, has certain benefits, rules, and taxes. For example, in a Roth IRA you invest post tax money because you’ve already been taxed on the personal income that you invest in it. The benefit is that your funds grow tax free.
You can start taking contributions on a Roth IRA tax free after 59 1/2 years of age. If you have a traditional IRA, then you invest money that hasn’t been taxed and it can be deducted from your tax return depending on your income level. The tax is deferred and you only pay on the growth when you withdraw funds or take contributions.
So whatever type of IRA you have, it will follow the same rules and regulations when you turn it into a gold IRA or precious metals IRA.
Gold Futures
Gold futures is investing in gold buy investing in a stock that’s listed on the stock exchange. Essentially, there is a contract for a buyer to purchase a certain amount of gold for a determined price in the future. This allows you to hedge against inflation and also buy gold for a lower amount.
However, there is risk involved in this type of investment, because you can be wrong in your prediction and could’ve bought cheaper if you had bought earlier or if you waited.
The contracts are for 100 ounces of gold and you can invest a minimum of $10 per contract.
Gold ETFS
Gold ETFS are like owning paper gold. You invest in an exchanged traded fund that has investments backed by gold. However, as an investor do you not own any physical gold. This investment allows to benefit from gold as an investment, but you don’t have to store the physical gold. The con is that you can’t sell the gold if it goes up in price.
What Type of Gold Investment is Best Right Now?
Right now, the price of gold is stable. It has consistently risen in value since investors began trading it as a commodity. Experts speculate that the price of gold can multiply 50 times. The Federal Reserve, the central banks, and the U.S. Government have created a massive bubble in the world economy.
The U.S. Dollar is the reserve currency of the world. The problem is that the dollar isn’t backed by anything. It’s backed by treasury bonds and the interest rates are regulated by the Federal Reserve. The dollar used to be backed by gold, but in order to stimulate the economy, they printed more many than they had backed.
They did this by selling treasury bonds. The treasury bonds pay the current interest rate. The interest rate is artificially decided by the Federal Reserve. So they print money that can be borrowed at artificially low interest rates by selling treasury bonds at those same interest rates.
Because of inflation, the Federal Reserve has to raise interest rates. Every time they do that, the stock market decreases, people sell their assets because they can’t afford to keep paying the interest. Then, the U.S. government has to pay that higher interest on the treasury bonds.
The fear that financial experts have is that when the interest goes too high, the U.S. government will default on the loans and the dollar will crash. When the dollar crashes, purchasing power will be extremely dwindled and therefore the price of good and services will be much higher. That will cause a depression.
In order to save your money from being worthless, you can purchase gold. Gold will be stable during the depression and most likely, the prices will explode. So you can purchase physical gold and store it in your home in a safe. But for those who have a lot of wealth, it doesn’t make sense to buy a lot of gold bars and store them at home. Plus there is risk of desperate people robbing you.
The IRS allows you to put some or all of your retirement funds into an IRA account. That’s the best investment you could make with gold now because you can purchase gold at a much lower price than it will be in the future. And then you can have it keep growing in your account and support your lifestyle.
When you need money, you can withdraw from the IRA and turn that gold into cash. You can escape having to pay taxes on the money now and let it grow tax deferred in an IRA. If it’s a Roth IRA then you already paid the taxes on it, so you’ll be able to withdraw your gold tax free and sell it. This is a simple way that you can 10x your net worth or even 50x.
