30 Comments

1. I wish I would have invested in gold back in 2003 when it was only $300 an ounce. But since then it has gone sky high and I don’t think I would be able to afford it now. If I could I would want to keep physical gold and put it in a safety deposit box for save keeping. When times get tough it’s good to have a little gold on hand to get you through.

   Reply

   • Hi Cory,

     Investing in Gold is any day a good option. A gold IRA or precious metals IRA is an Individual Retirement Account that includes physical gold, or other IRS approved precious metals (such as silver, platinum, and palladium). An IRS approved custodian holds in custody the contents of the Gold IRA for the benefit of the account owner. A Gold IRA functions in the same way as a traditional IRA, however, instead of holding paper assets, you can buy and own physical bullion coins or bars.
     Since gold is the most common precious metal invested into an IRA, the term “gold IRA” is used the most often in the industry to refer to a retirement account containing any combination of approved precious metals.
     You may have little to no say in your investments if you choose a conventional IRA or 401(k) with a bank or brokerage firm. But when you open a self-directed IRA with Advantage Gold, you are empowered to make your own investment decisions and choose for yourself which IRA eligible precious metal coins, bullion, and bars to invest in.

     There are many advantages to owning gold. Adding a gold component to your portfolio can considerably reduce your overall portfolio volatility, create a hedge against economic downturn, and add a tremendous opportunity for gain. For an individual planning for retirement, whether you are considering investing in gold for small savings or a more substantial long-term investment, buying gold into a self-directed IRA can help protect your wealth and can increase risk-adjusted returns. Having a modest amount of gold within a balanced retirement investment portfolio can potentially reduce the overall risk of the portfolio, helping to protect against downturns in the stock market.

     Gold has also become more accessible to retirement investors, due to the development of a wide range of investment products, such as a Gold IRA, that investors can include in their retirement savings portfolio. The diversity of a retirement investment plan with a precious metal IRA that includes IRS approved precious metal products (such as gold, silver, platinum, and palladium) means that gold can be used to enhance and create a wider variety of individual investment strategies and risk tolerances.

     Reply

2. Very interesting!  I never saw a need to buy gold myself, but I can understand now why some countries want gold as a hedge against political instabilities.  Some reports say gold is going to go way down and other reports predict new highs.  I’m having trouble sifting through all the opposing views.  In layman’s terms, could you post about deterrmining what’s real and what isn’t?  I do realize it is all speculative.

   Reply

   • Hi,
     I am glad to know that you could find this article interesting. Gold IRAs function exactly like regular IRAs, except instead of investing in stocks and bonds, you’re purchasing gold coins and bullion. Silver, platinum, and other precious metals can be included as well. While the notion of buying gold, a trustworthy investment, sounds safe, it doesn’t mean that a gold IRA is the best vehicle for your retirement savings. Here are a few things you should know before you go for the gold.
     Why choose a gold IRA?
     Many people see a gold IRA as a supplement to their other retirement funds, in part because the value of gold tends to move in the opposite direction of paper assets, like stocks and bonds. So when stocks and mutual funds are losing value, gold is usually gaining it, and vice versa. The idea here is that if your other investments take a hit, your gold will increase in value to help compensate, hedging your losses.
     While the value of gold fluctuates like anything else, it has remained a valuable commodity for thousands of years, and it will likely remain valuable for many decades to come. But there are a few drawbacks to opening a gold IRA that should give a would-be investor pause.
     The drawbacks of a gold IRA
     When you open a gold IRA, you will have to pay a one-time account setup fee, along with annual custodian fees. There may also be additional fees for transactions and withdrawals. These are typical of any IRA, but they may be higher for a gold IRA because these accounts are rare and fewer companies offer them.
     In addition, because gold is a physical commodity, it has to actually be stored somewhere. IRS standards say that unless you have an LLC, the gold must be kept by the IRA custodian, not the account owner. The company charges you for the storage fees and insurance to protect your gold, in case the facility is robbed. This charge is unique to gold IRAs and may be a flat fee or a percentage of your assets.
     Perhaps one of the biggest reasons to be wary of investing in a gold IRA is the unpredictability in the price of the metal. The cost of gold shot up to more than $1,000 per ounce during the Great Recession, but before that, its value had remained relatively constant between $300 and $500 per ounce since 1980. When you consider that the inflation rate during that same period rose nearly 152%, the investment doesn’t look as appealing. If you invested $500 in something that kept pace with inflation back in 1980, it would have been worth $1,258 just before the Great Recession hit in 2007. But if you’d invested in gold over that same time span, your $500 investment would barely have appreciated at all. That means you effectively lost $758. If you’d instead held on to that gold and sold it when it hit $1,895 an ounce in 2011, you’d have made $1,395.
     If you do plan on opening a gold IRA, don’t put too much of your money into it, especially if you’re nearing retirement age. Most experts recommend only having 10% or less of your retirement portfolio in gold to minimize the risk of losing your investment. It is worth the seeds you sow. Look at the top 10 Gold IRA options at http://bestiraoptions.com/ that are worth for the Gold IRA investment. These companies will definitely give you more than you invest in.

     Reply

3. Thanks for the very insightful article. Indeed strong buying from China and India should provide a good support for gold prices. 

   However, as you have rightly pointed out, the anticipation that the US Federal Reserve will begin hiking interest rates more rapidly next year has already caused gold prices to fall recently and could perhaps continue to remain a dampener to the market. To top it off, IMF recently downgraded its global growth forecast as well. 

   So with these conflicting factors, where do you see the gold prices heading?

   Reply

   • Hey Joe,

     I am happy to know that you liked the article. Gold has long been referred to as a “safe haven” for investors during times of market volatility and high inflation. Since the financial crash of 2008, investors have flocked to gold, making it one of the most reliable markets of the past decade.
     Yet 2018 has seen the metal lose much of its shine. Despite turmoil in emerging market economies and a burgeoning US-China trade war, the metals that traditionally serve as haven assets have not attracted the expected influx of investment.

     In August, gold prices fell below the psychologically important $1,200 per troy ounce mark for the first time in more than two and a half years. This represents its worst losing streak since 2013, with prices down 12% since April. “Analysts pin most of the blame on the dollar,” says Quartz. Its unexpected strength this year has “usurped the yellow metal as skittish investors’ preferred haven assets”, says the site, as well as making US-priced bullion more expensive for buyers with other currencies.

     “Gold has been a dud of an investment for much of the year,” admits CNN Business, but since its August nadir “it has started to regain some of its luster”. A mini-rally in early November, driven by a host of looming political issues, including the US-China trade war, US-Saudi tensions, and Italy’s recalcitrance over changing its budget, saw investors scurry to traditional safe-haven assets, pushing gold prices to a three-month high.

     Since then prices have been holding steady, with gold $1,246.70 an ounce as of 12.30pm on Thursday 13 December. Monday saw the precious metal price hit a five-month high and break $1,250, as the dollar slipped and expectations of US interest rate hikes next year dimmed, brightening the appeal of non-yielding bullion.

     However, FXEmpire reports futures are edging lower on Thursday with the market trading inside the previous day’s range for a second session, “suggesting investor indecision and impending volatility”. Since the start of the week, “the market has drifted sideways to lower, primarily due to increased demand for higher risk assets and rising Treasury yields”, says FX, while “price action this week is also reflecting an easing of tensions over US-China trade relations”.

     Amid global trade war fears, Brexit uncertainty and concerns around the US economy, “the safe-haven assets continue to be well supported in this environment and that along with some recent comments from the Fed on changing their potential path on interest rates has also been supportive”, said David Meger, director of metals trading at High Ridge Futures.

     Gold is likely to further consolidate below the 200-day moving average, around $1,255 at present, Commerzbank analysts said in a weekly note. Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose to the highest level since late August on Tuesday, CNBC reports. “The key for the gold market will be the future trajectory of interest rate hikes, known as the dot plots and where the Federal Reserve sees long-term interest rates,” says Kitco.

     The Fed raised interest rates in September and has said it plans four more increases by the end of 2019 and another in 2020. But a US Labour Department report on Wednesday showed no change to consumer prices across the month of November. The news means the Fed will likely address the issue of weakening inflation at its meeting next week, potentially laying the ground to slow the roll-out of interest rate hikes next year. Higher US interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

     I hope this is of some help.

     Reply

4. Hello there, I find it interesting that China seems to be heading in a different direction than the rest of the world (at least the West) when it comes to how they feel about gold. They ( the Chinese) seem to think that the more gold they acquire the more valuable their currency. 

   I like how your article points out that this is not necessarily so. The reason being that the U.S. for instance has printed paper currency that has far exceeded its gold reserves. 

   It’s interesting how we are able to do that. It’s as if we are borrowing from ourselves. Maybe I’m missing the mark, but I think if you print money, you should have some wealth to back it up. 

   Great article 

   Jose  

   Reply

   • Hi Jose,

     Indeed, this is a good investment. Two things the most successful investors take advantage of are the time and tax advantages they’re entitled to. For individual investors, there’s no better way to do this than by opening an IRA. But what is an IRA, and how can you get started? Here’s an overview of the two basic types of IRA accounts and the benefits of each.

     What is an IRA?

     An individual retirement account, or IRA, is a special type of account designed to help American investors build money for their retirement. There are two main types of IRA accounts, Roth and traditional, and both have their benefits and drawbacks, with the main difference being the tax treatment.

     These two IRAs have some things in common. They have the same contribution limits, currently $5,500 per year (or $6,500 if you’re over 50, to let you “catch up”). This contribution amount can be used entirely on one type of account or split between both — e.g., you can put $3,000 in a Roth IRA and $2,500 in a traditional IRA.

     Further, both accounts are allowed to grow tax-free until you withdraw money. In both accounts, you have to wait until age 59-1/2 to withdraw your investment returns without facing an early-withdrawal penalty. There are some exceptions, though, like the ability to withdraw up to $10,000 toward a down payment on your first home.

     Roth IRAs are great, if you qualify

     A Roth IRA basically allows you to contribute money that you’ve already paid taxes on; it then allows that money to grow tax-free until retirement. When you’ve reached retirement age, you can withdraw the money tax-free, which could save you hundreds of thousands of dollars in potential tax liability down the road.

     Roth accounts are also great for people who may need to access their money before retiring. One of the most appealing features of a Roth IRA is that it doesn’t necessarily tie up your money until retirement. You’re allowed to withdraw your contributions (but not any gains) penalty-free at any time.

     However, not everyone qualifies for a Roth IRA. In order to be eligible to make a full contribution to a Roth IRA, you need to earn less than $114,000 per year ($181,000 for married couples), and eligibility phases out entirely for incomes higher than $129,000 ($191,000 for married couples) for the 2014 tax year. If you are under the income cap, you can make a full contribution to a Roth account, whether or not you participate in a retirement plan at work.
     There are ways around the income limits, however. In a strategy known as the “backdoor” to a Roth IRA, anyone, regarless of income level, can contribute to a traditional IRA, then convert the account to a Roth IRA, so long as they pay taxes on any pretax funds contributed to the original traditional account.
     Traditional IRAs save now, but you’ll pay later

     Although everyone can qualify for a traditional IRA, not everyone can use the full tax benefit. If you are covered by a retirement plan at work, the full immediate tax benefit is only useful if you make less than $60,000 ($96,000 for married couples who are both covered, and $181,000 when one spouse is covered under an employer’s plan). If you earn below this amount, any contributions to a traditional IRA are tax-deductible. In other words, you don’t pay taxes on that portion of your income that year.

     However, it’ll cost you down the road. Your deposits are allowed to grow and compound on a tax-deferred basis, but your distributions, once you retire, will be taxed as ordinary income. Plus, a traditional IRA doesn’t allow you to withdraw your principal without penalty before retirement. There are other drawbacks of a traditional IRA as well. For instance, a Roth IRA doesn’t have any requirement to take distributions by a certain age, whereas traditional IRA rules mandate distributions by age 70-1/2, lest the IRS can assess a penalty.

     Which should you choose?

     To help decide what’s best for you, let’s look at three avenues for investing $5,500 per year for 30 years: a Roth IRA, a traditional IRA, and a standard, taxable brokerage account. For simplicity’s sake, let’s say your portfolio earns 5% dividends and the value of your investments also rises by 5% per year, for total annual returns of 10%.

     Either IRA choice is obviously better than the taxable account. Not only will the taxable account be worth less due to your dividends being taxed every year, but you’ll have to pay taxes when you withdraw your money. If you’re in the 25% tax bracket, this makes your $716,000 portfolio effectively worth just $537,000 — and that’s not including state income taxes.

     For the traditional IRA, your money compounds on a tax-deferred basis, but you pay taxes on withdrawals, which makes your $905,000 portfolio worth less than $679,000 after taxes.
     With the Roth IRA, you have to pay tax on your income before you contribute, so your $5,500 annual allocation for retirement savings really becomes an after-tax contribution of $4,125, assuming you’re in the 25% tax bracket. Compounded the same way as the chart above, the Roth account after 30 years with $4,125 annual contributions would have an ending value of about $679,000 — the same as the “real” value of the traditional IRA. It’s just a question of whether or not you want the tax benefit now or down the road.

     Invest early and often

     Even if you have an employer-sponsored retirement plan, such as a 401(k) or a pension plan, an IRA is still a good investment choice, and it allows you to take more control over your own retirement. Chances are that the amount of money in those accounts won’t be enough to provide you with total financial security, and the benefits of investing in an IRA are so great that it’s a no-brainer to use one to supplement your current retirement savings.
     If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.

     For a fool-proof return on your investment, do check this link
     http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for opening up a Gold IRA

     Reply

5. Thank you for sharing with us this fascinating article on crazy investment in gold by China and India.I was reading this article and I found that China and India are making a wise decision because gold is a precious stone anyone dream to have .

   I am not in state of investing in gold but if I could get a chance to find much money,I would do like China and India.

   This article is very informative.

   Reply

   • Hello Julienne,

     Thanks for the praise that you have showered.

     It can pay to save in an IRA when you’re trying to accumulate enough money for retirement. There are tax benefits, and your money has a chance to grow. The deadline for a 2017 traditional or Roth IRA contribution is the same as the 2017 tax-filing deadline—April 17, 2018—so time is running out to contribute for the 2017 tax year.

     Why an IRA? An IRA is one of several tax-advantaged options for saving. If you have a retirement plan at work, an IRA could offer another tax-advantaged place to save.

     Here are some reasons to make a contribution now

     1. Put your money to work

     Eligible taxpayers can contribute up to $5,500 per year to a traditional or Roth IRA, or $6,500 if they have reached age 50, for 2017 and 2018 (assuming they have earned income at least equal to their contribution). It’s a significant amount of money—think about how much it could grow over time.

     Consider this: If you’re age 35 and invest $5,500, the maximum annual contribution in 2017 and 2018, that 1 contribution could grow to $82,360 after 40 years. If you’re age 50 or older, you can contribute $6,500, which could grow to about $17,900 in 15 years.1 (We used a 7% long-term compounded annual hypothetical rate of return and assumed the money stays invested the entire time.)

     The age you start investing in an IRA matters: It’s never too late, but earlier is better. That’s because time is an important factor when it comes to compound growth. Compounding is what happens when an investment earns a return, and then the gains on the initial investment are reinvested and begin to earn returns of their own. The chart below shows just that. Even if you start saving early and then stop after 10 years, you may still have more money than if you started later and contributed the same amount each year for many more years.

     This hypothetical example assumes the following: (1) annual IRA contributions on January 1 of each year for the age ranges shown, (2) annual $5,500 contribution for first year and thereafter, (3) an annual rate of return of 7% and (4) no taxes on any earnings within the IRA. The ending values do not reflect taxes, fees or inflation. If they did, amounts would be lower. Earnings and pre-tax (deductible) contributions from traditional IRAs are subject to taxes when withdrawn. Earnings distributed from Roth IRAs are income tax free provided certain requirements are met. IRA distributions before age 59½ may also be subject to a 10% penalty. Systematic investing does not ensure a profit and does not protect against loss in a declining market. This example is for illustrative purposes only and does not represent the performance of any security. Consider your current and anticipated investment horizon when making an investment decision, as the illustration may not reflect this. The assumed rate of return used in this example is not guaranteed. Investments that have potential for a 7% annual rate of return also come with risk of loss.

     2. You don’t have to wait until you have the full contribution

     The $5,500 IRA contribution limit is a significant sum of money, particularly for young people trying to save for the first time. The good news is that you don’t have to put the full $5,500 into the account all at once. You can automate your IRA contributions and have money deposited to your IRA weekly, biweekly, or monthly—or on whatever schedule works for you. Making many small contributions to the account may be easier than doing one big one.

     3. Get a tax break

     IRAs offer some appealing tax advantages. There are 2 types of IRAs, the traditional and the Roth, and they each have distinct tax advantages and eligibility rules. Contributions to a traditional IRA may be tax-deductible for the year the contribution is made. Your income does not affect how much you can contribute to a traditional IRA—up to the annual contribution limit. But the deductibility of that contribution is based on income limits. If neither you nor your spouse are eligible to participate in a workplace savings plan like a 401(k) or 403(b), then you can deduct the full contribution amount, no matter what your income is. But if one or both of you do have access to one of those types of retirement plans, then deductibility is phased out at higher incomes.

     Earnings on the investments in your account can grow tax-deferred. Taxes are then paid when withdrawals are taken from the account—typically in retirement. Just remember that you can defer but not escape taxes with a traditional IRA: Starting at age 70½, required minimum withdrawals become mandatory, and these are taxable (except for the part—if any—of those distributions that consist of non-deductible contributions).

     On the other hand, you make contributions to a Roth IRA with after-tax money, so there are no tax deductions allowed on your income taxes. Contributions to a Roth IRA are subject to income limits. Earnings can grow tax-free, and, in retirement, qualified withdrawals from a Roth IRA are also tax-free. Plus, there are no mandatory withdrawals during the lifetime of the original owner.

     As long as you are eligible, you can contribute to either a traditional or a Roth IRA, or both. However, your total annual contribution amount across all IRA accounts is still $5,500 (or $6,500 if age 50 or older).

     4. You may think you can’t have an IRA, but make sure

     There are some common myths about IRAs—especially about who can and who can’t contribute.

     Myth: I need to have a job to contribute to an IRA.

     Reality: Not necessarily. A spouse with no earned income can contribute to a spousal Roth or traditional IRA as long as their spouse has earned income. Note, however, that all other IRA limits and rules still apply.

     Myth: I have a 401(k) or a 403(b) at work, so I cannot have an IRA.

     Reality: You can, with some caveats—as mentioned earlier. For instance, if you or your spouse contributes to a retirement plan—like a 401(k) or 403(b)—at work, your traditional IRA contribution may not be deductible, depending on your modified adjusted gross income (MAGI).2 But you can still make a nondeductible, after-tax contribution and reap the potential rewards of tax-deferred growth within the account. You can contribute to a Roth IRA, whether or not you have contributed to your workplace retirement account, as long as you meet the income eligibility requirements.3

     Myth: Children cannot have an IRA.

     Reality: An adult can open a custodial Roth IRA (also known as a Roth IRA for Kids) for a child under the age of 18 who has earned income, including earnings from typical kid jobs such as babysitting or mowing lawns, as long as this income is reported to the IRS.5

     An adult needs to open and maintain control of the account. When the child reaches the age of majority, which varies by state, the account’s ownership switches from the parent over to them.

     Make a contribution

     Your situation dictates your choices. But one thing applies to all: the power of contributing early. Pick your IRA and get your contribution in and invested as soon as possible to take advantage of the tax-free compounding power of IRAs.

     To choose some of the best IRA’s to invest in, look here:
     http://bestiraoptions.com/best-gold-ira-options

     This page should get you started if you wish to invest your resources into a Gold IRA, and if you are convinced that you should, it will help you to rollover your current retirement plan to one that contains physical gold and precious metals! Make sure to read thoroughly as the next step is to choose the best Gold IRA Company to work with and you do not wish to miss out on choosing to work with the best company rather than having to spend more money, time and worries with anything less than the best option we recommend!

     Reply

6. Really loved the article.  I would love to hear your opinion in investing in other precious metals.  Do you think we will start seeing people investing in rare earths the same way they invest in gold? For example, electric car batteries need rare earths to  run.  Do you foresee a “rare earth” fund becoming the new normal in the investment world?

   Reply

   • Hi James,
     Thanks for taking out time to read the article and liking it too. I was rather surprised to see that a UK company is recruiting salesmen to sell rare earth metals directly to retail investors. This post is simply a warning to those so approached that you really don’t want to be doing such retail investments in rare earth metals. Quite why I’ll explain in a moment.

     The advertisement itself was pretty clear. Selling rare earth metals to retail investors is not illegal in the UK. Nor is it controlled in any manner: it’s no more controlled than selling cornflakes or Beanie Babies to people. But they were looking for good telephone sales people who wanted to make the move into financial sales. So, clearly, they were looking for sales skills not financial ones. It wouldn’t be too far off the mark to say that they were trying to staff a boiler room: although this time for physical commodities, not strange stocks or bonds. The wages were good too, another sign of it potentially being such a boiler room.

     Given what I’m saying here I’m obviously not going to link to the advertisement. For the thing is, rare earth metals, actual physical stocks of them, are an incredibly bad thing for retail investors to be trying to invest in. I cannot think of any way in which it would actually be a good idea. I can understand the attraction of trying to sell them, certainly. There’s been enough newspaper reporting about how China currently controls 97% of production, everyone’s very worried about where future supplies will come from and so on.

     It’s also true that there’s not much clarity about pricing. That makes it a great deal easier to attach a hefty margin to any goods that are shipped. It is great for the salesmen and helping to explain those decent incomes.

     The story of the Rare Earth Elements, or REE, boom is one of the most disappointing but valuable parables for investors today. Rare Earth Elements were supposed to represent a sort-of new millennium gold rush that would bring big profits to investors and increased national security for the United States. Neither aspect of the story has worked out the way it was supposed to.

     REEs are a series of minerals found in the earth’s crust that are important for producing high tech electronics and for use in industrial processes. For example, one of the most common uses for REEs is in magnets. REEs are not all that rare, but usually they are not concentrated in large veins of minerals the way iron, copper, gold, and other minerals are. Thus, the scarcity of economically viable deposits is what classifies these minerals as ‘rare.’

     REEs were not a well-known commodity until a few years ago, when a 60 Minutes report and a spat between China and Japan brought them to the surface of public attention. China produces most of the world’s REEs, and after a territorial dispute between the Chinese and Japanese, China banned REE exports to Japan. China’s attempt to weld its disparate group of small REE miners into an effective monopoly startled the markets and led to massive price hikes across the REE space.

     Then economics set in.

     China never had a real monopoly on REE production. The country’s REE mining industry is made up of numerous small firms, which makes any unified action among those firms next to impossible. But after the REE price spike, all of the firms in China rushed to increase production. And many firms around the world did the same thing. As production spiked, prices fell dramatically, and many firms that were once optimistic about potential profits found themselves selling a very oversupplied commodity.

     Now that the dust in the REE market has settled, there are not many investible companies left. Most of the mining is done in China, but even those firms are generally small and not suitable for most investors. Outside China, some of the biggest REE firms include Australia firms Iluka and Lynas. In the U.S., the only major dedicated REE miner is Molycorp (NASDAQOTH:MCPIQ).

     But Molycorp has been an unmitigated disaster for the vast majority of investors in its stock. The company sunk from a market capitalization of $6 billion in 2011 to less than $100 million by June 2015. Despite having the only operational U.S. REE mine, Molycorp has been unable to make a profit as REE prices continue to decline and its own processing costs remain high.

     The company declared Chapter 11 bankruptcy in late June 2015. Given the high cost of processing REE materials and the continued fall in prices, it’s questionable if Molycorp can ever live up to investor expectations even if it manages to cut its debt load and emerge from bankruptcy.

     Whatever entity emerges from Molycorp’s bankruptcy will likely be a profitable and investible business only if it is focused on the firm’s distribution subsidiary known as Neo, the profitable part of the company. That is an issue investors have plenty of time to consider though, as the firm’s bankruptcy is just starting.

     Australian firm Lynas was once considered a hot investment option like Molycorp. Unfortunately for investors, Lynas has faced the same headwinds as its American competitor, and its ultimate fate may be the same as well. Lynas’ stock has declined precipitously, and while the firm was able to attract some distressed equity investors in June 2014, that cash doesn’t change the market situation. In light of the unattractive economics in the space, Lynas is not a good investment option for investors at this stage.

     Of all the rare earth producing companies, Iluka is the only one that might be worthy of investment consideration, and even here the company is battling the same market uncertainty. Iluka has a number of interesting mining properties, and some of these properties offer low cost mineral development options in attractive growing geographies.

     The lesson for investors in the rare earths parable is that the conventional wisdom is not always right. Economics — in particular supply and demand — are the long-term drivers of profitability. China’s rare earth’s monopoly has been proven to be little more than a paper tiger, and investors who jumped on board the “next big thing” without a close examination of the fundamentals underlying the market found out the hard way that hype only lasts so long.

     Opening a Roth IRA at a Bank or Credit Union
     Elize walks into her local credit union and opens a Roth IRA. The credit union doesn’t have an investment division so it only allows her to contribute the money to certificates of deposit or a money market account. She can’t buy any stocks, bonds, mutual funds, or real estate through this Roth IRA because the servicer (the credit union) doesn’t offer it among its provided services.

     To make it more complicated, some, but not all, banks and credit unions also have brokerage divisions that allow you to buy investments for your Roth IRA that include stocks, bonds, and mutual funds from other companies. Wells Fargo and Bank of America, by way of example, fall into this camp.

     Opening a Roth IRA Directly with a Mutual Fund Company
     Erston decides he wants to buy shares of the Tweedy Browne Global Value Fund, ticker symbol TBGVX. He goes to the mutual fund company’s website, downloads an application, checks the “Roth IRA” box, and writes a check for $5,500, which is the maximum he is allowed to contribute in 2018 since he is only 33 years old. The mutual fund company opens a Roth IRA for him, but the only investments the account can hold are shares of funds managed by Tweedy, Browne & Co., LLC, the mutual fund manager. If he wanted to buy shares of a Vanguard S&P 500 Index Fund or Coca-Cola, he’s out of luck.

     Just like banks and credit unions, some, but not all, mutual fund companies also have brokerage divisions that allow you to buy investments for your Roth IRA that include stocks, bonds, and mutual funds from other companies. Vanguard and Fidelity, by way of example, fall into this camp.

     Opening a Roth IRA Through a Direct Stock Purchase Plan
     After a great deal of thinking, Jude makes up his mind and chooses to spend the rest of his life buying shares of The Coca-Cola Company and hold them tax-free through a Roth IRA. He doesn’t want to invest in any other stock or mutual fund, so he signs up for the direct stock purchase plan, which has a Roth IRA option. After completing the application, opening the account, and setting up a link between his checking account and Roth IRA, the beverage giant’s transfer agent begins making automatic monthly withdrawals from his checking account to buy more shares of Coca-Cola at a very low cost; typically less than $2 per transaction. He never pays any taxes on his Coca-Cola dividends because the stock is held in the Roth IRA.

     Opening a Roth IRA Through a Brokerage Firm
     Perhaps the most popular option is to open a Roth IRA with a brokerage firm such as Charles Schwab, E-Trade, or T.D. Ameritrade. It works exactly like opening an ordinary brokerage account. With few exceptions, you can buy any stock you want, any bond you want, any mutual fund you want, or any exchange-traded fund you want, often for a commission well under $10 per trade. You could have a Roth IRA at Schwab that held Vanguard funds, shares of General Electric, and some certificates of deposit issued by a bank in your state. In addition to enjoying the convenience of having all of your information on a single account statement, many brokers will reinvest your dividends for free.

     Alternatives to opening a precious metals IRA
     If you want to invest in precious metals but don’t want to deal with the extra hurdles associated with a precious metals IRA, you should consider investing indirectly instead. You could buy shares of an exchange-traded fund (ETF) that tracks the value of precious metals. You could also purchase stock in a precious metals mining company instead. This way, you still get some of the same benefits without the extra hassle and expense of opening a precious metals IRA.
     Many people choose to invest in precious metals because they know it’s always going to be considered valuable. But that value can fluctuate wildly over time, or worse, it could stay the same. This makes it a bit of a risky investment. If you are considering a precious metals IRA, make sure you understand exactly what you’re signing up for and limit your exposure so that you aren’t hurt too badly if the value of precious metals takes a hit. It is worth the seeds you sow.

     Look at a few precious metals to invest in. I have consolidated the list of best precious metals to invest in here: http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals

     Reply

7. Gold will never be out of fashion and as far I can remember it was always a save-keep against “hard” times.

   I am actually not surprised by knowing that countries will do just this to be on the safer side during political and economical instabilities.

   Your article really showed the point I am making.

   Great post and thanks for sharing. Hve even saved it.

   Reply

   • Hi Sylvia,

     Thanks for applauding.

     In 2017 the price of bitcoin reached parity with gold (by ounce) which grabbed the attention of gold investors around the world. With the current crypto mania there has been a surge in interest with the concept of gold-backed cryptocurrencies.

     A brief history of digital gold currency
     The idea of a gold digital currency has always had an appeal for those looking for an alternative payment system. Not long after the internet went mainstream E-Gold emerged as first digital currency backed entirely by gold in 1995. At its peak, millions of people around the world were using this service until it was shut down.

     Other attempts to make a digital gold currency were also made, but this was before the age of Bitcoin and blockchain technology.

     Now with blockchain technology established as a secure accounting method, and with Bitcoin becoming better known to the general public, a new era of gold-backed cryptocurrency is emerging. There is a proverbial (and literal) gold rush happening now in the crypto world, and even countries are looking to issue their own gold-based cryptocurrency.

     The basic concept is certainly compelling. A token or coin is issued that represents a value of gold (for example 1 gram of gold equals 1 coin). The gram of gold is stored by a trusted custodian (preferably third party), and can be traded with other coin holders.

     At a minimum the price of the coin will always equal the current gold rate. If the cryptocurrency becomes popular then the price of the coin can potentially increase in value, greater than the value of gold. If the cryptocurrency doesn’t take off then the value remains as the value of the gram of gold. It’s like a built-in stop-loss.

     There of course many risks as well. While the blockchain accounts for the coins, accounting for physical stored gold is another matter. When evaluating such tokens look for who actually owns the gold and how it is stored. In this regard our online gold partner BullionVault as a good example of accountable gold storage. When evaluating a gold crypto make sure that you own the gold.

     Buy gold with bitcoin
     Vaultoro

     If you are just looking to buy gold with bitcoin, the easiest and safest way is to open an account at Vaultoro. This is a gold vaulting service which allows you to buy and sell gold with bitcoin and other altcoins. The gold is 100% your legal property, and is fully insured in Swiss vaults. Vaultoro is ideal if you prefer to park your crypto gains in gold instead of cashing out into a fiat currency. Read more about Vaultoro.

     Gold-Backed Cryptocurrency Directory
     This is a current list of gold-backed cryptocurrency. This is a directory and not an editorial endorsement, so research all of the alternatives before investing. Some of the cryptocurrencies listed here don’t detail how they store and account for gold either, so proceed with caution. Any questions regarding each coin should be referred to their social media channel or forum listing.

     Since this post was first published there have been new coins added to the list and some are now ready to buy. The list is now sorted in order of availability.

     Pre-ICO
     A Pre-ICO (or ICO Pre Sale) is a token sale that is offered before the official ICO campaign or crowdsale goes live. There are fewer tokens offered at this point, and they are often sold at a discount which helps the project pay for the expenses of the launch.

     Ekon
     EkonName: Ekon (EKG)
     Location: Switzerland.
     Website: ekon.gold

     Ekon is a stable coin developed by Eidoo that is 100% backed by physical gold. Each Ekon token corresponds to 1 gram of gold 999. Ekon is an ERC20 token and you will be able to collect them within the Eidoo wallet.

     Golden Currency
     Golden CurrencyName: Golden Currency (PGCT)
     Location: Singapore
     Website: goldencurrency.world

     Golden Currency plans to be first global private currency on blockchain, both paper and electronic, 100% backed by gold. Pre-ICO on until July 2018.

     GoldFinX
     GoldFinXName: GoldFinX (GiX)
     Location: Singapore.
     Website: goldfinx.com

     GoldFinX (GFX) provides financing to Artisanal Small Gold Mines (ASGM) worldwide and gets in exchange of share of their production. The first production of gold will be delivered by Q2 2019, and will accumulate as well as stored indefinitely to back the value of the GiX coin.

     Pre-sale starts July 1st, 2018 and ends no later than December 31st, 2018. The GiX ICO launches in January 2019.

     GoldVein
     GoldVeinName: Gold Vein Token (CVT)
     Location: Russia.
     Website: goldvein.io

     GoldVein is a blockchain platform for investment in gold mining. The gold value of the token increases in value depending on the amount of gold mined.

     The Pre-ICO runs from April-June 2018, ICO August-September 2018, and tokens will be placed on exchanges December 2018.

     For any issues please contact the founder of the project Mikhail Pimulin by email pimulinm [at] gmail [dot] com, or any messenger +79100085987.

     Upcoming Pre-ICO
     AgAu
     AgAuName: AgAu (?)
     Location: Zug, Switzerland.
     Website: agau.io

     AgAu gets its name from the symbol for the chemical elements argentum, for silver, and aurum, for gold. AgAu is fully decentralised ownership of cryptocurrencies 100% backed by physical and allocated gold and silver. 1 AgAu Gold token = 1 g of LBMA Gold, and 1 AgAu Silver token = 1 g of LBMA Silver.

     Initial Coin Offering (ICO)
     An Initial Coin Offering (ICO) is how a new cryptocurrency raises money for its startup. A token is given a set rate, and there maybe bonuses for early buyers. It is rare to be able to buy ICO tokens with fiat currency, so you will need a stash of Bitcoin or Ethereum first.

     Airgead
     AirgeadName: Airgead
     Location: Dublin, Ireland.
     Website: airgeadcoin.io

     The Airgead Coin allows you to merge precious metals within one cryptocoin. Along with gold, you can merge silver, platinum, and palladium coins/bars as a basis for a worldwide currency. You can merge any amount of precious metals into a single Airgead Coin, and you can actually see what your Airgead Coin is merged with.

     The ICO is on until December, 2018.

     Cyronium
     CyroniumName: Cyronium (CYRO)
     Location: Jakarta, Indonesia.
     Website: cyronium.com

     Cyronium is a gold-backed crypto from Indonesia. Every 1 CYRO token has a guarantee of 1 Cyronium coin. 1 Cyronium coin consists of 20 grams of 99% gold LBMA (London Bullion Market Association). Where Cyronium differ from other offerings is they are offering the option of physical coins that will represent the CYRO token. If you elect to take the physical coin the CYRO token will be destroyed to avoid duplication. The coin will be shipped along with the certificate to the investor’s address. Physical gold will be held in vaults in Singapore.

     ICO will be conducted on May 26, 2018. After ICO, Cyronium can be traded in Santara marketplace (www.santara.co.id).

     EAU-COIN
     EAU-COINName: EAU-COIN (GELT)
     Location: Gothenburg, Sweden.
     Website: eau-coin.com

     EAU-COIN (pronounced “O-COIN”) is a gold-backed crypto token on an Ethereum-based blockchain smart contract. EAU-COIN is directly backed by real gold assets 100% owned by EAU-COIN with no liens or leverage. The tokens are issued in rounds with a built-in 20% bonus for the holders. At least 2 rounds will be issued every year of a fixed USD value related to fixed in ground gold assets that are being mined out.

     The EAU-COIN ICO begins in August, 2018.

     GOLDFUND
     GOLDFUNDName: GOLDFUND (GFUN)
     Location: Australia.
     Website: goldfund.io

     GOLDFUND (GFUN) helps near term precious metals producers get into production by providing the capital they need. In return GOLDFUND is rewarded with part of the production, and made available for purchase with purchased GFUN coins on the ZOMIA Gold Exchange.

     ICO runs from 1- 31 December, 2018.

     Jinbi
     JinbiName: Jinbi (JNB)
     Location: London, UK.
     Website: jinbitoken.io

     Jinbi is a UK and Belarus token backed by an increasing physical gold floor from the production of gold by the mining partner. Jinbi will create liquidity events following production milestones whereby each coin holder will receive a dividend payable in physical gold or Jinbi Token (JNB). All other funds are reinvested back into Jinbi to continue further gold production.

     Jinbi sale has been extended until latest 31st December 2018.

     Karatcoin
     KaratcoinName: Karatcoin (KCG)
     Location: London, UK.
     Website: karatcoin.co

     Karatcoin is a platform to trade gold certificates, exchange Karatcoin tokens, as well as save and exchange currency using gold cards. KCG (GOLD Token) is the token used in the Karat Blockchain. It represents 1 gram of 99.99% LBMA standard gold secured in safehouse vaults.

     The ICO closes 11th November, 2018.

     Kinesis
     KinesisName: Kinesis (KAU)
     Location: Cayman Islands.
     Website: kinesis.money

     Each Kinesis coin represents physical precious metal allocated on a 1:1 basis (1g gold = 1 KAU). Bullion is purchased simultaneously when a Kinesis coin is minted and each coin has bullion directly allocated to it from the moment of being minted into the Kinesis system, for the life of the coin.

     Initial Token Offering (ITO) runs until March, 2019.

     Sudan Gold Coin
     Sudan Gold CoinName: Sudan Gold Coin (SGC)
     Location: Dubai, U.A.E.
     Website: sudangm.com

     Sudan Gold Coin is a gold mining business with blockchain technologies that offers a fair distribution of the profit. Each token at the beginning will be tied to the 0.05g of gold per token. More gold is added to each token as the gold is physically mined. The mine is located in a study area of over 8000 Km2 in Northern State of Sudan. The Dubai SG mining Co controls 100% of the Sudanese mining company.

     ICO ends 30 January, 2019.

     With all of these factors in mind, investors may want to reflect on the pros and cons from their own personal lens before deciding whether to build up their stockpile of silver bullion. Timing is also an important factor for those who want to reap the benefits of the white metal. Here,

     http://bestiraoptions.com/best-gold-ira-options/ira-approved-precious-metals/ira-approved-silver

     I have collated IRA approved silver options which will help you further to know the best one to invest in.

     Reply

8. Why India and China are rushing to buy Gold

   Gold although a metal  is treated and traded as a commodity.

    One of  the reasons could be mans fascination through the ages  with something that they can keep apart from banks and institutions. 

   China,s household buying seems to peak in the Chinese new year and gift giving.time

   India,s situation is somewhat different.   India has to import  nearly all of its gold.   In rural areas this has resulted in the peasants hoarding gold because of its scarcity.Another reason is to avoid paying Income tax

   Generally It seems people distrust governments and this is one of the  basic reasons for buying gold the world over,

   I believe that this is a very interesting subject which should be researched and discussed at length.

   Reply

   • Hi Robert,

     Many people see a gold IRA as a supplement to their other retirement funds, in part because the value of gold tends to move in the opposite direction of paper assets, like stocks and bonds. So when stocks and mutual funds are losing value, gold is usually gaining it, and vice versa. The idea here is that if your other investments take a hit, your gold will increase in value to help compensate, hedging your losses.
     While the value of gold fluctuates like anything else, it has remained a valuable commodity for thousands of years, and it will likely remain valuable for many decades to come. But there are a few drawbacks to opening a gold IRA that should give a would-be investor pause.
     The drawbacks of a gold IRA
     When you open a gold IRA, you will have to pay a one-time account setup fee, along with annual custodian fees. There may also be additional fees for transactions and withdrawals. These are typical of any IRA, but they may be higher for a gold IRA because these accounts are rare and fewer companies offer them.
     In addition, because gold is a physical commodity, it has to actually be stored somewhere. IRS standards say that unless you have an LLC, the gold must be kept by the IRA custodian, not the account owner. The company charges you for the storage fees and insurance to protect your gold, in case the facility is robbed. This charge is unique to gold IRAs and may be a flat fee or a percentage of your assets.
     Perhaps one of the biggest reasons to be wary of investing in a gold IRA is the unpredictability in the price of the metal. The cost of gold shot up to more than $1,000 per ounce during the Great Recession, but before that, its value had remained relatively constant between $300 and $500 per ounce since 1980. When you consider that the inflation rate during that same period rose nearly 152%, the investment doesn’t look as appealing. If you invested $500 in something that kept pace with inflation back in 1980, it would have been worth $1,258 just before the Great Recession hit in 2007. But if you’d invested in gold over that same time span, your $500 investment would barely have appreciated at all. That means you effectively lost $758. If you’d instead held on to that gold and sold it when it hit $1,895 an ounce in 2011, you’d have made $1,395.
     How to buy gold-backed cryptocurrency?

     Before you buy any of the gold-backed cryptocurrencies listed you will need to have a stash of Ethereum or Bitcoin available. If you already have then you can skip to the next section.

     If you are buying and selling altcoins on a regular basis then it’s worth getting accounts set up and verified on different exchanges. With the current high demand in trading crypto you may find that some exchanges will take weeks to get set up, so having different options will get you started quicker.

     Bitcoin and Ethereum are the two major cryptocurrencies that are used to buy alt-coins on exchanges. For ICO (Initial Coin Offering) purchases Ethereum might be the only payment available if the token is running on Ethereum. You will end up having accounts at different exchanges as not all exchanges accept fiat currencies, and the ones that do may not trade the coin you want.

     Here are some crypto exchanges where you can deposit cash to buy Bitcoin or Ethereum.

     Coinbase is the most well known site to buy Bitcoin and Ethereum. They are ideal if you are new and just want to get started quickly. (This link will also give you $10 on your first $100 deposit.)

     Coinmama is another speedy option to get Bitcoin or Ethereum.

     Coinmama: Buy Bitcoins with Credit Card

     Paxful is peer to peer marketplace for buying and selling bitcoin. They offer more than 300 ways to pay for bitcoins, such as direct debit, credit card, Paypal, and via giftcards.

     SpectroCoin offers a fiat and virtual currency exchange with more than 20 currency options available

     Once you are set up and have bought BTC or ETH you can then follow the instructions from the cryptocurrency you are buying.

     Cryptocurrencies that aren’t gold-backed
     While researching and updating this list I keep finding Cryptocurrencies that sound like they are gold-related. The biggest naming misnomer is Bitcoin Gold (BTG), which is a fork of the Bitcoin blockchain and has no gold attached to it. What a wasted opportunity to not have an actual gold-bitcoin. The name has really messed up my gold news alerts as well.

     At least Bitcoin Gold aren’t pretending to be linked to the value of gold, just as a Visa or Mastercard Gold Card isn’t pretending to be made of gold. Things start getting murky with Ethereum Gold (ETG). Ethereum Gold is built on the Ethereum blockchain and was launched in October 2017 as an airdrop to crypto forum readers. The website says that it’s a “smart-contracts governed ecosystem that applies blockchain technologies using the value of GOLD.” There is no other mention of how it is connected to the value of gold.

     Crypto Bullion (CBX) has been trading since before any gold-backed crypto got started, but it doesn’t have any bullion backing. It was launched to function as a store of wealth and emulate the properties and supply of gold.

     GoldCoin (GLD) is “Digital Gold” and not backed by physical gold. It was founded in 2013 and is a decentralised open-source cryptocurrency forked from Litecoin.

     GBCGoldCoin (GBC) is a Russian cryptocurrency and is not backed by gold coins.

     GoldReserve (XGR) appears to have started out as being backed by gold but “XGR is not backed by gold at the moment“.

     Gold Bits Coin (GBC) project is no longer gold-backed.

     News / Watch List
     The Blackwood Gold Coin – 1ozg (as in 1 oz of Gold). Only 120,000 Blackwood Gold 1ozg crypto coins will ever be issued.

     Pricefitch – Trading as PFA on bestcmex.com, unable to find any details about this.

     Korean startup GoldMining launches gold-backed cryptocurrency. Pre-sale of tokens will start on April 1.

     $UNY / $DIG — a cryptocurrency backed by gold by Cryptobontix.

     Venezuela announces new ‘Petro Gold’ cryptocurrency, one day after launching the Petro

     Canamex Gold Corp. announce a non-brokered private placement of Gold Royalty Tokens to accredited investors.

     Cryptocurrency backed by gold being developed by Perth Mint to entice investors back to precious metals – The Perth Mint is wholly owned by the Government of Western Australia, so this would be similar to the project being developed by the Royal Mint of the UK.

     Guyana Goldstrike investigates blockchain platform for cryptocurrency funding of the Marudi Gold Project

     IEG Holdings plans to create its own IEGH Crypto/Blockchain currency backed by gold metal and SEC registration as a security.

     Goldcliff (a mining company) plan to develop a gold based cryptocurrency.

     GoldenRock – a national cryptocurrency proposed by Kyrgyzstan that will be backed by gold.

     HayekGold – A gold-backed, digital asset using block chain technology and the Counterparty platform. By Anthem Vault who have developed Anthem Gold. Unclear if this is going to be developed as well.

     Petro – Venezuela will create a cryptocurrency backed by oil, gas, diamond reserves, and gold.

     Russia is looking into launching a gold-backed “CryptoRuble”, though as a state-issued cryptocurrency that cannot be mined, it’s not very crypto.

     Future gold-backed cryptocurrencies / ICO’s
     There are more gold-backed cryptocurrencies being developed, so we will add them here as they become known. If you know of any others or are developing one leave a comment.

     If you do plan on opening a gold IRA, don’t put too much of your money into it, especially if you’re nearing retirement age. Most experts recommend only having 10% or less of your retirement portfolio in gold to minimize the risk of losing your investment. It is worth the seeds you sow. Look at the top 10 Gold IRA options that are worth for the Gold IRA investment. These companies will definitely give you more than you invest in. http://bestiraoptions.com/

     Reply

9. It makes sense to me the shifts in value with the different generations. The younger generations do not seem to put as much value in gold or jewelry as the olders ones do, they put emphasis on technology and each leading piece. But I do have to say that I know plenty of people in my family that know and appreciate the true value of gold. Thanks for all the info.

   Reply

   • Hi Alisa,

     In today’s modern economy, investors have a plethora of investment options at their disposal, each with their own associated risk/return profile.
     With such a wide variety of choices, it can be difficult for investors to select the most appropriate option for their needs. In this article, we will be providing our readers with information on an increasingly common type of investment: the Gold Backed IRA.

     I will be answering the following frequently asked questions:

     • What is a Gold Backed IRA and how does it differ from a regular IRA?
     • What are some of the advantages and disadvantages?
     • Is this kind of IRA suitable for me?
     • What do I need to do if I want to open such an account?

     What is a Gold Backed IRA and how does it differ from a regular Individual Retirement Accounts?

     This type of IRA falls under two categories: the ‘self-directed IRA’ and the ‘precious metals IRA’. A self-directed IRA is simply an IRA in which the owner of the IRA is in charge of all the investment decisions related to that account. A precious metals IRA is an account in which the funds can be invested in precious metals; currently there are four types of metals which are permitted to be invested in by the IRS: gold, silver, platinum, and palladium. The funds must also be used to directly own the physical commodities themselves (for example, investing in Gold Exchange Traded Funds is not permitted). The specific requirements for the allowed precious metals can be found here.

     Similar to a regular IRA, precious metals IRAs also fall into two types: traditional IRA and Roth. In the former, contributions are tax-deductible in the year they were made while withdrawals in retirement are taxed at ordinary income tax rates. In the latter, it is the opposite, with no tax deductions for contributions but generally tax-free withdrawals. This is no different for IRA precious metals accounts. However, because the IRS does not permit the investor to have actual physical possession of the gold, a trustee will have to be appointed to hold the physical gold, usually in a licensed depository. As such, administration and storage fees are applicable, with annual fees typically being in the $250 range.

     What are some of the advantages and disadvantages of this type of IRA?

     This type is just one vehicle for investors to obtain physical commodities (in this case, gold, or another of the approved precious metal types – silver platinum and palladium) in their portfolio. Adding gold to one’s portfolio can have several benefits, namely:

     Providing a safe haven component to a portfolio due to its capability as a store of value.
     One needs to only have a cursory knowledge of history to know that gold and silver have been used as a form of currency for thousands of years. Even paper money’s value was initially backed by gold, although that is no longer the case. As such, the money supply can and is easily manipulated, which may affect the long term value of the currency as a whole. Investing in gold provides a hedge against inflation and currency depreciation; further, while stocks can go to zero and bonds can default, gold will always have value.

     You can diversify your portfolio because of the low or negative correlation with other traditional investments such as stocks and bonds. The theory of portfolio diversification states that an ideal diversified portfolio contains investments which are only loosely correlated with each other, resulting in the overall risk of the portfolio being lower than the sum of its parts. Gold’s correlation with the price of stocks and bonds has historically ranged from the negative (particularly during recessions) to low positives that usually remain below the 40% mark.

     Good historical returns over the long-term.

     While over the past 5 years, gold prices have been volatile and generally on a negative trend, on a longer-term (10 year) basis, its average annual returns stood at 5.71% (as at Dec 2015), far above for example, 10-year US Treasury yields. With the right mindset, precious metals do have growth potential as well, but not usually in the short-term.

     For further details on the above, kindly refer to our article ‘Why Invest in Gold?’ However, it is our responsibility to ensure that you are also aware that these types of ira accounts are not without its risks, such as:

     Price Volatility Risk

     While gold and silver functions as a store of value is undeniable, as are other precious metal types, it is still subject to the same market forces that affect the prices of all commodities and financial assets. As mentioned, gold prices have exhibited significant volatility, with many analysts pinpointing speculative forces behind this volatility. As such, gold may not be a viable short-term investment, although as previously shown, it can and has demonstrated good long-term returns.

     Risk of Fraud or Theft

     Because the IRA investor is not permitted to physically possess the gold, a broker and custodian is required in the process, exposing the investor to counterparty risk. This comes mainly in two forms, namely fraud and theft. Some companies may issue ‘gold certificates’ to the investor which may or may not be reflective of the amount of physical gold they actually have. In the latter, gold is always subject to the risk of theft. This risk can be mostly mitigated by choosing the right gold investing company, for more on how to do that, refer to our guide here.

     Risk of Regulatory Changes

     While you may be invested in precious metals currently allowed by the IRS, there is no guarantee that IRA rules will not change in the future. After all, IRS regulatory decisions can often be highly vague and seemingly arbitrary without any benefit to the common taxpayer. Unfortunately, there is nothing we can really do to manage this risk, however we assess this risk as very small and it would be unwise to not take advantage of some of the benefits of Gold IRAs because of this!

     Tariffs Are Real, and Prices Are Rising

     For example, despite a declaration made by Treasury Secretary Steve Mnuchin that a threatened trade war between the U.S. and China was “on hold,” Trump has said he’s proceeding in the effort to apply 25 percent tariffs on up to $50 billion in imports from China and China has just hit back with tariffs on $34 billion in imports from America.

     You may have also heard that tariffs threatened back in March against neighbors Canada and Mexico, as well as on the European Union, were put on hold while trade representatives from all parties continued renegotiations of existing agreements. Well, they’re back on now, as said negotiations have apparently fallen apart all the way around.

     And, sure enough, the price of steel is up from a year ago. Way up. Holmes points out that steel has soared a whopping 45 percent in the last year, and that it’s just a matter of time before that much-higher cost is reflected in the price of cars, for example. Holmes mentions that the U.S. has imported automobiles squarely in its tariff sights, and cites a report by German business magazine WirtschaftsWoche that suggests Uncle Sam may altogether ban the import of German luxury automobiles.

     Holmes’ eventual punchline? That the already-inflationary climate expected to fully engulf the American economy is going to be sharply exacerbated by growing trade troubles. That’s going to be good news for those with the foresight to be positioned in gold, says Holmes, who cites a revealing piece of data from the World Gold Council (WGC) indicating annual gold returns have averaged 15 percent when inflation was 3 percent or higher.

     Consumer Price Index is Now Soaring – Is Your Portfolio Ready?

     Despite gold’s sudden 2% drop on Friday, June 16, the prospect of “regular” inflation combining with trade conflict-fueled inflation is a reason to remain particularly optimistic about gold’s prospects in the near term. According to a recently-released Labor Department report, the consumer price index jumped 2.8% in the past 12 months – the fastest rate at which it has climbed in six years.

     While my firm belief is that every portfolio should contain at least a modest allocation to precious metals to act as a stabilizer, there will be times when an even heavier weighting makes sense. An inflationary climate that looks to get considerably worse is surely one of those times. To learn more about preparing your IRA or 401(k) to withstand these decidedly negative influences, call Augusta Precious Metals at 855-976-5436. Speak with of our experienced, knowledgeable professionals about the role physical gold and silver can play in keeping your retirement account productive during what, for most, will be an uncooperative inflationary climate.

     It seems as though no sooner does President Trump announce a tariff, that he or a member of his administration quickly backtrack and publicly suggest tariffs won’t really be enacted. Except we can already see they are being enacted, and prices are already moving upward. As the country continues to move headlong toward an acutely inflationary climate, prices on a wide variety of goods may begin soaring shortly. Should that come to pass, those who will already be positioned in gold stand perhaps the best chance to capitalize.

     Is a Gold or Precious Metal IRA suitable for me?

     Each investor is unique, with individual financial goals and resources. As such, careful consideration and evaluation of the advantages and disadvantages of such an IRA as elaborated above and elsewhere on this site should be made prior to making any investment decisions. However, we would like to dispel the notion that investing in gold and silver is a complicated investment that is suitable only for highly sophisticated individuals. That is not true in the least; in fact it is quite common for ‘regular investors’ with only a basic retirement accounts such as 401(k) and Thrift Savings Plans rolling over said accounts into gold backed IRAs in order to obtain the benefits. It’s also advisable to chat with an expert advisor from one of the top gold ira companies to ensure you have all the information you need before making any decision.

     What do I need to do if I want to open such an account?

     If you have made the decision to participate in Gold IRA investing, the process is actually very simple. Once you have chosen the ideal Gold IRA custodian, everything is as simple as filling out a few forms. For example, if you wish to do a 401(k) to gold IRA rollover of your current plan into a Gold IRA retirement account, the safest and fastest method is a direct rollover.

     Today’s economy can be highly uncertain, and with globalization increasing the inter-connections between individual economies, the butterfly flapping its wings in China can indeed cause a hurricane here in America. Gold investments can offer the smart investor protection over his or her portfolio in such times, in addition to its other benefits. Fortunately for us, if you decide to purchase precious metals to fund an IRA, owning bullion coins, gold bars, silver, platinum, palladium or other ira approved assets has never been easier. We encourage everyone to look closer into Gold IRAs, and we hope that this article has helped furnish you with some of the information you would need to make the right investment decision for your needs.

     I hope this clears everything. I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.

     Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out!

     Reply

10. Hey Uriah,

    China and India are two of the booming powerhouses in the Asian region and having those two countries opening gold investing opportunities is something we should all follow. Super excited to read about them involving, I can’t wait to start investing. There are a lot of scams though nowadays, and no offense but I have a feeling that a lot of them might come from these two countries when the market is huge.

    Reply

    • Hi Riaz,

      Gold investment is the new thing in the market that is indeed giving great returns. It’s not unreasonable that some IRA owners may have bad feelings about the stock market.

      However the safest fixed-income investments are currently paying microscopic interest rates even though the risk of future inflation remains worrisome. So the idea of investing some IRA money in gold or other precious metals might seem attractive. Here’s the story on what you can and cannot do with your IRA.

      Physical IRA ownership of precious metal coins and bullion

      Our beloved Internal Revenue Code allows IRAs to own certain gold, silver, and platinum coins and gold, silver, platinum, and palladium bullion that meets certain fineness standards. For example, an IRA can own American Gold Eagle coins, Canadian Gold Maple Leaf coins, American Silver Eagle coins, American Platinum Eagle coins, and gold and silver bars (bullion) that are 99.9% pure or better.

      However, some well-known gold coins, including the South African Krugerrand, are off limits as are bullion bars that are not sufficiently pure. The coins or bullion must be held by the IRA trustee rather than the IRA owner. In other words, you can’t have your IRA buy coins or bullion and then stash the stuff in your safe deposit box or bury it in your backyard. Sorry about that. These tax rules apply equally to traditional IRAs, Roth IRAs, simplified employee pension (SEP) accounts, and SIMPLE-IRAs. No problems so far.

      The big issue with IRA ownership of precious metal assets is finding a trustee that is willing to set up a self-directed IRA, handle the transfer of funds to the precious metals dealer, and facilitate the physical transfer and storage of the purchased coins or bullion. Only a relatively few outfits are in the game, and none of the major brokerage firms are willing to play. Conduct an Internet search to find a trustee. Most trustees will arrange for the physical storage of coins and bullion with the Delaware Depository Service Company in Wilmington, Del.

      A precious metals IRA trustee will usually charge a one-time account set-up fee (maybe $50), an annual account administrative or maintenance fee for sending account statements and so forth (maybe $150 or an amount based on the account value), and an annual fee for storage and insurance (maybe $125-$250 or an amount based on the value of the stored assets). Additional fees may be charged for transactions including contributions, distributions, and precious metal purchases and sales.

      Age-related considerations

      Since precious metal prices are volatile, using an IRA to invest in precious metal assets becomes (arguably) more problematic as retirement age is approached and reached. Also, once you reach age 70½, annual required minimum distributions (RMDs) must be taken from traditional IRAs. Therefore, your traditional IRAs (including any SEP-IRAs and SIMPLE IRAs) must have sufficient liquidity to allow for RMDs. That said, RMDs need not be taken from each IRA. The only requirement is that the proper total annual amount (at least) be withdrawn from one or more accounts. For example, you could have one IRA that is invested in precious metal bullion and one IRA that is invested in liquid assets like publicly traded stocks and mutual funds. The entire annual RMD amount can be taken from the liquid account while leaving the precious metal account untouched.

      Indirect precious metal investments via ETFs and mining stocks

      Due to concerns about transfers and storage, physical ownership of precious metal assets by IRAs is not for everyone, although it has become more popular in recent years.

      One option for folks who are uncomfortable with the idea of physical IRA ownership of coins or bullion is buying shares of an exchange traded fund (ETF) that tracks the value of particular precious metal. A few years ago, tax advisers worried that having your IRA buy such shares might be treated for tax purposes as buying collectibles (coins and metals are generally treated as collectibles under the tax law). Since IRAs are not allowed to own collectibles, that would have resulted in a deemed taxable distribution from the IRA with you then using the money to buy the prohibited EFT shares. Not good.

      Thankfully, the IRS has ruled that IRAs can buy shares in precious metal ETFs that are organized as grantor trusts without any tax problems. One of the championing benefits of a self-directed IRA is the freedom and power granted to clients to take the reigns of their retirement savings. A self-directed IRA allows clients to make investment choices that best serve their individual retirement goals and market expertise. A principal facet of this freedom is the ability to invest in alternative assets outside of the publicly traded securities market; including investing in a gold IRA or silver IRA.

      When you invest in precious metals with a retirement account at New Direction, we take the freedom of a self-directed IRA a step further by allowing our clients to choose their own preferred qualified precious metals dealers. Many self-directed IRA administrators allow their clients to work with less than a handful of metals dealers and depositories. At New Direction, we’ve worked with more than 65 different dealers this year alone, all at the client’s direction. Additionally, clients who have preexisting relationships with dealers or depositories can request that New Direction work with those specific businesses to carry out transactions with their gold IRA.

      New Direction clients can select between 15 depositories to store their precious metals investments; a number that keeps growing every year. The ability to shop a large selection of metals dealers and depositories allows our clients to choose a business that best suits their price range and service preferences for their gold IRA.

      When metals dealers work with New Direction, they can access a specially designed portal that shows a list of their clients, a client’s progress within the transaction process, and a client’s transaction history. We can also tailor this portal to meet any dealer’s specific needs. This degree of specification benefits both dealers and New Direction clients alike, as it ensures thorough communication between the client, the IRA administrator, and the metals dealer.

      An outstanding feature that sets New Direction apart is our in-house Precious Metals Asset Team (PMAT). This team is made up of gold IRA specialists who can guide our clients through the entire investment process and expertly answer questions regarding establishing, funding, and investing in precious metals IRAs. Available Monday through Friday, 8 am – 5 pm MST, this team ensures that clients, metals dealers, and depositories have a dedicated representative to contact about any questions or transaction requests. The PMAT team will also assist with gold IRA or silver IRA transfers between IRA accounts.

      Self-directed IRA account holders want flexibility and diversity in their retirement portfolios. New direction IRA offers both. Contact New Direction IRA today at 877-742-1270 (toll free), and take advantage of the freedom and control granted through a precious metals IRA with New Direction.

      The two most-popular precious metal EFTs are the SPDR Gold Trust (trading symbol GLD) and the iShares Silver Trust (trading symbol SLV). The IRS has approved them both. If you have doubts about your IRA being allowed to own a particular precious metal ETF, read the tax section of the fund’s prospectus, which should be available online. (Be aware that there are still some folks out there who wrongly believe that IRAs are not allowed to own precious metal ETFs.)

      Another indirect way of investing in precious metals is to have your IRA by stock in a mining company. For example, your IRA could buy shares in Barrick Gold Corp. ABX, -0.59% , the world’s largest pure gold mining company. There are no tax concerns with this option, because IRAs are allowed to invest in stocks of all kinds.

      Since prehistoric time, human are using the gold in trading and value keeping asset. Even current financial activities are always surrounding by the gold issue. The ancient treated the gold as the true form of wealth. Gold has been using early in 4000 B.C as a fashion decorative object in where today Eastern Europe is centred. In 1500 B.C the gigantic gold-bearing regions of Nubia made Egypt a wealthy nation (National Mining Association). By the time the gold has widely recognize as the standard form of medium of exchange for international trade. Gold is represented the royal and honourable in different religious and cultural area. Its aesthetic appearance is the finest ornament above all other metal. Gold play the role in all aspect around us, such as religious customs, reward system, ornament, jewellery, and even the component of industrial product. Gold exist and be using for decade, its intrinsic value is still maintain high and irreplaceable.

      Investing in gold has been seen as the supreme way of safe haven investment. Gold investment is booming in recent year and the reasons behind this incident can be explained as the investor become more aware of the benefit of the gold and its special features. Gold demand for investment purpose accounted one-thirds of gold demand all over the world which is substantial influential (World Gold Council, 2009). Investment demand for gold has shown as significant increase in the last seven years as investor seeking the fashion to balance their investment portfolio and safeguard against the economy and political uncertainty

      Generally gold demand can be divided into three main types, which included the Jewellery demand, gold investment demand, and industrial demand. I hope this clears everything. I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.

      Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out!

      Reply

11. This is a very insightful information. I agree, China’s and India’s economy is booming and growing in a rapid rate.  I didn’t know that China is the 2nd worlds largest gold holder in the world. That’s pretty interesting.

    I thought about investing in gold, however I still need to learn up on this more. I really like the info you’ve provided. I’ll be sure to check back in.

    Thank you for this.

    Reply

    • Hi JD,

      Thanks for liking the article. In portfolio management, prudent investor will have different sort of investment vehicle. The reason for holding diverse investment is to safeguard the portfolio against fluctuations or uncertainty that occurs in the economy system. Gold investment has been studied by many of professional toward its ability to protect the wealth of investors against the overwhelming global financial crisis and economic uncertainty.

      Generally, the group of similar asset will react correspondingly among each other during the transformation of the economy and financial system. Diversification will reduce investor’s risk in portfolio investment. Besides the common investment vehicle like company share, bond, and mutual fund, gold investment is an option for investor to diversify their investment portfolio. Portfolio that contains gold investment is generally more robust and less risky as compared other investment vehicle.

      The inflationary hedging ability of gold is prominent especially during the economic uncertainty period. Gold price react quickly that other commodities when there is any change in the market condition. Conversely, price of the CPI-basket is adjusted slowly to the change of market condition ((Mahdavi & Zhou, 1997). Risk factors that may affect the gold price are quite different in nature from those that affect other assets. Purchasing power of gold is maintain even the transformation of the era is remarkably significant (Greer, 2005).

      In addition, gold is one of the examples of safety investment instrument that have very limited amount of risk associated with it. The credit risk is the possibilities that the debtor unable to repay the loan. Gold is unique which do not involve such repayment relationship. The profitability of gold investment is operating in the accrual basis. The liquidity risk which means the possibilities that the asset cannot be sold as the buyer in the market may not be available during the time of reselling. However the gold market has high demand rate from the individual consumer, jewellery sector, financial institution and manufacturing of industrial product. Thus its liquidity risk of gold investment is very low (World Gold Council, 2009).

      Problem statement

      Gold investment in Malaysia is less well known by investor, even though it is a superior investment vehicle. Generally, most of the elderly will save their money in fixed deposit. Some of them may invest their money into mutual fund and government bond. The rate of return from the fixed deposit is very low and the intrinsic value of the saving will be overwhelmed by the wave of inflation during financial crisis or recession.

      The purpose of this study is to find out what are the reasons that affect the intention to adopt gold investment in investor’s portfolio. In early 2008, the inflation rate surge high, most of the investor who invests in share market suffers a huge loss in the market. The collapse of Lehman brother and many giant corporations in 2008 raised the vigilance of the investors. Many of investors seek for the immunity to keep their capital away from the threat of inflation and downward movement of stock prices. According to World gold council (2009) stated that there is significant increase in the demand of gold investment.

      Current financial recession and anxiety toward future uncertainty have urge the political and finance officer unearth the solution to withstand the inflation problem. Some professors have suggests the gold investment to investor as the safe haven to protect their wealth against the inflation shock. Gold investment has the special feature of inflationary hedge which have been study by a number of researchers and professionals. Malaysian investors should add the gold investment into their portfolio and hence reduce the risk of investment. However, gold investment in Malaysia is still not widely adopted as compared to other counties such as Singapore, Thailand, China, United state and India.

      Some investors are eager to make the quick profit from the speculating activities such as short-selling the share and the commodities future. However the speculating activities will create the bubble in the market and finally it will turn into another financial turmoil. The gold price seen not stable in short and is more volatile than other commodities. However the gold price in long-run shown an upward shifting trend and the value of gold is appreciated over the past 30 years.

      In Malaysia, the gold investment opportunity is very limited and the public are hard to find the advertisement of the gold investment account or the gold investment seminar. The lack of public awareness toward the gold investment is one of the problems in Malaysia. It is imperative to enhance the public awareness to the gold investment and adoption of gold investment in the investor’s portfolio.

      Gold investment is very popular in other country such as china and India during the recent years. Based on the statement from the World Gold Council (2009) the investment demand hit high at 656 tones which account for 16 per cent of total gold demand. James Burton, the CEO of the WGC has announced the investment demand for the gold market has a striking increase in the last six years. The rising demand of gold investment is due to the investors seek to further diversified their portfolio and safeguard against economic uncertainty and political instability.

      However this tide is not yet hit the Malaysia Investment market as compared to other country. As we can see the method of gold investment in Malaysia is enormously limited. This thesis may help the local investment institution to identify the factors that affect the adoption of the gold investment. Thus the local institution can come out with the absolute plan special cater for the local investor. It may help to establish the sound financial investment structure in Malaysia. Besides, investors are furnished to more options of investment and enhance the ability to diversify their investment portfolio.

      Development of a country required the liberalization of the Malaysia market so that to attract the multinational corporation expand their business locally. Generally, Malaysia’s local investment institution is lack of competitive advantage as compared to giant foreign investment institution. Hence government always exercise its authority to prevent the foreign institution enter into Malaysia financial market. This will be an obstacle to the government in their liberalization plan. In order to increase the competitiveness of the local investment institution, the research on perception of local investor is indispensable. It would assist the local investment institution to compete with the strong forces from overseas.

      In the evolution of the world monetary system, the gold is increasingly been esteemed as the new form of currency after the abandoned of the Bretton Woods System in year 1973. The loss of confident towards the paper notes and some professionals have pointed out gold as a true form of medium of exchange. Greer (2005) has defined the money is backed by nothing other than the confidence that its holders place in the issuing bank. The paper notes will be able to exchange for goods and as way to store their wealth. However, it depends on the ability of that government to keep inflation under control. The problem of the fiat money have cause the Zimbabwe’ nation suffer from the hyperinflation due to the excessive money supply. Malaysian should employ some inflationary hedging instrument to avoid the unwanted event.

      The rising demand for gold in the countries such as china, India, United states and Australia in gold investment have significantly drive the gold investment as part the portfolio investment tools worldwide. Malaysia is still on the developing stage of this form of investment instrument. Thus we are rarely seen the Malaysian investors holding their portfolio with the portion of gold investment. Even gold is superior and have been widely adopted in other countries.

      The characteristic of gold

      Gold have variety of characteristics besides the independent variable stated in this research. For example, gold possess the characteristics of liquidity, store of value, durability, unit of account and Malleable. The characteristics of the gold provide strong foundation of the demand for the gold especially during the recession or economic uncertainty period.

      According to world gold Council (2009), the liquidity risk of the gold is relatively low as compare to other investment vehicle especially during the economic hardship. Murray (2004) said that the gold market provide high liquidity to investor when they are in the need of the fund. According to Sathye (2003), the collateral is a second source of repayment to the loan. The Marketability of the asset is an important consideration to the lending decision. The Marketability of the asset depends on the acceptability of the particular asset. Gold has the characteristic of acceptability. Levin & Wright (2006) stated that gold is widely acceptable and investor can sell the gold whenever they need the liquidity of the fund.

      The According to Harmston (1998), gold can uphold its real purchasing power in long run. He claim that gold have consistent value storing ability even at the economic instability. Sjaastad, Larry and Scacciavillani (1996) claimed that when world inflation is surging higher, gold is performance its remarkable function as a value storing instrument. Dubey, Geanakoplos & Shubik, (2003) said that gold is a form of commodity money and it can store the value. However gold is durable as compare to other commodities. Besides, the durability of the gold is prominent as a value storing asset.

      In chemical term, gold is a chemical element with symbol Au and atomic number of 79. This metal has the high thermal and electrical conductivity, resistance of corrosion and malleable characteristics (Wikipedia, 2009). Gold has an atomic number of 79 and atomic weight of 196.967. Gold has high melting point which at 1064.43°C. Beside, gravity of gold is 19.3 and can be explained as 19.3 times weight than equal volume of water (National Mining Association, 2004).

      Economic Factor and gold investment

      Purchasing power of gold is maintain even the transformation of the era is remarkably significant and the purchasing power of the contemporary currency is diminished gradually (Greer, 2005). In year 1945, Breton wood agreement which endorse by the United States Congress was set the gold exchange standard. The standard involves setting par values for currencies in term of gold and the member countries is required to convert foreign official holdings of their currencies into gold at the prevailing par value. Breton wood system had fixed the 35 US dollar equivalent to 1 ounce of gold to establish the global currency standard (Dammasch, 2005). According to world gold council (2009), the current gold price is increase sharply and currently one ounce of gold is approximately equivalent to 1079 US dollar per ounce. From the above , we can notice that the purchasing power of US currencies has generally declined due to the impact of rising prices for goods and services.

      Consequently, gold is always in pursuit by the investor when there is fluctuation in the currencies and economy. According to World gold council (2006), the robust growth of the gold investment demand recent year can be attributed to the factors such as macro-economic and the political instability. Economic factors have high contribution to the gold investment demand and the US dollar plays a crucial role in this aspect.

      According to Levin and Wright (2006), gold is prominent for its inverse relationship with the US dollar. During the drop in the currency rate of the US dollar recently, the gold price had shown a robust upward shift in the price. The currency factor contributes to investor decision making framework in adoption of gold investment (Boye, 2005). The inflationary hedging ability of gold and currency rate volatility is the key independent variable in this research and it is widely study by many of the professors.

      I hope this clears everything. I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.

      Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out!

      Reply

12. Investing in precious medals is rather complex directly. I see you have some options out there for the IRA, but what are your thoughts on investing in generic ETFs floating around the market?  They tend to be a lot more accessible from a capital standpoint, but I know they also tend to have some light management fees associated with them that might eat into potential profits. Would you still consider ETFs?

    Reply

    • Hi Craig,

      With their fairly recent rise in popularity, it is important to take a moment to speak with you a bit about exchange-traded funds, or ETFs as they are more commonly called, in order to help you understand what they are and how they work. In the chance, you aren’t already aware of them, or if you don’t own them in your own investment portfolio, ETFs are essentially mutual funds that trade similarly to stocks under their own ticker symbol.

      To buy or sell an ETF, you do so through a stockbroker and, unless the ETF is part of some special deal the broker has worked out with the sponsor of the ETF, they charge a commission, just as if you were purchasing or liquidating shares of, say, IBM or Microsoft. Still, there seems to be some confusion as to how investors actually make money from ETFs. Contrary to the impression you might get speaking to those who have an incentive to sell you these financial products, ETFs are not lottery tickets nor are they magic.

      Like all things, they have pros and cons that must be carefully weighed, especially in light of your personal circumstances, preferences, resources, and other relevant factors. While this general overview can’t do that for you, it can provide you with a fundamental understanding of how profits are generated for ETF investors in the hope that it will give you a chance to make more informed choices about your portfolio or, at the very least, the right questions to ask your financial advisor.

      How Investors Make Money From ETFs

      Making money from ETFs is essentially the same as making money by investing in mutual funds because they operate almost identically. Just like mutual funds, the way your ETF makes money depends on the type of investments it holds. The ETF itself is sort of like a trust fund – it may invest in stocks, bonds, commodities such as gold or silver, preferred stock, or a famous index such as The Dow Jones Industrial Average or the S&P 500. What does this mean for you, as an investor? Basically, it all comes down to this: How you make money from an ETF will depend on the underlying investments of that ETF over time.

      That is, if you own a stock ETF that focuses on high-dividend stocks, you are hoping to make money from a combination of capital gains (an increase in the price of the stocks your ETF owns) and dividends paid out by those same stocks. Likewise, if you own a bond fund ETF, you hope to make money from interest income. If you own a real estate ETF, you hope to make money from the underlying rents, capital gains on property sales, and service income generated by the apartments, hotels, office buildings, or other real estate owned by the REITs in which the ETF has made an investment.

      The Same Keys for Making Money in Mutual Funds Hold True for ETF Investing

      There are three keys that might help you increase your returns over time. These three things hold true when you are attempting to make money with ETFs:

      1. Don’t Invest in ETFs You Don’t Understand: There are some crazy ETFs in the world – some that utilize super leverage and short stocks, some that invest only in countries that are barely above third-world, and others that concentrate heavily in specific sectors or industries. As Warren Buffett is fond of saying, the first rule of making money is to never lose money. The second rule is to see rule #1. You should know the exact underlying holdings of each ETF you own why you have an investment in it.
      2. Keep Your ETF Expenses Reasonable: Generally, this isn’t a major problem because ETFs tend to have expenses that are more than affordable. This is one of the reasons they frequently are preferred for investors who can’t afford individually managed accounts. That is, a financial planner, financial advisor, or do-it-yourself investor can cobble together a portfolio of reasonably diversified holdings, even picking up things like ETFs that focus on individual sectors or industries for an expense ratio of like 0.50% per annum.
      3. Focus on the Long-Term: Ultimately and all else equal, short of some sort of structural problem or other lower probability event, ETFs should perform roughly in-line with their underlying holdings. This means if you hold an equity exchange-traded fund, you might be subjected to fairly horrific swings in market value in any given year. You’ll see periods like 2007-2009 when your ETF holdings are down 20%, 30%, 50% or more on paper. If you can’t handle this, you have no business investing in these securities. Though there is no guarantee the future will look like the past, historically, time has ironed out most of that volatility and investors have been well-rewarded.

      The thing to remember is that ETFs are like any other investment in that they won’t solve all of your problems. They are a tool. Nothing more, nothing less. A gold 401k is unique from other retirement plans in that it allows you to enjoy the numerous benefits of adding physical gold to your account. But if you’re unfamiliar with this type of retirement plan, you may be surprised at how a gold 401k really works.

      The term “gold 401k” is typically used to define an employer-sponsored 401k that has been converted into a gold IRA (also commonly known as a Precious Metals IRA, because it allows other metals, too.)

      A real gold 401k – a 401k plan that allows investments in gold – is considered somewhat of a unicorn in the precious metals industry. While not implausible, it would be extremely rare for a 401k to allow gold, because of the limited investment options for these plans.

      This is why many retirement savers make the decision to rollover their 401k into a gold IRA. But what are the advantages of doing so, and what could it mean for your retirement savings? Let’s a take a closer look.

      Benefits of a gold 401k: rolling over your 401k into a gold IRA
      – Unique protection
      A man holding a golden piggy bankMany people use gold to help protect their retirement savings from a variety of threats: inflation, the declining U.S. dollar, stock market volatility and an uncertain economic future. Each of these threats has the power to eat away at our retirement accounts or reduce our purchasing power when we need it most.

      Gold is unique from the paper assets that fund most 401k plans. Unlike mutual funds, stocks and bonds, gold is a finite resource and an extremely liquid asset that is not controlled by a single government or financial institution. Thus, it’s not subject to the whims and follies of Washington and Wall Street. In fact, gold is considered a hedge against inflation because its value tends to increase as bad monetary policies cause the dollar to decline even further.

      – Diversification
      Since gold can’t typically be added to other retirement accounts, a gold IRA allows for greater diversification – a key strategy for any retirement portfolio. Diversifying your retirement account can help minimize your exposure to losses from a single asset type.

      Remember, a gold 401k is not limited to gold. You can diversify with other precious metals, including silver, platinum and palladium – each of which has its own unique benefits. You can also hold other types of assets, including stocks, mutual funds, mortgages, real estate and others.

      – Wealth preservation
      If you’ve already done your homework, you know that gold has inherent growth potential – it’s been a proven store of wealth for thousands of years. But retirement savers don’t buy gold expecting to get rich – they buy it to protect the money they already have.

      And whether you’re just getting serious about your retirement account, or you already have a sizable nest egg saved up, anything you can do to safeguard your money today for an uncertain tomorrow is probably a smart move.

      – Tax benefits
      A gold-backed IRA offers the unique advantages above, combined with the tax benefits of any other IRA. That’s a key difference between buying gold for physical possession and placing it in a retirement account. By having your gold in an IRA, you can take tax deductions for your annual contributions, or allow the value of your metals to grow tax-free, depending on how you set up your account (Traditional or Roth).

      I hope this clears everything. I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.

      Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out!

      Reply

13. It does sound like China and India are making very wise decisions. I have been reading some of your articles about Previous metals and their values. And if chine keeps purchasing large amounts of gold, it quite the protection against inflation with does sounds very interesting. I would also love to invest in gold if I have the opportunity but I think the prices are quite high now. Is there a point in which it goes down and is the best time for investment?

    Reply

    • Hey Solomon,
      Even though gold and silver have long-lasting qualities most other investments don’t, we all want the best price we can get. It’s only natural, and any good consumer will consider the timing of their buying decisions. It’s a question almost every investor asks: even if I get a good price now, will I be able to get a better price later?

      Well, history has an empirical answer for you.

      When to Invest in Gold and Silver
      I looked at the historical data to see if I could identify the best period in the year to buy gold. Going into my research, I suspected January would be the best month. But what I found was interesting and points to other times when gold is a good investment.
      It’s easy to see silver’s higher volatility. What also sticks out is that historically, silver doesn’t come close to touching the January low at any other time. The other best time to buy silver is in June.

      As with gold, you’ll notice silver typically doesn’t come close to revisiting its prior year price, and that there were certain years when fell below where it started. But the historical data says that on average, investors will get their best price in early January or the prior year.

      Why is January Such a Good Month?
      The main reason that January is a good time for gold investments is that it historically is the best month of the trading year. January is a month where investors often choose to realize stock gains and losses from the previous November or December so they can defer their tax liability. It’s also the month many investors choose to start new investment programs.

      But the “January Effect” alone doesn’t explain gold’s performance. In fact, seasonality studies have shown that gold and silver outperform stocks more than 70 percent of the time in the month of January. Theories range from seasonal optimism to good old-fashioned superstition, but for whatever reason, early January is a great time to buy.

      Best Months of the Year to Buy Gold

      If you missed buying gold in January, when is the next best time to buy? Since 1975, the gold price has dipped the most in March. The daily chart above shows the price in April might be slightly lower, but historical trends show March is the month gold falls the most and is thus one of the best times to buy.

      The India Effect

      There is one other factor to watch in the coming years. India is becoming one of the world’s largest consumers of gold jewelry, and their appetite is having an effect on the market price. Studies by Moore Research Center have shown that gold prices usually rise during the Indian wedding season, which runs from early September until early October. In other words, the best period in the year to buy gold in India is a pretty good time to own it elsewhere.

      The Best Time of the Year to Buy Gold Is…

      There are a couple conclusions we can draw from the historical record for buying gold and silver. Early January, March or April, and late June is when gold and silver tend to be at their lowest prices of the year and are thus good times to buy. The data show that you want to be fully positioned before August.
      You are likely to get a better price this year than next year. Whatever amount you want for your long-term holdings, buy it this year, not next year. In the big picture, however, it’s less about snagging the exact bottom and more about how many ounces you own. Remember, gold is inversely correlated to other investments, including equities, so you want to have a meaningful amount of bullion before a stock market sell-off takes place. If you don’t, the price of gold could very well leave you behind, forcing you to pay not just a higher price but a higher premium.

      7 Signs That Tell You When Is The Right Time To Invest In Gold And Silver

      When to comes to investment, precious metals, especially gold is something that attracts an investor who is looking at highly profitable options. Though it is not wrong that gold fetches high returns, it happens only when you do it right, and doing it right depends on when you’re investing.

      If you are someone who aspires to begin investing in gold, or increase their profits, it is always confusing as to when you should buy. Though it is a little technical, investing in gold is always a very interesting decision to make.

      If you are confused with the big stock & bullion market jargons, here are 7 things you need to take care of. These are 7 signals that tell you what is the right time to buy gold and silver.

      1. When the stock market looks shaky
      So, usually when the other stocks are very unstable, most investors use gold to cushion their losses by investing in precious metals, especially gold. This is the right time to take advantage of the unstable market. However, in order to know when this period of instability comes, you need to keep track of the market and be up to date with stock trends, so you make no mistake.

      2. When gold to silver ratio is low
      Gold to silver ratio means the amount of silver ounces it takes to purchase an ounce of gold. When this ratio is low, it means gold is cheaper than silver, which in turn means that the ratio is gold-friendly. Similarly, when gold to silver ratio is high, it is silver-friendly, so you go short on gold and long on silver.

      3. When gold rate is lower than the rate at which you last bought
      This one comes with a lot of long-term trading experience. The basic logic behind this is the anticipation of a bounce back in gold price after gold falls below the price you last purchased it at.

      4. When gold market is showing a bullish tendency
      If you have been accustomed to the stock market, you would be familiar with the basic terms ‘bull’ and ‘bear’. The same goes for the bullion market as well. So when the market is showing a bullish trend, which means more investors are selling gold. This makes it the perfect time to buy, because this bullish trend will result in a lower rate for you to buy, followed by a bearish trend, when more investors buy gold, thereby increasing the gold rates.

      5. When gold has been on a higher price for a long time
      You know that the future of this is going to be a fall in price after the peak. That will be the time when you go long on gold, making the most of your waiting. This is something that relies partly on market research, past trends, and your understanding of investor behaviour also.

      6. When gold price is at or below the moving average
      For this, you have to first calculate the moving average and compare the price of gold with it. If the price is equal to or lower than the 200-day moving average, it is your time to go long. For this very calculated decision-making process, you regularly need to follow gold prices. One place where you can get LIVE regular updates on gold prices is Augmont Gold App, which you can install on your phone itself!

      7. When to sit back, and hold on to what you have
      It’s not always about trading when it comes to the bullion market. There are also times when you need to have patience, not selling or buying. Those are the times either when the market is too volatile to risk it, or when you’re looking at much bigger profit margins on your investment, which is only possible in the long-term.

      We believe you are well-equipped with some of the big technical specifics of the gold and silver bullion marker, and know when to go long or short. I hope this clears everything. I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.

      Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out!

      Reply

14. Nice article. China has always been investing into Gold because they share different perspective different from the western world. But the trade war between US and China this year has really dealt with the price of Gold. The price of Gold seriously fell this year and only God knows if the price will not continue to fall further next year. 

    But Gold has always been a save haven for investors. Gold will always survive any storm that cones its way. Have also noticed that EUR and Gold goes same direction during bear and bullish period. Also Gold is direct opposite of pair like USDJPY. 

     I really appreciate your highly informative article. 

    Thanks. 

    Reply

    • Hi Tsquare,

      Thanks for the compliment. Now that we’ve fully covered the general topic of precious metals as investments, it’s time to get a little more specific. When we refer to “precious metals”, we are primarily talking about the two metals we sell here at JMBullion.com: gold and silver.

      Gold and silver vary from each other in quite a few ways, so we wrote this article to specify all the differences and highlight the advantages and disadvantages of each metal. The topic we will be covering for gold and silver includes each metal’s price and the price ratio between the two, each metal’s liquidity, storage of the metals, and the markup for buying each metal.

      The Spot Prices of Gold and Silver
      Gold and silver prices move significantly year to year, so the best way to get a general gauge of the prices of these metals is to look at semi long-term charts. Below we have the gold and silver price charts dating from January 2000 to the time of this writing (February 15, 2012):

      Silver has followed a fairly similar pattern, ranging from ~$5/ounce to ~$45/ounce over the past 12 years, with a generally upward trend over the time period. What we can take from the above charts is that gold, as of late, has been significantly more expensive than silver. This price relationship between gold and silver exists despite the fact that there is actually much more above-ground gold in existence than above-ground silver; current estimates place above-ground gold at ~5 billion ounces and above-ground silver at ~450 million ounces (http://silverstockreport.com/essays/Silver_vs_Gold.html).

      The commonly accepted reasons why gold is more expensive than silver, despite its relative abundance, are that gold is more widely used in jewelry, gold is seen as more of an “alternative currency” than silver, and gold is in higher demand by both central banks and individual investors than silver.

      Gold/Silver Ratio

      The ratio between the gold and silver spot prices is called the gold/silver ratio, and is often used by investors to determine if either of the metals is undervalued as compared to the other. The gold/silver ratio measures how many ounces of silver you can buy with one ounce of gold. Below you can see the 10-year gold/silver ratio chart:

      The gold/silver ratio has always leaned in gold’s favor, with the ratio ranging from 32:1 to 84:1 over the last 10 years. The ratio at the time of this writing (February 15, 2012) is roughly 51.6:1.

      Liquidity
      Both gold and silver are extremely liquid assets, viewed by all as a valuable commodity, and even viewed by many as an actual currency. Investors can buy physical gold and silver online 24/7/365 from Regal Assets, as well as countless other precious metal retailers. When you are ready to unload some metal, you can sell back to most online retailers, virtually any pawn, coin, or jewelry shop, on eBay, or to other local individuals.

      The gold and silver markets are about as liquid as it gets, so you never have to worry about supply shortages or getting “stuck” with metal. If we had to give a nod to one or the other, we’d say that gold is the more liquid of the two metals due to its greater demand, as well as supply over silver.

      Storage/Transport

      When it comes to storage and transport, gold definitely gets the nod over silver. You can fit many more dollars worth of gold than silver into the same sized safe or shipping package. Not only is gold worth significantly more per ounce than silver, but also it is the denser of the two metals, making a specified volume of gold worth far more than an equal volume of silver.

      Markup

      The final topic we will discuss is the difference between the retail markup on physical gold and the retail markup on physical silver. As a precious metals investor, you always want to buy metal as close to the current spot price as you can, else the metal price has to increase significantly just for you to break even.

      Now, buying metal exactly at the current spot price is all but impossible for an individual investor, as the companies you buy from make their money on their buy/sell margins, so they have to add a tiny premium just to stay in business (with the exception of junk silver coins, which we discuss in our next article). However, by selecting the right products and quantities, you can make sure the premium you end up paying is as little as possible.

      In general, if you are spending any amount up to $1,500, silver is going to have a lesser markup than gold. At present retail prices, $1,500 would buy you just over 40 ounces of silver. At that quantity, most companies will charge a premium of about $2.25 per ounce. With silver currently sitting at about $33.50/ounce, a $2.25 premium per ounce represents a 6.7% premium over spot.

      As many people know, self-directed retirement plan investors use their self-directed IRA and 401(k)s to invest into real estate, private companies, precious metals and other “non-wall street” investments. I’ve worked with thousands of self-directed IRA and 401(k) investors and as I reflected on the question I realized that there are three primary categories of self-directed investors.

      I. COMPETITIVE ADVANTAGE INVESTORS USING ROTH ACCOUNTS

      These investors like to invest in what they know. They avoid mutual funds and the stock market because they have a competitive advantage over other investors and usually have a special expertise over other investors. Because they have a special expertise, they often expect to make significant returns and therefore will frequently use Roth IRA or 401(k) accounts for their investments. Let me offer a few examples from actual un-named clients of mine that all resulted in 7 figure returns.

      Software Engineer – Software Engineer who used Roth IRA funds along with some other technology savvy investors and funded an LLC. This LLC then engaged and paid some un-related developers to develop new programming that the Roth IRA investors knew would have value. The LLC owned by the Roth IRAs then in turn negotiated a royalty agreement with an un-related company who wanted the technology to be used in a specific software program that it would sell commercially. The LLC receives royalties on the use/sales of the product. The income goes back to the Roth IRAs tax free.

      Real Estate Developer – Real estate developer and investor personally develops millions of dollars of real estate a year and decides to use his Roth IRA to fund a specific real estate investment. Real estate developer converted a couple hundred thousand dollars of traditional IRA funds to Roth IRA funds so that he could acquire a specific piece of real estate which was to be held and later sold. The developer know the land would have significant value over the next few years as a result of zoning law changes and planned development from neighboring property. The Roth IRA paid for some paper development zoning changes upon acquisition and then held the property as an investment for a few years. The property later increased nearly 10 times in value as neighboring development took off.

      Bio-Tech Start-Up Entrepreneur – An experienced bio-tech investor had an opportunity to invest at early stages in a patent that was going to be the basis for a new bio-tech start-up. The investor used Roth IRA funds and funded additional research costs in exchange for an interest in the patent that was being developed by un-related researchers for commercial purposes. The patent was the basis of value for a start-up venture and the Roth IRA received a significant share of the company in exchange for the patent interest.
      This group would also include former Republican Party Nominee Mitt Romney and famous Venture Capitalist Peter Theil whose large self-directed IRAs have been reported on extensively.

      II. SEEKING INCREASED RETRUNS AND TIRED OF POOR FUND OR STOCK PERFORMANCE

      This is the largest group of self directed IRA investors. These investors have seen stagnant performance, losses, or ridiculous fees eat away at their retirement account. They are generally tired of the ups and downs of the stock market and want stable investments they can actually understand. This group usually invests in real estate, in its various forms, because it can offer more stable returns and because the investor can actually understand the investment (something they can’t do from a 100 page mutual fund prospectus).

      Retired Corporate Manager Becomes a Real Estate Investor – A retired real estate investor client of mine rolled over former employer 401(k) funds to a traditional self-directed IRA. This investor is in their early 60’s and uses the income from her retirement account to live on. She invested her traditional IRA into a modest 3 bd 2 bth single family rental. The property has no debt and the cash-flow goes back into her IRA. She routinely takes distributions of the cash-flow to supplement her retirement income. Since this is a traditional IRA she is taxed on the distributions (as she would with any traditional IRA) but she is not reducing the actual investment value of the IRA as she only distributes the cash-flow.

      Real Estate Broker Loans Solo 401(k) Funds to Other Investors – This real estate broker uses his self-directed 401(k) to loan money to real estate investors buying investment properties. Some people refer to these loans as hard money loans or as trust deed loans. The 401(k) will loan funds to other real estate investors in situations where banks are typically un-willing to lend. The real estate broker lends to properties in markets that he knows and receives a first or second place deed of trust (mortgage) securing his loan. The typical loan terms are 10% annual interest with 2 points. This self-directed investor knows real estate and has been able to receive annual returns far in excess of the stock market.

      III. HARD ASSETS OVER PAPER ASSETS

      These investors value hard assets over paper assets. They are generally disillusioned by the stock market and feel that price to earnings ratios of publically traded companies have sky-rocketed without regard to company performance. They tend to believe that stock prices have nothing to do with actual value but instead are propped up by the Wall Street money machine. They’ve usually had retirement accounts for years and have seen their account go through the dot-com bubble and the financial crisis. They have little faith in paper assets and desire to move to a self-directed account at a time when they believe the market is going to collapse. Most of these investors will invest in precious metals or real estate.

      Retired Corporate 401(k) – A retired corporate employee rolls over a portion of his prior employer’s 401(k) to a self-directed IRA and buys actual precious metals that are stored at a depository for his IRA. The precious metals are not an ETF or a fund but are actual physical gold bullion that meets the retirement plan rules for ownership by an IRA. Common precious metals would be gold or silver bullion as well as specifically approved American Eagle coins.

      Working Corporate Employee with Prior Employer 401(k) – A 50 year old corporate employee uses her present employer retirement plan for standard mutual fund investments based on risk factors and tolerances for investors her age. Her current employer’s plan cannot be self-directed but she rolls over a prior employer’s 401(k) to a self-directed IRA and uses that self-directed IRA to invest in real estate investments with other like-minded investors.

      I hope this clears everything. I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.

      Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out!

      Reply

15. Hi Uriah! Nice article about investing in gold by India and China, you described it really well. Sometimes I already got the feeling that in Western countries gold as investment option is not so popular anymore as it was shown in your article. If you look globally, the investment of gold is quite complex topic, you need to understand particular countries policy and their economy. Actually it would be good idea to invest money in gold, maybe it is a bit old fashioned but it`s not risky and it still has a bright future. Thanks for sharing with us!

    Reply

    • Hey Luke,

      Seeing today’s conditions, it indeed is a great idea to invest in Gold and precious metals. Gold has been a substance of value for millennia, and remains valuable today with the price of one ounce of the precious metal surpassing $1,300. Many investors seek to hold gold as a store of value and as a hedge against inflation, but it can be difficult and cumbersome to hold large quantities of physical gold. Security efforts are often put in place to prevent its theft which can also be expensive. Fortunately, there are a number of ways to gain exposure to movements in the price of gold without physically holding it. (For more, see also: 8 Reasons To Own Gold.)

      Gold Receipts

      It has been speculated that the earliest form of credit banking took place via goldsmiths who would store the gold of members of the community. In return, those depositing gold would receive a paper receipt which could be redeemed for their gold at some point in the future. Knowing that at any given moment only a small fraction of those receipts would be redeemed, they could issue receipts for a larger amount of bullion than they actually kept in their coffers. And thus a fractional reserve credit system was born.

      Today, it is still possible to invest in gold receipts which can be redeemed for physical gold. Although most government mints do not deal privately with gold any longer, some enterprising private “mints” do. For example, the Royal Canadian Mint (not affiliated with the Canadian government) offers electronic tradable receipts (ETRs) backed by their vaulted gold, as well as collectible coins minted from precious metals. These ETRs can trade on an exchange or change hands privately and track the price of the gold that backs it.

      Derivatives

      While receipts are backed by gold and can be redeemed for it on demand, derivatives markets use gold as the underlying asset and are contracts that allow for the delivery of gold at some point in the future. A forward contract on gold gives the owner of the contract the right to buy physical gold at some point in the future at a price specified today. Forward contracts are traded over-the-counter (OTC), and can be customized between the buyer and seller to arrange such terms as contract expiration and nature of the underlying (how many ounces of gold must be delivered and at what location).

      Futures contracts operate in much the same way as forwards, the difference being that futures are traded on an exchange and the terms of the contracts are predetermined by the exchange and not customizable. Because forwards trade OTC, they expose each side to credit risk that the counterparty may not deliver. Exchange traded futures eliminate this risk. Often times, forward or futures contracts are not held until expiration and so physical gold is not delivered. Instead, the contracts are either closed out (sold) or rolled over to another new contract with a later expiration. (For more, see: Trading Gold And Silver Futures Contracts.)

      Call options can also be used to gain exposure to gold. Unlike a futures or forward contract which gives the buyer the obligation to own gold in the future, call options give the owner the right but not the obligation to buy gold. In this way, a call option is only exercised when the price of gold is favorable and left to expire worthless if it is not. In other words, the price paid for the option (known as the premium) can be thought of as a deposit for the right to buy gold at some point in the future for a price specified today (the strike price). If the actual price of gold rises above that specified price, the owner of the option will make a profit. If, however, the price of gold does not rise above the strike price, the buyer of the option will lose the premium – like losing a deposit.

      Gold Funds

      Derivatives markets are efficient ways to gain exposure to gold and are generally the most cost-effective, as well as provide the greatest degree of leverage. For the average investor, however, derivatives markets are unaccessible. Instead, a typical investor can gain exposure to gold via mutual funds that buy gold, or using gold ETFs which are traded like shares on stock exchanges . The SPDR Gold Trust ETF (GLD) is popularly used; the investment objective of the Trust is for its shares to reflect the performance of the price of gold bullion. There are also leveraged gold ETFs that provide the owner with 2-times long exposure, ProShares Ultra Gold (UGL), or alternatively 2-times short exposure, Goldcorp (GG).

      Gold Mining Stocks

      While it may seem like a good way to gain indirect exposure to gold, owning the stocks of companies that mine for and sell gold, such as Barrick Gold (ABX) or Kinross Gold (KGC), may not give the investor the exposure to the precious metal that they wanted. The reason for this is that the majority of gold companies are in the business to make a profit based on the cost to mine for gold versus what they can sell it for. They are not in the business of speculating on its price fluctuations. Therefore, most gold companies hedge their exposures to gold price risk in derivatives markets, and owning shares of these companies mainly gives the investor exposure to the operating profit margins of that company. Still, if an investor wants to own gold stocks to diversify an equity portfolio they may want to consider a gold miners ETF such as the Market Vectors Gold Miners (GDX).

      Owning gold can be a store of value and a hedge against unexpected inflation. Holding physical gold, however, can be cumbersome and costly. Fortunately, there are several ways to own gold without keeping a physical stash of it. Gold receipts, derivatives and mutual funds/ETFs are all viable strategies to gain such exposure. Shares of gold mining companies, while seemingly a good alternative on the surface, may not give the gold exposure to investors that they want since these companies usually hedge their own exposure to price movements in gold using derivatives markets.

      How to Invest in Gold the Right Way

      Gold has been a store of value for thousands of years, but the idea of gold as an investment generates plenty of controversy. Warren Buffett has argued that gold is far inferior to stocks as an investment, but others note that the yellow metal has risen in value over time and has a safe-haven status to protect against loss of confidence in financial systems. If you want gold as part of your investment portfolio, you can pick from several smart gold investing choices, each of which has different investment characteristics. Below, we’ll go through five ways you can invest in gold and give you the information you need to decide the best one for you.

      1. Physical gold bullion
      For many gold investors, there’s no alternative to having actual physical metal in your possession. A variety of gold coins and bars are available from government mints and private sellers, and you can typically purchase them from coin dealers and other precious-metals retail specialists.

      The biggest benefit of physical gold is that you own it directly, without any intermediary between you and your investment. Yet physical gold also has challenges, as you have to find a secure way to store it, which can be costly. Also, most dealers charge premiums to the bullion’s value when you buy coins or bars, and you might receive less than the prevailing gold price when you sell.

      2. Gold exchange-traded funds
      For those who don’t need to hold their gold directly, gold ETFs offer more liquidity. SPDR Gold Trust (NYSEMKT:GLD), for instance, has shares that represent a bit less than a 10th of an ounce of gold. The ETF owns physical gold and stores it, acting as support for the value of the ETF shares.

      The benefit of gold ETFs is that you can buy or sell shares anytime the stock market is open, and the transaction costs are a lot lower than with physical bullion purchases and sales. However, some gold investors don’t like ETFs because they are still a financial asset and give you no actual claim to the physical gold that the ETF owns.

      3. Gold futures contracts
      If you want to have control over a lot of gold, futures contracts are a low-cost alternative, albeit with special risks. Gold futures contracts at the New York Mercantile Exchange come in units of 100 ounces, worth almost $130,000 at current prices. However, to open a position, all you need is a much smaller initial margin investment, and you also have to maintain a minimum margin level. Currently, the maintenance margin on the NYMEX is $4,200, or just 3% of the value of the contract.

      As you can see, margin offers considerable leverage for investors. But you’re still responsible for losses up to the full value of the futures contract, and you can be required to make additional cash deposits to cover losses. For some, the potential rewards outweigh the risks.

      4. Gold mining stocks
      The problem with directly investing in gold is that the metal doesn’t produce any income. Gold mining stocks, however, are active businesses, and although their prospects are linked to gold prices, mining companies can also rise when they have fundamental success in their operations. Moreover, most mining stocks go up more sharply than gold during periods of rising prices.

      However, gold mining stocks have added risks beyond bullion investments. Even if gold rises, a mining stock can plunge if a catastrophic event happens to the mining company’s business, such as a mine accident or the failure of a promising exploratory effort. Moreover, when gold falls, some mining stocks have even greater downward volatility.

      5. Gold streaming companies
      One hybrid way to invest in gold is to buy shares of gold streaming companies. These companies don’t mine gold, but they provide financing to mining companies in exchange for a share of their gold production.

      The benefit of streaming companies is that they have exposure to gold prices but also get a stream of income from their financing arrangements. For instance, streaming company Franco-Nevada (NYSE:FNV) has steadily raised its dividend for nearly a decade, and although Franco-Nevada’s current yield of around 1.3% is less than the market average, it’s quite a bit better than what most gold mining stocks pay. Similarly, Royal Gold (NASDAQ:RGLD) is a competitor to Franco-Nevada and has made smart gold streaming deals of its own. When gold falls, shares can go down, but poor industry conditions can also bring new opportunities for potentially lucrative financing deals that can be more advantageous for Franco-Nevada, Royal Gold, and other streaming companies.

      There are many ways to invest in gold and which one is best for you depends on your particular goals. By knowing the differences between these popular gold investments, you’ll be able to invest smarter and find the right way for your situation.

      I hope this clears everything. I’ve seen the “Gold Investment Kit” from Regal Assets and the advice and thorough coverage of fiat currency and the importance of investing in precious metals, and particularly why Regal Assets is better than its competitors from their video and pages. You can sign up for the Gold investment kit for long term gains.

      Regal Assets – http://bestiraoptions.com/best-gold-ira-options/top-10-gold-ira-companies/regal-assets – our #1 recommendation for storing your physical gold and precious metals in an IRA – do check them out!

      Reply