A gold investment can be a great way to not only diversify your portfolio, but also increase its growth potential and shield it from the effects of an unstable economy. And while the process of investing in gold is quite simple, it’s important to understand your options first.
With a little bit of homework, you can be sure that your gold investment is right for your needs and that you’ll be able to experience all the unique benefits of this valuable precious metal.
To help get you started, let’s cover some of the basics of investing in gold and take a look at some key questions you’ll need to consider along the way.
Is a gold investment right for you?
People invest in gold for numerous reasons. If you’re still on the fence about whether gold is right for you, consider some of the benefits:
Many investors purchase gold simply for diversification – a crucial strategy for all types of investing. Adding precious metals like gold to your portfolio can help minimize your exposure to losses when other types of investments go south.
Avoiding a volatile stock market.
For many, especially those who are nearing retirement, the stock market has become too much of a gamble. This is why gold IRAs have become increasingly popular – so that investors’ retirement savings are not tied exclusively to paper stocks, mutual funds and bonds, which are all subject to stock market volatility.
Hedging against inflation and the declining dollar.
Over the past decade, the United States has continued to print more money in an attempt to stimulate the sluggish economy. But these actions erode the dollar’s value, along with Americans’ purchasing power. On the other hand, these same actions tend to increase the value of precious metals, which is why many people buy gold to preserve their wealth in spite of Washington’s potentially disastrous monetary policies.
Paper currency and stocks are essentially only backed by the faith we put into them. Their value is influenced by so many different factors that are beyond our control. Gold, however, has inherent growth potential because it is a finite resource. Even though gold hit historic highs in recent years, many analysts believe we are nowhere close to a “peak.”
Paper gold vs. physical gold – Which is better?
Many inexperienced investors make the mistake of investing in paper gold, such as a gold ETF (exchange-traded fund), because it seems “simpler.” After all, you can purchase and own shares of these funds in just seconds by using any online broker.
However, this may not be the best strategy for your financial future.
Purchasing physical gold – either for personal possession or placement in a Precious Metals IRA – has several advantages.
– You own the actual gold. Physical gold investments are yours to keep, even if they’re being stored by your IRA custodian in a metals depository. When you buy paper gold, however, you essentially just own shares of a fund. Redeeming those shares for physical gold is a complex and difficult process with strict eligibility requirements.
– Physical gold has unique value. The pricing of paper gold is based on a different set of factors in the market. Similar to stocks, the price of a gold ETF can go up or down based on how many shares of the fund are being bought or sold at any given time. While the value of paper gold is somewhat correlated with the price of physical gold, gold ETFs are subject to their own market forces, which are often separate from those that affect the price of actual physical gold.
– Real, tangible protection. In times of economic crisis, don’t discount the ability of governments and banks to put immediate restrictions on redeeming paper gold for physical gold, even if you were previously eligible to do so. With physical gold, you can rest easy knowing you have the actual asset “in your hands,” rather than holding a certificate that may prove to be virtually worthless.
Types of physical gold investments
When investing in physical gold, you’ll have two primary types to choose from, each with its own individual options:
Bullion: Minted by governments around the world, these nearly pure gold coins get their value primarily from their gold content and weight, making them extremely liquid assets. Two popular examples include the American Eagle and Canadian Maple Leaf bullion gold coins.
Proof: Many governments produce immaculate-quality versions of their bullion coins in limited quantities each year. These “proof” coins get their value not only from their gold content, but also from their age, condition and scarcity.
Numismatic: Minted prior to 1933, these coins are highly sought after for their rarity and gold content, both of which contribute to their value.
Gold bars are another form of bullion, whose value is determined by gold content and weight.
Gold IRA – a gold investment for retirement
Certain types of gold are also approved for placement in a Precious Metals IRA – a popular option among those who want to combine the benefits of gold investing with the tax benefits of an individual retirement account.
Here’s what you need to know about opening a gold IRA:
Eligibility: A gold IRA is subject to the same eligibility requirements, contribution limits and distribution rules of a conventional IRA. Review the Internal Revenue Service’s (IRS) website to see the current eligibility requirements for self-directed IRAs, or speak to a tax professional.
Approved gold: Only certain types of official, government-minted gold bullion having a 99.5% purity are approved for placement in an IRA – with the exception of the Gold American Eagle (which has a 91% purity).
Rollovers: If you have an existing IRA, or a 401k with a previous employer, it may be eligible to be converted into a gold-backed IRA.
Gold possession: If you buy gold for an IRA, it must be stored by your custodian in an approved metals depository. Taking possession of your gold is considered a distribution (similar to withdrawing funds from a conventional IRA). If you are not placing your gold in an IRA, you have the flexibility of taking immediate possession to store in your home or keeping it in a depository for additional protection against theft or misplacing the gold.
Other investments: Gold IRAs are not limited to gold investments – you may also add stocks, mutual funds, real estate and a number of other assets, as approved by the IRS.
Take the first step – choose the right gold dealer
Choosing the right dealer is a crucial first step to investing in gold. Regardless of whether you’re investing for physical gold possession or for retirement purposes, it’s important that you have the expertise of an experienced precious metals company to assist you.
Birch Gold Group is a leading gold dealer that specializes in gold-backed IRAs. We sell all the most popular forms of gold, as well as other precious metals, and we can assist you through each step of the gold investment process.
Buying gold from Birch Gold Group is simple and hassle-free. Our experienced Precious Metal IRA Specialists can help you determine the right metals for your needs and goals, and we’re happy to explain the benefits of each option. We proudly maintain an A+ Rating with the prestigious Better Business Bureau and an industry reputation for integrity and superior customer service.
Jump start your gold investment today – click here to request a free investment kit, or call (800)355-2116 to speak to one of our specialists now.