Reallocation of Precious Metals


reallocation of precious metals gold bars hero image

NOTE: The following information is not intended to be for educational purposes only and not investment advice. For specific investment allocations, speak to a financial expert.

For decades investors have worked to craft the perfectly diversified retirement portfolio. For a long time, this simply consisted of a mix of stocks and bonds. But today, it’s clear that a well-diversified portfolio also includes its share of precious metals. Fortunately, reallocating capital inside of an IRA or other retirement account is easier than ever.

Why diversify with metals?

Precious metals are a great way to diversify your retirement portfolio. For decades, investors were convinced that the ideal investment strategy consisted of 60% stocks and 40% bonds. However, this portfolio allocation strategy is being rethought in recent years. One main reason for this is a reduction in bond yields. Historically, investors could rely on income from bond yields in economic recessions or downturns to weather the storm until markets corrected. This type of low risk — or risk-free in the case of government bonds — income is no longer available in the low-interest-rate environment seen in recent times. With bond yields remaining this low for years, investors have had to pivot to alternative assets for diversification and upside potential.

A near-zero percent interest rate policy has led many investors to reconsider the typical investment allocation strategy and opt to include alternative investments for a well-diversified retirement portfolio. Physical precious metals have become one of the alternative investment options for investors. While it is possible to purchase precious metals ETFs or mining stocks, the only way to truly gain direct exposure to this alternative asset class is to purchase them directly. Precious metals — such as gold, silver, platinum, and palladium — hold their value quite well in most economic conditions and tend to pace, if not outpace, inflation. Their stability makes them an excellent diversification option to hedge against recessions and economic uncertainty.

Correlation with Other Assets

Yet, within precious metals, there are a wide variety of investment options to choose from. Let’s look at the different precious metals investment options available for investment into a retirement account.

 

Your Physical Precious Metals Investment Options

Bullion vs. Proof

Before we get into the different types of precious metal options for your IRA, it’s essential to understand the difference between two important types of precious metals produced around the world: bullion and proof. Bullion coins are high-quality and generally intended for investors rather than collectors. However, bullion coins will not have the mirror-bright finish or the crisp lines of a proof coin. Depending on the mint, bullion may or may not be sold directly to the public and instead sold through dealers located throughout the country. For instance, the U.S. Mint doesn’t sell bullion directly to consumers who must purchase the precious metals from dealers, while the Perth Mint sells directly to consumers.

Proof coins are not created for regular circulation and instead produced at the highest possible quality and intended for collecting and saving. Proof coins are sold directly by the US Mint to investors, collectors, and dealers who generally store them in protective cases within safes or depositories.

Generally speaking, proof coins may benefit from additional collectible value. Bullion coins, on the other hand, are generally prized for their precious metal content only. You can think of proof coins as limited-edition collectibles, with the potential for a secondary market value higher than their metal content. Bullion is more like a “standard version” which is both purchased and priced primarily for its precious metal content.

Goldgold American eagle coins 1-10 ounce

Thanks to the Taxpayer Relief Act of 1997, investors were given access to invest in physical precious metals, including gold, in a self-directed IRA (SDIRA). When it comes to gold coins, your SDIRA can include approved Treasury-minted coins. These coins can be any size, including one ounce, one-half ounce, one-quarter ounce, or one-tenth ounce.

The following are examples of gold coins that are approved for self-directed IRA investments:

 

Gold Proof Coins Gold Bullion Coins
  • American Gold Eagle Proofs – A limited-edition coin sourced directly from US gold
  • >American Gold Eagle – Comprised of 91% gold and issued in denominations of 1/10 oz, 1/4 oz, 1/2 oz, and 1 oz
  • Canadian Gold Maple Leaf – A 24-karat coin from the Royal Canadian Mint with .9999 purity
  • Gold Twin Maples – Weighs 1/4 oz and .9999 purity, the Royal Canadian Mint only began minting this coin starting in 2017.
  • American Buffalo – A 24-karat bullion coin with .9999 purity
  • Austrian Gold Philharmonic Coins – Weighing 1 troy ounce and at .9999 purity, these coins feature orchestral instruments on their engraving
  • Australian Gold Kangaroos – These 1 oz coins featuring the image of a kangaroo come in at .9999 purity

 

As for gold bars, the US government has imposed some restrictions for these products to be investable inside an IRA. Gold bars must be produced by an NYMEX or COMEX-approved refinery or the U.S. national mint to ensure authenticity. Additionally, gold bars and coins must meet the minimum purity requirements of .995 purity to be deposited directly into an SDIRA.

NOTE: American Eagle bullion and proofs, at 0.9167 purity, are the only exception to the 0.995 purity minimum.

Silver

Silver Proof Coins Silver Bullion Coins
  • American Silver Eagle Proofs – .999 pure coins
  • American Silver Eagle Bullion – The official silver bullion coin of the US
  • Canadian Silver Maple Leaf – The purest minted silver coin in the world, at .9999 purity
  • Canadian Silver Twin Maples – A 2 oz silver coin with .999 purity
  • America the Beautiful – The largest US-minted silver bullion coins, weighing 5 oz and comprised of .999 fine silver
  • British Silver Britannia – Issued by the Royal Mint since 1997, these silver coins contain 1 troy ounce of silver along with fractional sizes as well
  • Austrian Silver Philharmonic – Introduced recently in 2008, this coin made of 1 troy ounce of silver quickly became one of the world’s top-selling bullion coins

 

Silver bars have similar requirements to their gold counterparts for IRA inclusion. The purity requirements are a bit higher, with a minimum .999 pure silver bar necessary. Also, silver bars must be produced by an accredited facility. Acceptable accreditations include: COMEX, LME, LBMA, LPPM, TOCOM, NYMEX, NYSE/Liffe/CBOT, and ISO-9000 or a sovereign mint like the Royal Canadian Mint.

Platinum and Palladium

Platinum and palladium are two other precious metal options for your IRA. These metals do not carry the same trading volume or liquidity on the market as gold and silver. However, they provide another means of diversifying your retirement savings.

Some examples of platinum and palladium-approved coins that can be invested in an IRA include:

  • American Platinum Eagle – The official platinum bullion coin of the United States, these coins are legal tender, weigh 1 troy oz, and have a purity of .9995
  • Canadian Palladium Maple Leaf – Weighing 1 oz, these coins are .9995 pure and have a face value of $50 CAD

As for bars, IRA-approved platinum and palladium bars must have a minimum of .9995 purity. Palladium is privately minted, and in order to be included in an IRA, it must come from an NYMEX or COMEX-approved facility.

How to Reallocate Precious Metals into Your Portfolio

Outside of an IRA, reallocating precious metals into your portfolio will likely trigger a taxable event. That’s because selling one investment to buy another is a taxable event in a non-retirement account. Taxes are a significant factor in traditional investment accounts and can drastically change your wealth generation and growth.

Instead, you can rebalance precious metals within your IRA easily and without any tax consequences because of the tax-advantaged nature of retirement accounts. Therefore, you can reallocate positions as often as you’d like without having to worry about the tax consequences. If you are curious about reallocating your precious metals within your IRA, a Birch Gold Group Precious Metals Specialist can help with this process.

Alternatives

Instead of purchasing precious metals outright for your retirement account, there are other ways you can gain exposure to these commodities. While you won’t own physical gold, silver, or other precious metals directly, you do stand to benefit from their value through these investments. These include:

  • Precious Metals Miner Stocks – Companies that extract precious metals from the Earth and profit from the proceeds
  • Precious Metals Royalties Stocks – Companies that provide capital to miners in exchange for a share in the revenue or precious metals that are mined
  • Precious Metals Bonds
  • Precious Metals Mutual Funds – Invests in a group of precious metals companies and actively managed by professional investment managers
  • Precious Metal ETFs – Funds that are traded over-the-counter and hold precious metals
  • Precious Metal-backed Cryptocurrency – Digital assets tied to the price and value of precious metals

stock bond financial print outsAll of these alternative investment options can be bought within an IRA. But remember, they aren’t the same as reallocating directly into physical precious metals themselves. Choosing any of these investment options means you won’t own any physical precious metals in your IRA. Furthermore, these “paper gold”-type investments are subject to a number of risks and downsides, including counterparty risk, tracking errors, management fees, trading premiums, and so on. You can learn more about the risks of paper gold here.

How Should You Allocate Your Precious Metals Portfolio?

At Birch Gold Group, we can’t give you investment advice. But we can help you to better understand precious metals, their place in a well-diversified portfolio, and how to reallocate your capital into precious metals if you choose to do so.

Whether you are interested in rebalancing into gold, silver, or other precious metals, doing so inside of an IRA account is not only easy, it provides the most optimal tax benefits since you don’t pay any taxes for reallocating investments like precious metals within an IRA. There are even a wide variety of metals and products to choose from within precious metals themselves.

The Precious Metals Specialists at Birch Gold Group are ready to help you reallocate your IRA into precious metals today.