Federal Reserve Chairman Ben Bernanke announced a third round of Quantitative Easing (QE3) in an attempt to stimulate the economy and create more jobs. Owners of gold were among the cheerleaders believing that QE3 is nothing more than the government printing money, and inflation will be sure to follow.
The price of gold has gone up over the past couple of years and many people believe it is a better investment for retirement than stocks. While we don’t advocate the purchase of gold as an investment, it is important to carefully follow the rules for owning gold in a retirement account.
An IRA may not invest in collectibles like precious metals and art. There is a specific exemption allowing IRAs to hold certain US minted coins and gold bullion suitable for regulated futures contracts. Not all IRA custodians will hold physical gold, so you need to verify this in advance and exercise due diligence to make sure they are a reputable custodian. There are usually ongoing costs associated with the storage of gold. Make sure you know what fees will be involved.
There are other ways to participate in gold without owning the physical metal. Stock of gold mining companies and precious metal mutual funds may be able to provide the benefit of owning gold without the complication of storage issues. These positions may not follow the actual price movement of the metal. Another way to participate is to own exchange-traded funds (ETFs) that invest in physical gold. Gold ETFs should mirror the price of the metal without actually owning it. They carry the same tax consequences of gold ownership when held outside of an IRA. However, the IRS has issued several opinions that give the indication they will not consider the ETFs to be a collectible that is prohibited from being held in an IRA.