The popularity of precious metals as investments never really fades; it just goes through high and low periods. Right now is a high time, and it is no coincidence that the United States economy is also uncertain.
The same was true historically, when fears for the dollar led to gold hoarding. In 1933, the United States Government even confiscated gold from the public in exchange for bills, an exchange which Americans in the know fight hard to prevent in the modern day.
Fears about the Economy
To understand interest in precious metals, one must understand the context. Global crises such as natural disasters, wars, and political upheaval make people wonder if another world war looms. When there is war, there is financial suffering.
Countries pour all of their resources into funding the war effort and sanctions interrupt the flow of commerce, including foreign foods some countries rely upon. Meanwhile, those families and groups with holdings in precious metals have historically survived, and done so more successfully than those without.
There was actually a company called Precious Metals Financial operating from Sherman Oaks, California. The company was BBB-accredited in 2011, but they have ceased trading.
Their title stated their purpose, and a lot of companies play with variations on the same idea: precious metals, gold, silver, gold and silver, liberty (as in the Liberty coin) appear in many company names. Sometimes they contain “IRA” to prompt a second look at IRA investments and how precious metals can be used to improve one’s retirement outlook (theoretically).
It is also extremely important to balance both sides of the argument: even investment could potentially lead to losses if you buy in when the premium is high and it falls. Spooks want consumers to be afraid: fear sells bullion. Intelligent investment companies offer the facts only.
Why are precious metals so important to investors right now? Is their influence in the mainstream or are gold, silver, palladium, and platinum niche commodities? Can they be used to back IRAs and 401k plans, self-directed or otherwise?
If customers listened to investment experts, their investment portfolios would include up to 20% precious metals, no less than 7% (depending on whose opinion you follow). The point is that some portion of one’s investment profile should include one of the four metals listed above because they are reliable in ways stocks and bonds are not.
Why Invest in Precious Metals
For one thing, they are real currency, always worth their own weight (a value which is easier to establish with silver and gold than with platinum and palladium, known more for their industrial purposes than as money).
While inflation will cause one to pay increasingly large sums of money to buy the same thing until the dollar ceases to be worth much of anything, gold and silver are more than paper. Every economy recognizes gold even when they fail to acknowledge the US Dollar.
As countries’ industrial efforts grow, so does their need for silver, platinum, and palladium — all rare resources, and becoming rarer all the time. If one can maintain a supply of one or a mixture of these four metals and it is secure, she holds the key to survival when the economy is suffering and can support her family.
There are two basic ways to invest in precious metals: one being to store it privately (at home or in a privately chosen secure location); the other as part of an investment plan, in which case metals will be held in an approved location.
An IRA or 401k is administered by a third-party who does not own the gold but acts as go-between and adviser, ensuring clients make only allowable contributions and withdrawals and accept distributions no later than the IRS deems fit (aged 70 ½, unless one holds a ROTH IRA which can remain undistributed). Employees and IRA account holders sometimes have too little say in what funds or commodities they should purchase.
For some people, it is unacceptable to own gold and yet not have physical access to it at all times, or being told how and when to add holdings. The administrator’s favorite stocks might not sound promising. Although they might be subject to some taxation and incur substantial risk, clients would rather hold savings privately or at a privately chosen depository.
All Precious Metals: Created Equally?
An IRA can be used to invest in some but not all metals. The precious metals named above are the only ones currently approved. Only bullion and bullion coins are acceptable.
Numismatic coins cannot be added to an IRA because, though they might be worth more than their face value in years to come, their gold purity is suspect. Also, many countries’ gold bullion falls below COMEX-approved ratings, so only specifically allocated coins are approved for inclusion in an IRA (ROTH or Traditional).
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