The discussion of gold and silver was mainly heard among miners, sunken treasure divers, coin collectors and wealthy governments. Today, it is quickly becoming more main stream.
Three camps of people are currently discussing and purchasing precious metals: investment speculators, risk removers, and those preparing for economic collapse. All three have found that physical gold or silver offer something they are not able to get anywhere else. This article will focus on the second camp, risk removers.
If someone believes in diversification and wants to spread their risk, not only should they consider metals as another asset class, they need to consider currency risk. How many of your retirement investments are measured in US dollars? What happens to these accounts if the dollar falls quickly?
"Barring a miracle, there will be a fierce storm of inflation sometime in the next few years and it will wipe out a big chunk of the national debt, along with the debts of individual citizens, and the savings of others." - Michael Kinsley Jan 19, 2012 Bloomberg
Gold tends to outperform other investments during periods of political or economic tension. The same factors that cause other investments to suffer will traditionally cause the price of gold to rise. Many financial experts recommend maintaining 10%-20% of your portfolio in precious metals to ensure sufficient diversification and to provide a hedge against inflation and market downturns. Recent trends and events, however, might indicate an increase in these percentages.
To accomplish this diversification, many will place gold and silver inside an IRA or ROTH IRA. Due to the Taxpayer Relief Act of 1997, investors can add a wider variety of precious metal bullion to their IRAs. This is accomplished through use of a self-directed IRA and a safe depository that only the IRA trustee may access on your behalf. With capital gains rates likely to increase, investing in metals within a ROTH IRA could be a way to reduce currency risk, diversify your portfolio and get tax free gains!
Regardless of which camp a person falls in, a purchase should be made carefully. Metal dealers have not been highly regulated and they are not all the same. In Austin Texas, a commemorative coin marketer has agreed to pay up to $5 million in restitution and comply with the Texas Deceptive Trade Practices Act.
Today a dealer must comply with the Federal Bank Secrecy Act (BSA), Patriot Act, Office of Foreign Assets Control, and others. Without face to face business transactions verifying a client's Government issued photo I.D., SS number and using BSA software, the most popular online precious metal dealers are in violation of these Federal laws. Things to look for in a dealer include: real time transactions, knowledgeable, easily facilitates IRA transactions, security, confidentiality, compliance with face-to-face transactions, and a buy-back program. Look out for hard sell tactics, churning your holdings, and leveraged or margin accounts. The Federal Trade Commission offers this advice:
"Check out the company by entering its name in a search engine online. Read whether other people have something to say about their experiences with the company. Try to communicate offline if possible to clarify any details. In addition, contact your state Attorney General ( http://www.naag.org ) and local consumer protection agency ( http://www.consumeraction.gov )... "
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