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A gold IRA is an individual retirement account with a twist. Unlike a conventional IRA, this type of IRA allows you to hold IRA-eligible gold in your retirement account.
Gold and other precious metals like silver, platinum, and palladium have several advantages over traditional investment vehicles or “paper assets” such as stocks, mutual funds, or real estate.
One of the most notable benefits is that tangible metal wealth can provide a hedge against dollar fluctuations. Gold, in particular, has an inverse relationship with the dollar’s value. When the value of the dollar decreases, the value of metal tends to go up, and vice versa.
According to Investopedia, the price of gold grew by 330% between 2005 and 2020. Over the same period, the Dow Jones Industrial Average (DJIA) increased by just 153%. The metal also outperformed the DJIA in 2021 and 2022, indicating that it may be a good hedge in periods of geopolitical and economic uncertainty, rising inflation, and asset volatility.
Market analysts also expect gold prices to increase considerably over the next decade, as humankind will have mined all of the planet’s deposits in the next 20 or so years.
All of that makes this metal a potentially good investment to diversify your retirement portfolio. However, if you also want to receive the tax benefits of holding your gold in an IRA account, you must buy IRA-eligible gold. Read on to learn everything you need to know about purchasing and storing IRA-approved gold investments.
What Gold Bullion Are IRA Approved?
Gold IRAs allow you to hold IRA-approved precious metals in bullion coins or bullion bars. IRA-eligible gold is gold that meets the purity and other standards of the Internal Revenue Service (IRS) for inclusion in self-directed IRAs.
Examples of IRA-eligible U.S. and foreign coins include:
- American Gold Buffalo Coins
- American Gold Eagle Coins
- Australian Gold Kangaroo Coins
- Austrian Gold Philharmonic Coins
- British Britannia Gold Coins (2013 and newer)
- Canadian Gold Maple Leaf Coins
- 2014 Gold Canadian Arctic Fox Coins
- 2016 Golf Canadian Snow Falcon
- Chinese Panda Gold Coins
Keep in mind that some gold coins meet IRS purity standards but aren’t IRA-eligible gold, as they are considered collectibles, which we’ll see below. Small bullion bars eligible for gold IRAs include:
- UBS Gold Bars
- Sunshine Mint Gold Bars
- Valcambi Gold Bars
- Valcambi Gold CombiBars
- Royal Canadian Mint Gold Bars
- Credit Suisse Gold Bars
- Johnson Matthey Gold Bars
What Gold Products Are Not IRA Eligible?
Collectibles are generally ineligible for IRA investing. These include various commemorative, numismatic, and rare collector’s gold bullion coins and bars, such as:
- Austrian Corona Coins
- Chilean 100 Peso Coins
- Dutch 10 Guilder Coins
- French 20 Franc Coins
- French Napoleon Coins
- Israeli Tower of David Coins
- Mexican Gold Peso Coins
- Russian George the Victorious Coins
- South African Krugerrand Coins
- Swiss Vreneli Coins
- U.S. Liberty Coins
- USSR Chevroneet Coins
If a dealer of precious metals tries to sell you these coins for investing in a gold IRA, take caution. They either aren’t familiar with IRA and IRS standards or have malicious intent. The same goes for collectible silver coins.
Top Five IRA-Approved Gold Products That Are on Demand
Unlike traditional investment vehicles, one IRA-eligible gold item doesn’t usually perform better than the others. The value of IRA-eligible gold is typically the same regardless of the manufacturer, and the price of gold coins and bullion bars tends to closely reflect the “spot price” of gold, which is based on the current market value of an ounce. So, it doesn’t really matter whether you buy proof coins or gold bars.
Nevertheless, some gold IRA investors prefer to buy from specific mints and precious metal and gold IRA companies that they trust. Some precious metal coins also have a slightly higher value because of the additional demand as collectibles. You may also find it easier to quickly liquidate coins for cash than gold bars.
Here is how the prices of some of the most popular gold coins compare to the spot price per ounce ($1,859.00) as of February 15, 2023, according to monex.com:
- Gold American Buffalo: $1,991.10
- Gold American Eagle: $1,982.00
- Gold Australian Kangaroo: $1,930.10
- Gold Canadian Maple Leaf: $1,859.00
- Gold Vienna Philharmonics: $1,930.90
Why Are Some Precious Metals Not Eligible for an IRA Account?
Collectible precious metals such as gold bullion and silver coins don’t usually meet the IRS purity and minimum fineness requirements. For this reason, they aren’t eligible for investing in a gold or silver IRA account. As we mentioned earlier, American Gold Eagle collectible coins are an exception to the rule.
IRS Requirements for Gold Investment Inside an IRA
The IRS standards for IRA-eligible products are as follows:
- Purity: Gold must be 99.5% pure, with the single exception being American Gold Eagle collectible coins.
- Production: All products must be from an approved assayer, refiner, or manufacturer accredited by a national government mint or COMEX, ISO 9000, LBMA, LME, LPPM, NYMEX, NYSE/Liffe, or TOCOM.
- Coins: Proof coins must have a certificate of authenticity and remain in their original mint packaging in pristine condition. Non-proof bullion coins must be in superb uncirculated condition without signs of wear and tear.
- Bars: Small bullion bars must meet precise weight specifications.
Note that if you are considering investing in a gold IRA account, it’s not enough to simply purchase IRA-eligible gold. You’ll also need to set up a self-directed IRA, fund the IRA, choose IRA-eligible gold items like gold bullion coins or bullion bars for investment, and store the gold in an IRS-approved depository.
The Importance of Using an IRS-Approved Depository
The IRS requires every gold IRA owner to store their gold investments in an IRS-approved vault. These ultra-secure depositories must meet stringent state and federal regulatory standards on size, service area, record-keeping, management, and more. Keep in mind that this entails ongoing storage fees.
You can use the same depository to store other precious metal items in your physical possession, such as silver bullion coins, platinum coins, platinum bullion bars, various proof coins, and more.
Can You Store an IRA-Eligible Gold Product in a Non-Approved Depository?
IRS regulations don’t allow you to store your IRA-eligible gold outside of an IRS-approved vault if you want to enjoy the tax benefits that come with a gold individual retirement account. Investments deposited into a traditional IRA are deductible up to your annual limit, and funds in a Roth IRA grow and can be withdrawn tax-free when you retire.
That said, you don’t need a retirement account to invest in gold. You are free to buy both IRA-approved and non-IRA-approved gold outside of an IRA and store it in a home safe, a bank deposit box, or any other secure location of your choosing.
In that case, you won’t be eligible for IRA tax benefits, but you can still enjoy investment returns. In addition to the less stringent storage requirements, you would also benefit from more relaxed purchase requirements, which are the same as those for non-IRA-approved gold.
What to Consider Before Buying IRA-Approved Gold Coins or Bullion
Gold IRAs can be great investments, but they are not for everyone. Before buying IRA-eligible gold, consider the following:
- Minimum investment requirement: Many gold IRAs require a minimum initial deposit, usually of $25,000 or more. If you don’t have an existing IRA balance to roll over, you may not be able to meet this minimum.
- Fees: Opening a gold IRA costs more than opening a traditional IRA or buying non-IRA-eligible or IRA-eligible gold outside of an IRA. In addition to the initial gold IRA set-up fee, you also have annual storage and account maintenance fees.
- IRA contributions: The annual IRA contribution limits for 2023 are $6,500 if you are under 50 and $7,500 if you are 50 and older. If you want to purchase gold in excess of your contribution limits, you must do it outside your IRA.
- Early withdrawal penalty: If you make a withdrawal from your IRA prior to age 59 and a half, you will typically incur a 10% tax penalty. However, this rule has exceptions, such as withdrawing IRA funds to pay your medical insurance after losing your job. Generally, however, if you want to be able to liquidate your investments before you retire, a gold IRA might not be a good fit for you.
Looking to Invest in a Gold IRA? We Can Help.
If you are considering opening a self-directed IRA and funding it with eligible gold but don’t know where to start, our team at Oxford Gold Group can help. Our mission is to educate people like you about investing in gold, silver, platinum, and other precious metals and help them make the most of their investments.
We are not financial advisors, but we can share our extensive knowledge and experience in precious metal investing to enable you to make informed choices about your financial future.
Together, we can devise an investment plan for your retirement to help you enjoy your golden years in peace and comfort. From silver bullion to proof coins and platinum bars, we know the ins and outs of buying precious metals for self-directed IRAs.