Can You Hold Your Own Gold? Holding Gold as an Investment

Author: Focus on the User | 10 min read
Can you invest in gold and hold it?

Physical gold investments have been known to provide an inflation hedge against market changes and are often used as a portfolio diversifier. Gold IRAs have become increasingly common ever since the economic conditions have become extremely volatile, and the price of gold has been on the rise. While IRAs are not allowed to hold any collectibles, gold is an exception in some cases. But one of the common questions that comes to one's mind is can we hold our gold in our own home?

What type of gold can a person hold?

What type of gold can a person hold?

Holding gold in your IRA is legally possible, but not all gold investments can be included. The rule of hand is that IRAs cannot contain collectibles. All precious metal investments are a part of collectibles, including coins, bullions, and bars. But the IRA requirements have an exception for certain forms of Silver, Gold, Platinum, and Palladium as opposed to the rule of hand.

All precious metal assets that can be included in the IRA must have a minimum of 99.5% or higher, including gold bullion bars and silver produced by refineries approved by COMEX or NYMEX. This also includes bullion coins which are legal tenders. Qualified gold coins also include Canadian Maple Leafs and American Eagles. Coins offered in the previous years, for example, Double Eagles and British and South African sovereign coins, do not meet the required exception.

Almost all the custodians of IRAs do not allow holding Gold in IRAs, and only investments in publicly-traded securities are allowed, including gold stocks, mutual funds, bonds, options, exchange-traded funds and futures.

But as discussed, holding gold is not impossible. To do so, an individual investor must find a custodian who offers a true, self-directed IRA. The custodian's need is imperative because of the requirement set by IRS, which states that the gold bar, coin, or bullion must be in the custodian's possession. This means investors cannot purchase metals from the money in their IRA and store them in their homes. An IRA-approved custodian must be taken on board for this, which can easily be found on the internet with extensive experience, considerable fee structure, and buying and selling process. Find the top gold bars for your portfolio to maximize returns.

Home storage of Gold IRAs and Penalties

Home storage of Gold IRAs and Penalties

Home storage advertisements have created a lot of confusion among potential investors about Gold IRAs. Contrary to what is stated in the advertisements, the Internal Revenue Service has always warned investors against investing their tax-exempted retirement accounts in precious metals like gold and silver.

Storing gold at homes has never been allowed, even if the investor buys the gold himself after meeting the requirements set by the IRS. During the process of setting up an LLC, the investor must choose their preferred depository who will be responsible for keeping the gold at a secure location while it would still be under the name of the LLC. Investors under the age of 59.5 are not allowed to store gold at home; if they do so, a 10% penalty would be applicable.

Why is there so much confusion regarding this?

The main reason for the confusion among investors is that according to the law set by the Internal Revenue Service, the investors are not allowed to hold 'collectibles like wine, artwork, gems, and antiques. The tax law itself sounds very vague, giving room to advocates to operate according to their desire. This law also allows investors to invest in real estate, fishing, tax liens, untraded securities, and other alternative financial assets.

Specific laws, including the publication 590A and 408(3) of the Internal Revenue Service in the US, also allow investments in specific bullion bars and coins of precious metals, including Gold, Silver, Platinum, or Palladium.

Better Alternatives

Regardless of the buying process being the custodian's responsibility, the investors must ensure that the assets bought comply with the requirements set by IRS. Investors might also conclude that owning Gold ETFs is more beneficial than owning gold assets like bullions or coins to benefit from the increase in gold prices. This is because ETFs can be easily liquified in open markets and can also buy, insure, and store gold at considerably lower prices than an IRA's custodian.

According to the restrictions laid down by the IRS, the owner of an IRA cannot engage themselves in buying and selling transactions related to IRAs. This means an investor is also not allowed to transfer to already-owned IRA bullions or coins.

While it is known that investing in precious metals like gold, silver, platinum, and palladium is a beneficial investment, investing by means of coins, bullions, and bars is inefficient. Owning gold assets and keeping them at home is a method commonly used by investors who want to are worried about the change in the value of the currency and prefer to keep an alternative currency form with themselves to liquidify it whenever needed. People investing in gold, for this reason, should not own their assets through an IRA and rather own them separately.

Super IRA or LLC IRA

An alternative suggested by many people is a Super IRA or LLC IRA. These IRAs allow investors to select their preferred IRA and start a self-directed IRA. These types of IRAs can help investors avoid huge fees demanded by the custodians as the transactions are performed by LLC, instead of the custodian, through checking accounts or regular brokerage accounts. When investing through these IRAs, investors must also ensure that even if the LLC purchases the assets, they are stored by the custodian to avoid performing a prohibited transaction resulting in a penalty fee.

The Rules Apply to All IRAs

The above rules apply to all IRAs, including Roth, Traditional, Simple, 401(k) and SEP. It must also be noted that investing in precious metals like Gold, Silver, Platinum, and Palladium through an IRA is an available option but is not the best option available. Investing through exchange-traded funds or taxable accounts is a far better idea because of its efficiency.

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Disclaimer: Content on this website is not intended to be used as financial advice. It is not to be used as a recommendation to buy, sell, or trade an asset that requires a licensed broker. Consult a financial advisor.

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