A Gold IRA is an IRA account that is invested in gold coins or bars instead of stocks, mutual funds, etc. The account can either be set up with pre-tax funds or as a Roth IRA, bought with post-tax money. See Analysis: Should You Get A Gold IRA?
The Internal Revenue Service allows holders of self-directed IRA accounts to purchase bars and coins minted from gold or other approved precious metals such as silver, platinum, or palladium. IRA funds can also be invested in gold-related “paper investments,“ such as Exchange Traded Funds, stock in gold mining companies, precious metals mutual funds, or precious metals commodity futures. However, the term Gold IRA primarily is used to describe a self-directed IRA with funds invested in hard metals.
Unlike other IRAs, these accounts require purchasing and storing the physical asset. As a result, gold IRAs require the use of a custodian, typically a bank, brokerage firm, etc., to manage the account. For more information, see Gold IRA Rollover.
Is holding gold a good idea for an IRA? For most of recent history, the answer is no. Gold has to be stored, doesn't pay dividends, and has no earnings. It has industrial and jewelry uses, but by and large most of the yellow metal sits in bank vaults and safety deposit boxes. People believe it's a safe holder of value when times are tough.
Gold spiked in the early 1980s, then stayed in the $400 to $500 per ounce range until around 2006. In the financial crisis of 2008-2009, gold peaked at over $1,700 per ounce. It has since traded in the $1,100 to $1,300 range. That means for more than 30 years, gold went mostly sideways. Meanwhile, if you had invested in the broad stock market from 1982 to 2006, your IRA would have risen five-fold.
This is not to say that precious metals don't have a place in your portfolio. But if history is any guide, gold will have to come a long way to match the returns of the overall economy as measured by the broad markets.
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