Are Gold IRAs a Safe Investment?

"Gold is money," is what JP Morgan said to Congress in 1912. A century later, most people would probably agree. Investing in a gold IRA is a good idea if you want to diversify your retirement portfolio and hedge against inflation. 

A gold IRA is a self-directed retirement account that allows you to hold gold bullion or other forms of physical gold like coins or bars. Similar to a traditional IRA or a 401(k), a gold IRA requires a specialized custodian who handles and stores your precious metals for you.

Mainstream media commercials often urge retirees to convert their savings into precious metals in IRAs and gold IRAs. But first, it is crucial to understand the benefits and risks before deciding whether you should invest your hard-earned retirement money into another type of retirement fund.

Key Takeaways

  • The gold IRA is an individual retirement account that allows investors to invest in physical gold and other precious metals.
  • A gold IRA can be an effective inflation hedge despite being centered on a single asset class
  • A gold IRA does not yield any interest or dividends and costs money to store and protect with a custodian.
  • The tax advantages of an IRA aren't fully utilized in a gold IRA and have higher expenses than a traditional or Roth IRA.

Special risks related to investments in gold

Investments into precious metals, and gold specifically, come with specific risks so let’s see what you need to look out for to ensure you don’t lose money.

Gold storage issues

Any tangible asset is at risk of theft. Even when your gold is in a depository, it can still be robbed, so totally avoiding risks is a real challenge. Truth be told, depositories must be insured to qualify for gold IRAs, which would secure your investment so long as your account does not surpass the custodian's declared value.

Some dishonest custodians may steal from their customers' accounts or commit fraud by selling precious metals they do not truly own. A custodian who is insuring financial transactions is far less likely to do this, and even if they do, your gold is still insured. Therefore, it is a good idea to be cautious when choosing a custodian, as not all of them are the same.


Gold isn’t perfect when it comes to liquidity. This is due to the fact that buying bullion costs slightly more than buying regular gold and will sell for a little less than regular gold would. This is because brokers get a cut from both types of transactions, so this is something you need to account for when considering this investment.

Cost of gold

Gold's price is subject to ups and downs. Nobody can forecast its future with 100% certainty. On top of that, when you buy, there are special markups depending on whether you want to invest in bullion, coins, proofs, or some other form; these markups are added to the current gold prices.

It’s a one-time cost, and the markup can differ depending on the vendor. Likewise, when an investor needs to sell their gold, each type of gold has its own set of guidelines. Still, there are risks to all investments, and gold will probably never be worthless since, historically, this has never happened.

High short-term price volatility

Compared to the stock market, gold is very complicated when it comes to its price. For example, the recent inflation caused the US Federal Reserve to increase interest rates creating a dip in gold prices. In addition, when the dollar is strong, the gold price tends to stay low, whereas when the dollar is weak, more gold is usually bought, which raises the price of gold.

Gold's price increases in tandem with inflation. Therefore, if you diversify your holdings with gold and intangible assets, a deficit on the gold side will be counterbalanced by the gain realized by other investments and vice versa.

A speculative asset with no yield

The bullion's lack of income-producing qualities, such as interests or dividends, is a drawback. Besides, keep in mind that storing your bullion involves expenses. While there are associated costs with holding your retirement investment in gold, due to it growing when inflation rises, we get some returns on investment, and our savings can never fully fall through. It’s an interesting trade-off.

Gold taxation

There are no interest yields, dividends, or other returns on gold investments. Therefore, it doesn't benefit from the tax-free growing feature of IRA investing. Only when you sell your gold for a profit would you qualify for a tax deduction. Furthermore, if you start withdrawing gold before reaching 59½ year old, you will be subject to income tax on the gold's value and an early withdrawal fine of 10%.

Why are gold IRAs so popular lately?

Some investors argue that the US dollar is rapidly losing purchasing power and that gold will protect you financially in difficult times. Rising concerns are the effect of national debt and inflation.

So gold IRAs became very popular among investors seeking to establish a diversified retirement portfolio. The price of gold often moves in the opposite direction of intangible assets, making gold IRA a solid investment for inflation protection which is quite a serious issue in 2022.

The popularity of gold IRAs has, therefore, considerably increased since the Global Recession and the economic collapse of 2008. In addition, the combination of unprecedented gold sales and the emergence of many businesses focused on handling and streamlining transactions has made investing in a gold IRA an easy process.

Moreover, economic and international news have an impact. Due to the expected inflationary effects of the Federal Reserve's stimulus initiatives and a steep rise in geopolitical risks, there has been a high demand for gold IRAs.

The advantages of having a Gold IRA

Gold IRA investments have considerable benefits, including:

  • Future security

    A Gold IRA offers long-term security. There is no chance that gold will become obsolete anytime soon since it has been around for thousands of years.

  • Tax Advantages

    Gains that are tax-deferred or tax-free are available when you invest in a gold IRA.

  • Diversification

    An investment in gold provides diversification from other types of assets, such as stocks and bonds, which may vary amid times of high inflation or economic uncertainty.

  • Quick Liquidity

    You'll get a good return on your investment if you buy gold now and sell it when its price rises. Furthermore, gold is also easy to sell if it’s an emergency and you need fast cash.

  • Cumulative Interest

    The interest you earn on a gold IRA is added to the investment's principal and is known as compound interest. This process continues until the investment's final maturity date or until you start withdrawing funds.

  • Asset Protection

    Gold acts as a portfolio hedging tool to balance other assets in your portfolio and is a safety net in times of crisis.

The disadvantages of having a Gold IRA 

Although a gold IRA may offer many benefits, it also has some disadvantages.

  • High fees 

    Since you cannot store gold just anywhere, there are bound to be some extra fees. You are forced to hire a custodian to acquire, ship, and move the precious metals from your IRA. You also pay for safe storage and insurance.

  • Storing challenge 

    Tying your retirement to a bunch of metal stored somewhere is risky if the material is not stored properly. A proper storage facility is always insured against theft. You should avoid storages that can’t offer this perk since you are at risk of being robbed and not getting anything in return, even though you are paying for storage.

  • Fails to utilize tax benefits 

    A physical asset cannot benefit from the tax-free growth features of IRA investing. Only capital gains from selling your gold at a profit can qualify for a tax benefit.

  • Financial limitations

    You don’t have the right to just add precious metals you own into your gold IRA. The same goes for purchasing precious metals for your gold IRA alone. Instead, a custodian must handle all transactions on your behalf.

Finding reliable brokers and custodians 

If you want to purchase a gold IRA, you'll need a broker to help you buy the gold and a custodian to set up and manage the account. 

Finding a broker

Experts recommend the following selection criteria:

Full disclosure:

Have information on all costs, including any hidden fees, before investing.


Since each investor has unique goals, find a brokerage that will work with you.


To protect your money, only do business with a company having all necessary licenses, registrations, insurance, and bonds.

Broker fees:

Besides the going rate, the broker's commission (markup) varies based on whether you want gold bullion, coins, and so forth. The markup is a one-time cost that varies based on the vendor.


Opt for brokers with expertise in the field. Look for positive reviews on objective third-party sites like Better Business Bureau, Trustpilot, or Business Consumer Alliance.

Finding a custodian

A few precious metal dealers may suggest an IRA custodian. But, customers are free to carry out an independent search for custodians.

Most asset custody services are banks, trust companies, credit unions, brokerage houses, or savings and loan organizations authorized by federal or state regulators.

Custodian fees: 

Even though annual fees and associated asset or transaction costs are a part of all IRAs, they may be higher for gold IRAs. In particular, this applies if you use a different financial entity than the one that oversees your other accounts.

Required Minimum Distribution (RMDs) for Gold IRAs

Annual required minimum distributions (RMDs) from traditional IRAs are mandatory once you reach age 72 (or 70.5 if this happened before January 1st, 2020). RMDs do not apply to Roth IRAs. You must have enough liquid assets to make your required minimum distributions from traditional IRAs.

Gold IRAs may have trouble complying with RMD regulations and may get forced to liquidate assets. On the bright side, you can use other IRA funds to satisfy the RMDs. So, when choosing a Gold IRA, investors need to consider RMD restrictions.

The Verdict

Ensure your investment portfolio aligns with your timeframe and general risk tolerance. Investments in Gold IRAs are classed as "alternative investments," much like investments in other asset types. Alternative asset classes generally shouldn't make up more than 5% to 10% of your retirement investment portfolio.

Importantly, you should consult a financial expert to determine the match with your overall portfolio goals. While gold can diversify your retirement plan, it should only constitute a reasonable portion of your retirement savings, depending on your risk tolerance.

About the author Greg Lorenzo

Greg is a financial expert who has been advising his audience on loans for over 10 years. He has a wealth of knowledge and experience in the area, and he is passionate about helping people get the best possible deal on their loans. Greg is an expert in negotiating loans, and he has a proven track record of getting his clients the best possible terms. He is also a strong advocate for financial literacy, and he regularly gives workshops and seminars on the topic.

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