When investing with funds in an IRA, gold has become a popular choice. While gold could be a good investment depending on the circumstances, it is not always as great as others may have you believe. Here are a few reasons that you may want to consider keeping gold out of your IRA.
1. Custodian Theft
With gold, custodian theft is a real, if rare, possibility. The custodian of your gold IRA could decide to clean out your account and run for the border. When this happens, there is really nothing that you can do about it other than hope the authorities recover your money. Gold investments are not FDIC-insured as some other types of investments are. Many companies that offer gold investments are not well-known companies like many of the brokerages that offer other securities. Therefore, you may have to work with a company that you are not familiar with.
2. Third-Party Theft
When dealing with a physical asset like gold, there is always the possibility that it could be stolen by a third party. Most people that invest in gold in IRAs do not actually take physical delivery of the gold. They let another company hold it for them; the investors have certificates only. If the company loses your physical product, it could be devastating to your IRA funds. Unless the gold is insured, your funds will be gone. You will have lost a portion or perhaps all of your retirement portfolio.
3. Problems of Storing Actual Gold
Taking physical possession of gold is another option when investing in the precious metal with your IRA. Many people with a negative view of the economy or world market take this approach with the idea that they will have something of value regardless of what happens to the economy. One drawback to this approach is that you need to keep the gold in a safe and secure facility on your own. Moreover, when gold is just sitting, it is not creating any wealth nor drawing interest. Therefore, the only way that you can benefit from this is if the price of gold continues to go up and you sell it later. When you go to sell it, you will have to worry about transporting it to the buyer without its getting lost or stolen.
4. Gold Scams
A number of companies have unscrupulously handled gold sales. For example, they have sold certificates that proclaim gold ownership to investors when they do not actually have the gold in their possession. This creates a level of risk in your investment. Unless the company that sells you the certificate actually has the gold on hand, it is difficult to determine the validity of your investment. While there are laws against selling more shares than can be backed up by physical gold, there have been several companies that have still done it. It is hard to enforce the laws about this because it is difficult for an inspector to access and physically count the gold.