Should you go for a Gold-backed IRA?
If you want to effectively hedge against inflation keep far away from your investment portfolio, maintain the real value of your money and enjoy an advantage from future gold prices shifting upwards, then your best bet is to dedicate a portion of your retirement wealth to a gold IRA.
Plus, gold IRAs are not any more or less complicated than other traditional IRAs – on top of that, gold IRA involves considerably fewer investment strategies and critical decisions compared to, let’s say, an IRA that has a stock portfolio and has to consistently by balanced, evaluated and monitored.
Of course, you should expect downside to a gold-backed IRAs as well.
When you talk about the potential for portfolio growth, gold IRAs have the slowest growth potential compared to stocks, mutual funds and bonds.
And that is understandably due to the fact predicting gold price 10 or 20 years from now is something even brilliant financial analysts can have trouble conjuring.
Will Gold Resume its Uptrend?
Due to the fact the Federal Reserve keeps on printing money and continuously pours it into the economy, it has become an increasingly difficult task keep a finger on when gold will start to increase in price.
According to historical records, an increase in money has does not significantly impact the economy in the initial months – it is after 9 to 18 months have passed that effects beings to surface.
Then add another year into for the effects to sink into consumer price inflation.
In simpler words, the Fed is always looking to drive the economy with a loose steering wheel.
However, after a few disappointing trends, gold is beginning to increase in value – better yet it has also become one of the best performing precious commodities, which is expected to shine this year as well – there is an exponential number of growing trends that are playing in gold’s favor.
The primary reason why gold could not perform as per the expectations of investors is because of the federal government’s ‘quantitative easing’ program, which enabled the Fed to print money by the truckload to facilitate the financial markets in one of the biggest economy’s in the world – that is after the credit crises and the recession.
This is essentially the reason why investors invested in gold; the US dollar was continually declining. Gold has become an anti-currency tool.
Buying Gold the Right Way
Buying precious metals like gold and silver is quite simple. But what can make it complicated is if you are pressured into investing in gold products you have no clue about. With the understanding of how to make a general purchase, you will be successfully able to steer clear of any pitfalls. It just like riding a bike, once you master the basics, riding your bike becomes second nature.
The three basic fundamentals of buying gold or silver are spot price, premium, and mark-up. The spot price is what big-game investors and bullion banks pay in marketplaces, for example, commodities exchanges located in London, Hong Kong, and New York. The trades they invest in primarily consist of futures contracts, where gold buyers don’t get physical delivery.
Next up, are billion-dollar wholesalers of physical gold and silver bullion products who have the capability to directly purchase from a plethora of national mints on a global scale at prices, which top the spot price by a small margin.
However, wholesalers like that are quite a few in the US – on top of they don’t sell gold or silver bullion to individual gold-backed IRA investors.
What these wholesalers essentially do is include marginal profit as well as include overhead costs, which is known as a premium, and then sell the bullion to retailers. The premiums can considerably differ, taking into account the market conditions, the demand, and supply of gold, the type of gold product and the need for it.
After the retailers buy the gold from the wholesalers, they sell the bullion to individual investors interested in converting to gold.
However, the retailers will sell you the gold at a mark-up, which is basically the retailer’s overhead costs and profit.
So, if the dealer ends up paying a 3.5% premium, which would be above the spot price for gold bullion, and proceeds to sell it at 5.5% (above the spot price), the dealer’s mark up would amount to 2% points.
In volatile market conditions, gold buyers should spend less than 7% over the spot price for gold coins. However, you have to understand that the fact that you will have to pay more for popular gold bullions products, for example, the American Gold Eagle coin or a coin that is manufactured at a private mint.