Trading and Investing in Gold in Your IRA

The most direct route for gold exposure is the physical market for bars and coins. However, owning physical gold involves storage and insurance considerations.

Futures are the next option on the investment pyramid, as the CME’s COMEX gold futures provide a physical delivery mechanism. Meanwhile, many ETF and ETN products are available to investors and traders that track gold prices, and even some that leverage the price action on the up and downside.

Gold’s bull market began in 1999 when the United Kingdom decided to auction off half the nation’s gold reserves, causing the price to drop to a $252.50 per ounce low. Since then, gold has consistently made higher lows and higher highs, reaching a peak of $2,429 per ounce in April 2024. As gold’s bull market celebrates its silver anniversary, no pun intended, this year, all signs point to higher prices over the coming months and years, offering the potential for a significant profit. 

It's important to note that even in the most aggressive bull markets, such as gold's, price movements rarely follow a straight line. In fact, a pullback often occurs after each new high, providing market participants with a potential entry point into the bullish gold market. 

Gold is a unique asset that should be a cornerstone of your long-term investment strategy, providing stability and security in uncertain times.

Why is gold rallying?

• Over the past years, central banks have been buying gold to add to reserves, validating gold’s role in the global financial system.
• Gold is the world’s oldest means of exchange.
• The world’s leading fiat currencies derive value from faith and credit in the countries that issue the legal tender. Gold is a rare precious metal that has been money for thousands of years.
• Gold is an inflation barometer that moves higher as the economic condition increases. People have turned to gold in times of geopolitical turmoil and uncertainty.

What are the rules for owning gold in an IRA?

• Investors can only own gold in a self-directed IRA, which allows investments in alternative assets.
• The IRS regulations allow gold futures trading in an IRA account.
• IRA gold exposure is available through the metal, futures, gold-related ETF/ETN products, and gold mining shares and mining ETF/ETN products.

The reasons to own gold in a diversified portfolio

• Diversification tends to reduce risks. A balanced approach to stocks, bonds, and alternative assets, including gold, could be optimal for long-term savings.
• Gold’s bull market has been firmly in place for a quarter of a century, and the trend is always your best friend.
• Gold is an inflation hedge that tends to outperform other assets during periods of geopolitical uncertainty.

Understanding gold futures

• Gold futures and futures options trade on the CME’s COMEX division.
• The gold futures market is highly liquid. Open interest, the total number of open long and short positions in the futures arena, was around 525,000 contracts. At $2,300 per ounce, the futures market had a value of $120.75 billion. Gold futures typically trade over 200,000 contracts daily.
• Gold futures involve margin and leverage. The current original margin is under 5%, creating leverage. Market participants must maintain exchange-determined margin levels daily.
• The standard COMEX gold futures contract contains 100 ounces of metal. The CME offers a micro gold contract that contains 10 ounces of metal.

The three reasons gold will likely continue to make new highs

• The trend in any market is always your best friend, and it remains higher in gold.
• Inflation remains stubbornly above the Fed’s 2% arbitrary target level. Higher inflation for longer supports higher gold prices.
• BRICS countries are likely to roll out a BRICS currency to challenge the dollar’s reserve currency dominance in global trade. A BRICS currency could use gold as a backstop, increasing gold’s profile on the global economic stage.
• Wars in Ukraine and the Middle East and Chinese plans to reunify with Taiwan create significant uncertainty in the geopolitical landscape.

Gold is the world’s oldest investment asset and store of value and wealth. Long before there were stocks, bonds, currencies, and other assets, gold was the precious metal that represented wealth. Gold is a unique, limited, and rare asset that belongs in long-term portfolios.

Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!