Should You Invest in Precious Metals?

by Jamie Simmerman · 9 comments

Investing for your retirement can be a big headache these days. With an unstable economy, stock market investments and traditional retirement options can be risky.

For those 60 and under, stock market investments may still be an option, but for those over 60, a more secure investment (at least for a portion of your portfolio) is preferable. The answer for many is investing in precious metals.

Why Precious Metals?

While a diverse retirement portfolio is preferable, many workers are investing large portions of their retirement funds in precious metals like gold and silver. When the economy took a nose dive during the financial crisis, “We buy gold!” signs popped up everywhere. There were ads on TV, billboards along the highway, and jewelry stores at the local mall all wanting a piece of the stable gold trade market.

Historically, precious metals have shown a slow but steady increase in value – something that offers a “rock” of stability in uncertain financial times. But investing in precious metals can be disastrous if you’re not careful.

When to Invest in Precious Metals

Anyone can start a precious metals investment plan, but it’s especially important as you near retirement age. To protect their savings from the volatility of the stock market, many individuals choose to roll over their 401K plans into a Gold or Silver IRA five to 10 years before they retire.

Others choose a split plan from the start, with a portion of their investments placed in precious metals. After the stock market crash in 2008, many are leery of losing their investments just before retirement – with little to no time to recover.

How to Choose a Precious Metals Dealer

Scam artists abound anywhere money is to be made, and precious metals investing is no different. You must choose your precious metals dealer wisely.

Here are a few points to consider when choosing a dealer:

1. A precious metals IRA is backed by physical gold or silver. This means that you’ll have to store the metal in a secure location. Keeping your gold locked up in the family safe in the den probably isn’t the best option, so make sure you get details on your storage options before signing on with a dealer.

2. Not all gold is created equal. For investment purposes, you’ll need currency grade gold. The U.S. Mint has put certain standards in place to ensure investment gold is worth the dollars you use to purchase your gold IRA. Currency grade gold must have a fineness of 0.9999 percent in order to be suitable for investment purposes. Anything less can’t be used for investments.

3. Not all gold dealers offer currency grade gold investments. This is where your research, probing, and intuition come into play. You’ll need to throughly investigate and question your gold dealer to make sure you’re not dealing with a scam artist. While normally asking your colleagues for recommendations is enough, that isn’t the case with gold investments. Getting a few referrals from others is a good place to start, but you’ll have to do your own research, go over the fine print repeatedly, and get everything in writing before signing on.

4. Research the track record of any dealer by digging into the public facts about the company, reading reviews online, and asking people in your community about their investment experiences with the company. Check with the Better Business Bureau and your local Chamber of Commerce for complaints filed against a company.

Investing in precious metals is right for those who want a secure investment option and are willing to forego large gains that might be possible with other investment options.

Investing in precious metals won’t provide large profits in a short period, but it will provide a steady ROI over time – and it won’t wipe out your retirement in a volatile economy. It’s a good option for those who want to invest but are conservative or need a secure portfolio.

What advice do you have for those considering investing in precious metals?

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  • Silver Savior says:

    I get a kick when people only recommend up to 15% on the high end for precious metals allocation. Care to lose 85% of your portfolio in a paper asset crash? If they don’t get it by now then they never will.

  • Greg says:

    I realize I made the mistake by using all of my IRA and buying precious metals. Now I have reached the 59 1/2 mark and am trying to decide if I should cash it or bring it home. One company said to save the silver proof coins and sell the other gold proofs and all non proofs and purchasing all silver proofs. Then closing the IRA selling all silver as it is only valued at the spot price, thus bringing my taxes down by 70%. I mentioned this to a friend and he stated this is hogwash. Now I don’t know what to do. Any help?

    • Arminius Aurelius says:

      Sadly a high percentage of people are lured into buying ” rare “- proof MS – 65 to MS-70 coins The problem is that the premium is so high that in most cases you will never get your money back . If you buy EF- 40 or or AU 50 [ EF – extra fine / AU – almost uncirculated you are safe . Anything over MS- 60 is insanely priced . ……..a Rip Off

  • Arminius Aurelius says:

    I have been investing in Precious Metals since about 1978. Back then 1 ounce of pure Gold cost about $ 200.00 . In 1979 it reached about $ 450.00 an ounce . Then suddenly in mid January 1980 it ran up to $ 850.00 That was IRRATIONAL.
    Whenever it is too good to be true …… warned , it is a sucker trap. And it was .
    I happened to sell most of what I had accumulated the very day it started to crash and CRASH it did . Started to buy cautiously again in the mid 1990’s . By 1998 and 1999 it was dirt cheap . [ $ 250.00 – $ 280.00 ] It has been going up since then . Yes , there was a crash last March or April down to the $ 1200.00 – $ 1300.00 range but that was orchestrated by the Fed , the Banksters and Wall Street , they don’t like competition , they are SLIME . They cannot be trusted as was proven by Goldman Sachs in 2007 / 2008 when they promoted bundled Mortgages while at the same time they were placing bets that the market would CRASH . They WON and we lost . When the market crashed in September , October and November 2008 , I jumped in and bought heavy in the $ 730.00 – $775.00 range . The same with Silver bullion , it dropped from $ 18.00 an ounce to $ 9.00 an ounce . Great deal , when everyone else is selling , I jump in and BUY , BUY , BUY . Buy low and sell high . The $ 1200.00 range now is pretty good but I am waiting for a market [ Dow ] crash and will then jump in and BUY big time once again. Paper money is worthless over time whereas Metals always maintains its value.

  • Zachari says:

    Since the early 1900s, the U.S $ has lost up to 98% of its purchasing power to date. This trend is not exclusive to the U.S $ alone. Most fiat currencies are on a devaluating trend as central banks around the world continue to print more money to stimulate economies. However, since gold is limited in supply and has intrinsic value, it is considered to be a safe haven when it comes to long term investments like saving for retirement. Historical data does not lie. If you pull up a chart showing price movement for gold for the past 10-20 years, you will see a steady upward trend. That is why owning physical gold is the best way safeguard your life savings as you head into your golden years.

  • dojo says:

    Since most currency might take a ‘dive’ in the next 30 years (you never know what can happen and even the most ‘secure’ ones can ‘fall’ in the following decades), I don’t rely on any for my retirement. In my country, 20 years ago, we had such a huge inflation that within months the money you’d have paid for a HOUSE turned into money just enough for a pair of jeans. So no, I am not relying on our own currency or any other for that matter.

    Gold (and I mean SOLID gold – coins or whatever form) is gold now and will be gold in 3000 years from now (not that I’ll live this much anyway :D). So, we do have USD and Euro savings on the short-term (vacations, health etc.) and we try to get some gold from time to time and keep it safe for the retirement.

  • Property Marbella says:

    Investing in gold, silver, platinum, etc. requires as much knowledge as trying to get rich in the stock market. There are no shortcuts to riches.

  • RedC says:

    I own some silver & gold coins, but I would not recommend converting one’s entire IRA into precious metals. Limit precious metals to 5-8% of your IRA. Buy only from a reputable dealer, not ebay. Current prices are the best in several years. Buy physical coins, not paper shares in ETF’s or mutual funds, which have been untrustworthy lately. Keep the precious metals in a safe, dry place, usually in a bank deposit box or safe hidden in your home. Do not tell friends about this.

  • Simon says:

    I have always steered clear of precious metals in my investment portfolio, I find it at times complex: finding a reliable dealer, security for the metals and keeping track of their worth. There is also the issue of offloading them if need be and do so without incurring excessive costs. My advice to any one wishing to go into precious metals, do indepth research into what you are buying. Understand the pros and cons of precious metals as an investment and find a very reputable dealer to help you.

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