Can You Own a Gold ETF in Your IRA?

exchange traded fund

With the price of gold having set new all-time highs recently, more and more people are trying to take advantage of the potential for future gold price growth. And many are wondering how exactly they can gain exposure to gold through their tax-advantaged retirement savings accounts.

One method of gaining exposure to the gold price that has become popular in recent years is gold exchange-traded funds (ETFs). Shares in gold ETFs trade just like shares in stocks or mutual funds, and can allow you to dip your toes in the water to see if gold is right for you.

Many people want to know whether they can own gold ETFs in their IRA accounts. The answer is yes, but gold ETFs aren’t the only way to own gold with an IRA.

What Is a Gold ETF?

Gold exchange-traded funds are funds that claim to own pools of gold and then sell shares of that fund to investors. Often the share price of a gold ETF might be related to the gold price, such as being 1/25 or 1/100 the price of an ounce of gold.

If the gold price goes up, the share price of the gold ETF should go up too. If the gold price goes down, the share price of the gold ETF should go down.

Because shares in gold ETFs trade just like shares of stocks and mutual funds, they can be owned by an IRA. There are numerous different gold ETFs available, each with different purported advantages and disadvantages, and each with their own expense ratios.

Advantages of a Gold ETF

One of the main advantages of a gold ETF is the ease of purchase and sale. Buying a gold ETF is as easy as buying Treasury bonds or shares of stock in Nvidia.

If you have a brokerage IRA account, you can log into your account and purchase shares of gold ETFs at the click of your mouse. This makes gold ETFs a quick and handy way to gain exposure to the gold price without having to actually purchase physical gold.

For this reason, gold ETFs can sometimes be something that you don’t hold for the long term. Undoubtedly there are many people who trade gold ETFs with the objective of holding shares for a short period of time, maximizing returns, and then dumping the shares again to take a quick profit.

Disadvantages of a Gold ETF

One of the disadvantages of a gold ETF is that you don’t actually own gold, nor can you convert your gold ETF shares into physical gold. For some people, this may actually be a benefit, because they don’t want to have to deal with the hassle of storing physical gold.

But many people who buy gold are doing so because they see gold as a safe haven asset, a store of value, and a friendly port during financial storms. Very often they may want to hold gold for a longer period of time, possibly several years, to help protect themselves against long-term moves in financial markets.

They may not want to actually store gold at home, but they might like the option of being able to take possession of their gold holdings, something you can’t do with a gold ETF.

Gold ETFs also are somewhat opaque when it comes to who stores their gold, with various custodial and subcustodial arrangements potentially encumbering the gold the ETFs claim to own. And there have always been concerns that gold ETFs could issue more shares in the fund than they have gold backing for, betting that not every shareholder will want to redeem his shares at the same time.

This would be a situation akin to fractional reserve banking, and if it were ever to transpire that a gold ETF didn’t have the gold it said it did, it could cause a collapse of what some refer to as the “paper gold” market.

Can I Own Physical Gold in My IRA?

In contrast to gold ETFs, you can also own physical gold in your IRA. IRAs are prohibited from owning collectibles, including certain coins and metals, but any physical gold coins or bars with a fineness of .995 or higher are IRA-eligible, as are the modern Gold American Eagle coins minted by the US Mint.

Holding physical gold in a gold IRA is a little different than owning shares in gold ETFs, as many IRA custodians won’t administer physical assets like gold. You would need to find a self-directed IRA custodian with experience working with gold IRAs in order to start a gold IRA. Goldco works with experienced gold IRA custodians who have served our customers admirably in administering their gold IRAs.

One method of funding a gold IRA is with a tax-free rollover or transfer from an existing 401(k), 403(b), TSP, IRA, or similar retirement account. Once you have rolled over funds to your gold IRA, you get to choose which IRA-eligible gold coins or bars you want to purchase.

Gold IRAs are subject to all the same rules and regulations as any other IRA account, including those related to distributions. And when you choose to take a distribution from your gold IRA, you can choose to take it in cash or in physical gold as an in-kind distribution.

Gold ETF vs. Gold IRA?

Whether you decide to purchase gold ETFs for your IRA or start a gold IRA will be dependent on your financial situation, your financial goals, and your financial timeline. Gold ETFs and physical gold each have their advantages and disadvantages, and it’s up to you to determine which makes sense for you.

If you’re looking to add physical gold to your portfolio, whether it’s to diversify your holdings, hedge against inflation, take advantage of rising gold prices, or protect yourself against recession, Goldco has numerous gold options available to you.

We work directly with mints around the world to bring you high quality IRA-eligible gold products. And with over 5,000 5-star reviews from our satisfied customers, we work hard to ensure that our customers think of us as one of the best gold companies in the business.

And if you don’t want to own any gold or gold ETFs in your IRA, we even offer the option of direct cash sales of gold coins and bars, which we can ship directly to you. We want all of our customers to reap the benefits of gold ownership.

So if you’ve been thinking about adding gold to your IRA or financial portfolio, maybe now is the time to start learning more about how to do it. Call Goldco today to find out how gold can help you safeguard your financial future.

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