June 24, 2022

6 Things You Need to Know Before Investing in Precious Metals with a Gold IRA  

Key Points

  • Self Directed Gold IRAs (AKA Precious Metals IRAs) allow you to invest in gold, silver, platinum, and palladium. 

  • Precious metals in an IRA must be stored at a custodian and be minted by the government or meet a certain fineness requirement.  

  • Investing in a Gold IRA gives you a tangible asset, can hedge against inflation, and helps diversify your portfolio.  

  • Gold IRAs generally have storage fees and no dividends or interest income. 

Gold IRA: 6 Things You Need to Know

With the uncertainty of the economy and the volatility of the stock market, many investors may ask themselves... 

Gold and Silver Bars and Bullion sitting in a secured vault

How can I hedge against the stock market and inflation? 

Is gold a good investment? Should I invest in precious metals? 

Is there a tax-advantaged way to invest in gold?  

What is an ideal balanced portfolio? 

Depending on your goals and long-term investment strategy, a Gold IRA (also known as a Precious Metals IRA) may be what you’re looking for to make your retirement account sparkle. 

Including precious metals like gold or silver in your IRA adds a tangible asset to your retirement portfolio and can hedge against inflation. But before you start investing, it’s crucial to do your research. Here are six things you need to know before investing in precious metals in a Gold IRA.  

1. The Precious Metals Must Be in the Physical Possession of a Custodian

Standard brokerage accounts only let you invest in standard assets like stocks, bonds, and mutual funds. To invest in alternative assets, like precious metals or real estate, with your retirement funds you must open a Gold IRA. Gold IRAs are a type of Self Directed IRA that give you the power to add gold, silver, platinum, and palladium to your retirement portfolio.

The Internal Revenue Code requires all precious metals in an IRA to be held in the physical possession of a custodian like Madison Trust. A recent court case, McNulty v. Commissioner, reinforced this rule. That means you cannot stash your gold at home in places like safety deposit boxes, home safes, closets, or buried in your backyard.

The safest approach to store your metals is at an approved depository. Madison Trust works with Delaware Depository to securely store the metals in their vault. The metals should never be held personally. To maintain their tax-advantaged status, the precious metals must be held by a custodian.

secure vault door at Delaware Depository to store precious metals.

2. The Precious Metals Must Fulfill Specific Fineness Requirements

Self Directed IRAs allow accountholders to invest in practically any asset. However, there are a few assets that are off-limits to self-directed accounts, with collectibles being one of them. The Internal Revenue Code determined gold and other precious metals to be collectibles, unless they fall under a certain exception. If the precious metals are minted by the government or if the precious metals meet certain fineness requirements, then they can be invested in with a Self Directed IRA. In either case, the precious metals must be held by a custodian. When investing in an alternative asset like precious metals, it is important to understand exactly which metals you can invest in and which ones are prohibited.

Gold IRA Fineness Requirements: Gold 99.5% pure, Silver 99.9% pure, Platinum 99.9% pure, and Palladium 99.9% pure.

According to IRS Publication 590-A, your IRA can invest in “one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.” Internal Revenue Code 408(m)(3) (A)(i)-(iv) and 408(m)(3)(B) outline the types of precious metals you can invest in with your Self Directed Gold IRA.  

3. Required Minimum Distributions Still Apply to a Gold IRA

If you choose to invest in precious metals with your retirement funds in a Traditional IRA, you must start taking required minimum distributions (RMDs) once you reach age 72. If you take a distribution before age 59 ½, you will have to pay applicable taxes and early distribution penalties.

Required Minimum Distributions (RMDs) Infographic. Taking a distribution before age 59 1/2 incurs a 10% early withdrawal penalty. You may start taking penalty-free distributions at age 59 1/2. Self-Directed Traditional IRA account holders are required to take RMDs once you reach age 73, deductible contributions and earnings will be taxed at ordinary income. Self-Directed Roth IRA account holders do not need to take RMDs, you can even pass on the wealth to your heirs.

To distribute your precious metals from Madison Trust there are two options:

  1. Sell the Metals and Distribute as Cash - To distribute your precious metals from Madison Trust, you can choose to liquidate your precious metals and receive a cash distribution. The price of the metals will be based on the market on that date, and you will receive your distribution funds via check or wire. 
  2. Create a Personal Account at Delaware Depository - Another option is to create a personal account at Delaware Depository Services Company (DDSC). Once your personal account is set up with them, we can move forward with the distribution of metals and transfer them to your DDSC account.  

4. Benefits of Investing in Gold in an IRA

A Gold IRA is a good way to increase your wealth as the value of the dollar decreases. Here are a few advantages of investing in gold or other precious metals in your retirement account.

Icon of an increasing trend graph and a dollar sign to show that you can hedge against inflation when you invest in precious metals with a Gold IRA.

Hedge Against Inflation

Owning precious metals in your Self Directed Gold IRA can provide you security and peace of mind. Typically, precious metals and the stock market have an inverse relationship. If the value of the stock market decreases, the value of precious metals increases (and vice versa). Therefore, adding a Gold IRA to a retirement portfolio can provide insurance against inflation and economic crisis.

Chart comparing the price of gold to the Dow Jones in the last five years.
Chart courtesy of usmoneyreserve.com/resources/charts-prices/gold-price-chart/

This graph compares the price of gold to the Dow Jones in the last 5 years. Evidently, the inverse relationship between gold and the stock market holds true.

money with arrows pointing out to show that you can diversify your retirement portfolio with alternative assets such as precious metals and real estate.

Diversification of Retirement Portfolio

Precious metals are an alternative asset, which can diversify your retirement account portfolio. Most financial advisors tell their clients to invest in a wide array of assets. A truly diversified portfolio would hold standard assets like stocks, bonds, and mutual funds as well as alternative assets like precious metals, real estate, and more to smooth out the risk.

Gold and Silver bullion to show how these are tangible assets.

Tangible Asset

Precious metals are tangible assets, creating a perception of safety among investors. Unlike stocks, gold and silver are less likely to reach a zero-dollar value since they hold value as a raw material. 

Wheel with arrows going around it in a circle to show limited supply of gold

Limited Supply

Over time, the production of gold has been decreasing. Typically, with a decreasing supply, the value increases.

Icon of planet Earth to indicate that precious metals are accepted and hold value all over the world.

Accepted Worldwide

Precious metals like gold and silver are accepted all over the world. It is one of the very few investments that hold value across the globe.  

Flower next to arrows pointing up to show the growth of precious metals investments in a Gold IRA.

Tax-Advantaged Account

A Self Directed IRA is a tax-sheltered account. The gain assumed on investment is solely determined by the purchase and sale price of the precious metals. Since you are holding the assets in a tax-sheltered Self Directed IRA account, there are no capital gains taxes owed. 

graph showing the volatility of the stock market.


As with any investment, gold can also be volatile. If your portfolio is balanced with both gold and stocks, the loss on either side would be balanced by the gain experienced by the other assets.

5. Disadvantages of Investing in Gold with an IRA

As with any investment, there are both advantages and disadvantages of a Gold IRA. Here are a few disadvantages to consider before you invest in gold with your retirement funds.

Icon of a document with an increasing trend graph and magnifying glass with a checkmark inside to display the distribution process for a Gold IRA.

Distribution Process

Taking a RMD from gold may be more complicated than taking a RMD from a traditional asset. This is because you must take out the whole piece of the precious metal you own if you do not have cash available to complete the distribution. This may result in a withdrawal of more value than you would if your assets were in cash.

However, if you have a more liquid asset in your Self Directed IRA or another IRA, you can use those easily available funds to fulfill the RMD requirement.  

Checkbook icon to display the fees associated with a Gold IRA.


A Gold IRA has several fees, including a custodial fee and storage fee. 

6. You Can Invest in Gold in a Roth IRA

As long as your Roth IRA is self-directed, you can invest in gold. With a Roth IRA, taxes are paid upfront when a contribution is made – meaning taxes are paid before depositing it into your IRA account. This is as opposed to a Traditional IRA, in which you pay taxes upon withdrawal. Typically, a Roth IRA is best if you expect to have a higher tax bracket when you retire.

An added benefit of a Roth IRA is that you are not required to take RMDs, which saves you the hassle of doing an in-kind distribution or liquidating your precious metals. And you can pass down your wealth to your heirs. 

Investing in gold with a Roth IRA is a great way to mitigate risk in an economic downturn and can hedge against inflation.

Blue sky and cloud background with street sign in front that says “Retirement: Roth IRA” and arrow pointing to the right.

Are Gold IRAs a Good Idea? Should You Invest in Gold in your IRA? 

When you add gold to your retirement account, you are literally turning part of your nest egg into gold. But is putting a Gold IRA in your portfolio the right investment for you? The answer to this question is dependent on your retirement goals and investment strategy. 

Savvy investors understand diversification is key to a well-balanced portfolio. A popular rule of thumb for investing is to not put all your eggs in one basket. This way, no matter if the stock market takes a dip and the value of gold increases (or vice versa) your balanced portfolio is prepared for any volatility that occurs and will still be growing. 

Why Choose Madison Trust’s Gold IRA? 

Gold coins investment with a Self-Directed IRA

At Madison Trust, we understand the value of diversification which is why our Gold IRA does not limit your investment to just gold, silver, platinum, and palladium. You have the freedom to invest in any investment idea you have including real estate, private business, loans, etc. – you name it, and we can make it work in your Self Directed IRA

Conclusion: Let’s Put It All Together 

A Gold IRA is a great way to diversify your portfolio with a tangible asset that can provide security and hedge against the volatile stock market. While gold has the potential for a high return, it’s also possible for it to decrease unexpectedly. You decide when to buy and sell your precious metals and determine if the advantages outweigh the risks in your specific financial situation.  

If you are considering investing with a Gold IRA, it is recommended to consult a financial or tax advisor to see if precious metals would be a good fit for your portfolio. 

It’s also crucial to open a Gold IRA account with a company that has straightforward fees, secure investing, and unmatched client support – like Madison Trust. 

Interested in learning how to open a Gold IRA with Madison Trust? Find out more

If you’re not ready to sign up just yet, don’t worry! A Madison Trust Specialist is available to answer all of your questions.

Investor woman speaking with a financial advisor about her investment strategy and shaking his hand.

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