Should I Invest in a Gold IRA?

should I invest in a gold IRA

Should I invest in a gold IRA is the question that still many ordinary folks ask themselves. In this post, I will outline the reasons for ordinary folk to invest in a gold IRA account.

Any investment asset has certain risks, some higher and some lower. The idea when investing is to know exactly what the risks of a particular asset are, in order to make the right decision, the decision that suits your needs best and at the same time minimizes your risk. Over the years, we’ve seen many investors lose their fortunes because they just got too greedy.

Many investors should be asking themselves the should I invest in a gold IRA question more often, this way they will be able to make a better decision regarding their IRA investment.

The same applies to your IRA investment. An IRA invested solely in mainstream assets will put your savings at risk in case of a market crisis.

For example, last year (2020) between February and March the stock market lost 10.000 points. As a result, trillions of dollars invested in stocks bonds, and other mainstream investment products were lost. Many IRA investors had to postpone their actual retirement time, due to low funds in their retirement accounts.

Gold IRA Definition

A gold IRA investment is an individual retirement account, an account that functions the same way as a regular IRA account however, instead of holding paper assets, it holds physical bullion coins or bars.

Gold IRA vs Traditional IRA

A gold IRA is treated by the IRS as any other IRA. The difference between the two is that a mainstream IRA is invested in mainstream assets such as the stock market, government bonds, options, and so on whereas in a gold IRA the money is invested in gold. The IRS has also allowed IRAs to be invested in other precious metals such as silver, platinum, and palladium. Moreover, Cryptocurrency IRAs are also allowed.

should I invest in a gold IRA

A gold IRA is an asset that holds its value, especially during bad economic times. A gold IRA will secure your savings and offer financial stability to your investment.

A traditional IRA investment (401k, SEP, Thrift, Roth, and so on included) invest in traditional assets, such as the stock market. Although these types of investments can offer great returns, they are subject to large fluctuations during difficult times. That means you could see your money disappearing in a very short time.

Reasons to Invest in a Gold IRA

  1. Diversification. In an investment portfolio putting all eggs into one basket is a big mistake. A prudent investor should include different types of investments just in case things go wrong. Gold is the asset that will diversify your investment portfolio.
  2. Protects your investment from inflation. Inflation rates will rise to high levels thanks to endless money printing by the Fed. High inflation rates are bad news for your dollar. In a high inflation environment, your purchasing power will drop substantially.
  3. Gold is a tangible asset.
  4. Gold is not a chain in someone else’s liability. eg. Having your money invested in a company’s shares and the company goes bust due to illegal activities or because it took the wrong business decisions.
  5. A gold investment protects your savings from geopolitical uncertainty. If a war breaks in the Middle East, for example, the traditional investment assets will take a downturn (stock market) but not gold and other precious metals.
  6. Increasing demand for gold and silver for industrial use. eg gold is used in computers mobile phones and so on.
  7. Low or negative interest rates. That means your dollar loses value every single day if it is stored at the bank.
  8. The weak dollar is more bad news for your life savings
  9. The stock market bubble. We are witnessing an unprecedented bubble in most assets. The stock market bubble though is the one that once it bursts it will actually cause the biggest problems in the economy because this particular bubble is a huge one.

Rotten Political and Financial System

The newly elected Biden administration is faced with an almost impossible task. First, the social and political divisions of this great country should be addressed. Then something must be done to deal with the covid19 virus and then something should be done to change the monetary system.

should I invest in a gold IRA

Most finance experts and market analysts agree that today’s fiat currency monetary system does not work. Since its introduction back in 1971 it has only created disorder and turbulence in the economies and the markets.

Unfortunately, we are faced with irresponsible individuals who do not have the political will and guts to make the right decisions for themselves and for the country. In addition, central bankers are also responsible for this, because they have seen their profits skyrocket, at the expense of you and me, and they do not want that to change.

The Abandoned Gold Standard

In 1971 President Nixon abandoned the gold standard policy. It was a move that surprised the western world. The US kept cheating the rest of the world by printing cash in order to finance the Vietnam war. There was only one way for the US to get out of this and that was to abandon the gold standard policy.

What President Nixon started in 1971 is now leading to an uncontrollable money printing bonanza. Nevertheless, money printing has been carried out in the past in most western economies. Nowadays though the money printing programs that take place right now are enormous. President Trump and the Fed carried out a gigantic 2,5 trillion money printing program. The new Biden administration is willing to add another three billion fake money to the economy.

The Europeans too agree to raise a 2,1 trillion dollars stimulus package. Their funds will be raised by selling bonds collectively. In addition, similar money printing and bond selling programs have-are been carried out by most western countries.

Financial Crisis is on the Way

All these money printing and bond selling programs mean more debt for the bond sellers and worthless money flooding for those who chose to print cash. The results from these are likely to be.

  1. Further weakening of national currencies including the American dollar
  2. High inflation levels
  3. A large drop in our purchasing power
  4. Mainstream assets (stock market, etc.) to take a large fall
  5. Gold and other precious metals will see their value increased substantially
  6. Mainstream IRA programs will suffer big losses

should I invest in a gold IRA

Gold IRA Benefits

You may regret if you choose a conventional IRA or 401(k) investment with a bank or brokerage firm. The stock market bubble is expected to decimate traditional investment assets. Stocks, bonds, and so on will see their prices drop substantially. That means your, life savings could perish overnight and in the end, there won’t be enough savings for you to retire.

Since most IRA accounts are invested in traditional assets, and since all these assets move downwards or upwards together, (correlated assets) there must be another asset that does the opposite.

On the other side gold is a non-correlated asset. (an asset whose value isn’t tied to larger fluctuations in the traditional market) In fact, gold always does well in times of crisis. Call it a financial crisis, recession, geopolitical tensions, war, covid-19, trade war, whatever the case is, gold not only maintains its value but also sees significant gains.

Black Monday1987Iraq-Kuwait War1990Dot Com Crash2001Financial Crisis2008Stock Market Decline-38.9-22.5-27%-34%Gold Price Results+5%+7.5%+1%+5%Gold Outperformed Stocks By Ratio45:131:129:140:1

========>related articles  Gold IRA frequently asked questions

Conclusion

We have seen the risks involved with a mainstream investment portfolio. Prudent investors do not put all eggs in one basket. This is applicable right now because we are facing an overvalued stock market and the effects of the uncontrollable money printing policy.

An IRA investment should be low-risk or risk-free. That’s because it is made of money that is not in abundance but your own hard-earned savings. In addition, if that money gets lost, then you will have nowhere else to turn to.

Since the IRAs are made of hard-earned money then, extra care should be taken to make sure the investment is well protected. Considering gold is a safe-haven asset during bad times, then a gold IRA will ensure that your life savings will not perish overnight in case of a financial crisis.

Should I Invest in a Gold IRA?

There is no doubt the evidence for investing in a gold IRA is overwhelming. However, when investing your life savings all care should be taken in order to avoid possible traps and mishaps.

 

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All Time High for Gold Price - What's Next?

All Time High for Gold Price – What’s Next?

All Time High for Gold Price - What's Next?
Gold Bars

Within a month, gold’s price has reached all-time highs breaking all resistance. The yellow metal managed to break through the 2011 historical highs of $1.920. Everything is set for gold to continue it’s run and market analysts wonder if this is going to be the end of it, or if gold’s epic rally will continue.

According to World Gold Council, in the first six months of the year, there was $39,5 billion invested in gold ETF’s another all-time record high for gold. Only in June, investors added 104 tonnes of gold adding their total investments to a record high of 3.261 tonnes. The appetite for gold increased in July. As stated by the bank of America, there was $3,8 billion invested in gold ETFs in the week between 15 and 22 of June. It was the highest amount of money ever invested in gold within a week.

If we integrate the latest data with the old historical data, we will come to an interesting conclusion regarding gold’s future price.

Gold’s best year for inflows was 2009 when there was a 646 tons increase. This record is already overthrown and that was done during the first six months of the year.

The amount of gold bought by the ETF’s is colossal. It is larger than the amount of gold bought by the central banks for the years 2018 and 2019 together. It amounts to 45% of total world production for the first six months of 2020.

In 2009 when there was a record 646 tons of gold sold, the yellow metal went from $880 per troy ounce to $1.226. Two years later, gold surged to $1.920. Are we on the same path again, or not?

Every time there is a gold surge I always get asked the same question. Is now the right time to liquidate? My answer is: Do the reasons responsible for gold’s performance so far still apply?

Need for an Investment Refuge

The main reasons for gold’s price rally are:

1-The never-ending covid-19 nightmare. We have seen the second wave of the virus spreading like a wildfire all over the world. In the States, the first wave isn’t over yet and things do not look good at all. There is not a single day without bad news. Record company losses, unemployment, companies shut down, zero consumer confidence, and so on.

2-The worsening trade relations between the two superpowers US and China are also bad news.

3-It will take almost a year before a vaccine or proper medicine that deals with the virus is produced. The news from many research centers is not encouraging. For example, a study from the Frankfurt hospital in Germany shows that a number of people who recovered from the virus have developed certain changes in their heart muscle, which make them susceptible to a heart attack. That means, there will be added strain to health centers for a long time after the end of the pandemic.

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To Secure Currencies from the Dollar

All Time High for Gold Price - What's Next?
American Dollar

During the last few years, many central banks acquired vast amounts of gold. In addition, the trend to “bring gold back home” has also been an indication of the coming changes to globalization and international cooperation.

When central banks buy vast amounts of gold, there is always a reason. They usually do it when they expect inflation to rise. Another reason will be because they expect high monetary losses.

Gold will help a western economy to deal with tougher economic conditions and a possible currency crisis due to money printing and a repeated quantitative easing policy. For the rest of the world, gold buying is a way to keep some control over their own currencies.

We have seen countries such as Russia, Turkey, China, India, Iran and so on to acquire gold and secure it at “home” in their own facilities. Gold to them offers independence from the dollar, in case of a numismatic and a trade war. Gold gives their central banks the same opportunities with the western banks.

Low Yields and Negative Interest Rates All Time High for Gold Price - What's Next?

The bond market now is trading at very low yields and in many cases at negative yields. Negative yields and low interest rates result in low spending power. As a result, gold becomes attractive to investors because it is considered to be a store of value and rightly so.

Final Words

The fundamentals for the gold rally are there. There is no reason for the rally to stop. I expect some consolidation to take place soon but I do no see gold slowing down. Gold feeds from uncertain and troublesome times and we are seeing that right now. Nevertheless, acting with caution and always be prudent without placing all eggs into one basket, is the best way to invest in today’s uncertain times.

The low yields, the negative interest rates and the stock market downturn, are threatening many retirement funds with extinction. Thus, the savings of a lifetime for good honest Americans are already slashed. To avoid further losses it is advisable to change your IRA fund into a self directed gold IRA fund.

PS. Stick around, I will be following soon with more

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Gold is on Fire - The Facts

Gold is on Fire – The Facts

Gold is on Fire - The Facts
Gold Bars

Last week’s gold performance has been outstanding. Its run started on Monday from $1,810 and ended on Friday at $1,901 per troy ounce. Gold needs only 19 dollars to get over its record high of $1,920. Judging from last week’s performance this outcome is highly probable to take place the oncoming week.

Reasons for Gold Rally

  • The oncoming US and China trade war
  • The falling yields
  • The growing economic uncertainty due to the Covid-19 nightmare
  • The weak dollar
  • The US and EU economic stimulus

The Oncoming US and China Trade War

The trade issues between the US and China did not start with the covid-19 virus. Prior to the pandemic, the two superpowers were fully immersed in a trade war.

In fact, the trade war started in July 2018 with the US imposing 34 billion in tariffs on certain Chinese products and as a result, China followed suit. The trade war did not stop there and by the end of 2019, the Americans had imposed a total of 450 billion dollars sanctions. The Chinese responded with a total of 170 billion dollar sanctions.

This year the Chinese have been accused of the way they handled the coronavirus crisis and rightly so. President Trump is one of their critics.

The US-China relations saw another escalation last Friday, when China retaliated for Houston’s consulate closure, by ordering the US to close its consulate in the city of Chengdu.

No doubt this action added more fuel to gold’s engine.

The Falling Yields

Gold is on Fire - The Facts
Empty pockets

High grade fixed income plays an important role in a modern investment environment. It tends to be safe, more liquid, and a less volatile asset.

Nevertheless, right now bonds are trading at very low yields even negative yields. In fact, there are trillions of dollars trading at negative yields. This is due to the quantitative easing policy adopted by the European central bank and by the Fed.

This has pushed many investors away from the bond market and forced them to place their capital in profitable assets. Gold is one of them. If we take a closer look at gold, we will see that gold was trading at around $1400 per ounce before the end of 2019. Last Friday gold jumped over the $1,900 mark. In addition, analysts expect gold to continue its rally before consolidating.

The Growing Economic Uncertainty Due to Covid-19 Nightmare

Gold is on Fire - The Facts

There is no country in the world the global pandemic hasn’t touched. In the beginning, we all thought we could deal with it easily by shutting down and staying at home. It didn’t work. Unfortunately, over 14million people have been infected worldwide and over 636.000 have lost their lives.

In the US the nightmare doesn’t seem to come to an end. The number of those infected is on the rise. In Europe, the second wave is on the way. Spain yesterday reported 8,000 new infections, while there is also concern In Italy, France, Germany, and many other countries.

The damage in the global economy is enormous. Trillions of dollars have been lost, large corporations have gone bankrupt, while many more are facing an uncertain future. There is no end to bad news as LinkedIn announced job losses. The Microsoft-owned firm will be letting go of around 960 jobs across the globe, as the pandemic has reduced demand for its recruitment products.

The Weak Dollar

Gold is on Fire - The Facts

The US dollar is down on its knees. At the moment it trades at 0,86 and it looks like it will stay there for a while. The dollar’s downturn came as a natural consequence of the government’s and Fed’s massive money printing program.

The weak dollar makes it easier for international investors to buy gold and silver because the cost is significantly lower. Increased international demand boosts gold’s value.

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The US and EU Economic Stimulus

The Americans and the Europeans have announced massive economic stimulus programs to deal with the covid-19 devastating effects. The US government has already carried out a 2.3 trillion stimulus program and is just about to introduce an additional 1 billion program. This will actually raise the national debt to $26.5 trillion dollars, or 132% of the national domestic product. (GDP)

On the other side, the EU has agreed to spend a $2.1 trillion stimulus package. The Europeans will raise money by selling bonds collectively rather than individually, which then will be given to member states. Most of it will be grants given to countries without them having to pay it back.

Those enormous economic stimulus programs are a way for the US and Europe to deal with the coronavirus’s massive economic blow.

All additional fiscal stimulus introduced around the world will give gold a further boost.

Final Words

  1. The never-ending US and China trade conflict will continue for a while and as the election date is getting closer, president Trump could actually step it up if he thinks he could get more votes out of it.
  2. The quantitative easing policy will continue for at least the next couple of years, which will push more investors out of the bond market and into the precious metals.
  3. The coronavirus nightmare will be dealt with only after a vaccine is introduced and that will be no earlier than 2021.
  4. I do not see the dollar recovering before the end of 2020.
  5. The US and EU economic stimulus are here to stay and that will push gold’s price further.

My opinion is gold and silver will continue to rally, but not for long. There will be some consolidating in the following week’s and then I expect the rally to start again, as the fundamentals are right therefore, now is the right time to invest in gold.

Additional reading:  Investing in gold July 2020

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