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What is a Gold IRA?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 23 August 2016
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A gold IRA is a specific kind of financial account in regional finance systems, i.e. in the United States. The IRA or individual retirement account is a kind of savings account that U.S. citizens can use to shield income from immediate income tax, by saving up money and providing for their personal retirement. Every country in the world has its own systems and procedures for allowing citizens to save money for old age. In the U.S. the IRA exists alongside a system called Social Security, which returns previously collected funds to retirees.

Buying physical gold is not a part of investing in a gold IRA. Rather, it is a financial account that includes gold holdings of one type or another. The IRA may include physical gold, but through various financial maneuvers, that physical gold may or may not be in the actual possession of the account holder.

In the vast variety of IRAs that United States citizens can use to save for retirement, the Gold IRA represents a specific investing philosophy. IRAs are, for the most part, primarily investments; the account holder takes cash and invests it in any combination of equities, securities, bonds or funds, hoping for gains over time. A gold IRA invests in gold in some form, hoping for eventual gains based on the fluctuation of the price of gold.

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In looking at gold IRAs, it’s important to understand the many different ways that investors can participate in gold holdings. Investors can buy physical gold or bullion, as well as coins or gold items that mirror the value of bullion or raw gold. They can also buy gold related stocks, or invest in gold through a variety of precious metals funds. Some of these funds, called exchange traded funds, or ETFs, are bought and sold like single stocks, but include a diversity of gold-based holdings.

Many financial counselors explain to potential account owners that a gold IRA helps an individual investor to back up his or her belief that gold will continue to gain value while other valuations, for example, national currencies, may lose significant value. Some other professionals might explain that a gold IRA can provide a partial hedge against inflation. As the worth of a single national monetary unit, for instance the U.S. dollar, experiences a decline in value or worth, the price of gold will rise by contrast, making dollars invested in gold worth more than they were at the time of gold purchase.

The strategy for a gold IRA may include lump purchases of raw gold, or incremental purchases over time. Purchasing gold in specific ways will help the account holder to gain from future price increases in gold. It’s also important to note that some complex financial instruments may also allow account holders to profit from price declines in gold or other precious metals. Some of these “short funds” are not legally allowed to be part of an IRA, however. Single investors can get qualified counsel from finance professionals on what is allowed to be included in a gold IRA or similar savings account.

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