Holding gold in retirement accounts

Discussion of the Gold portion of the Permanent Portfolio

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vnatale
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Re: Holding gold in retirement accounts

Post by vnatale » Fri Jan 03, 2020 9:18 pm

sophie wrote:
Mon May 29, 2017 5:02 pm
As dualstow observed, there's been quite a few discussions of gold recently. This question hasn't come up recently though, and I can't even remember any old threads about it.

Like everyone else, I hold a lot of gold ETF shares because there aren't a lot of options in tax-advantaged accounts, but I'm increasingly nervous about it. These funds often trade differently from gold price, and the discrepancy can be substantial. The recent takeover of GTU and the problems at some funds during the 2013 drawdown makes it clear that there's more to the value of ETF shares than gold price. Since gold is meant in part as protection for extreme situations, I'm not sure I want to be testing those waters further with ETFs. Gold is the one place in the portfolio where you really want to be ultra-conservative.

Putting all the gold into taxable, where there are much better options, would be great, but the math doesn't work out for me. I'm happy for cash and gold to dominate in taxable, but I don't want things to be too out of whack.

An option for retirement accounts that I'm considering as an ETF alternative is buying gold coins within an IRA. In most cases you'd have to open a special account and deal with astronomical fees, but Fidelity has recently made this a viable option, with fees not much higher than an ETF. The coins are kept in unallocated storage at the Bank of Nova Scotia. There is still some manager risk (i.e. you have to trust Fidelity and its partner bank), but there are fewer layers to worry about. I'd posted about this before but as kind of a side issue. Here's Fidelity's info page on its gold bullion program:

https://www.fidelity.com/trading/invest ... r-platinum

In a nutshell: buying + selling fees on amounts between $5,000 and 50,000 total 4.5%, and for transactions over $50,000 it's 2.98%. Annual storage costs are 0.5% (billed quarterly and you can pay from another account). These were lowered recently from 2-3% the last time I'd checked. In comparison, the bid-ask spread at Colorado Gold is 3.5%, IAU's ER is 0.25%, and GLD's ER is 0.4%.

Everbank has a similar program, but the fees are much higher than Fidelity's. Ditto for specialist precious metal IRAs. Frankly I'm amazed that Fidelity has been able to offer the program at these prices. It's almost too good to be true.

I was thinking I'd like to leave something like 20% of my gold allocation in ETFs, for ease of rebalancing, and put the rest into the Fidelity precious metals program as "deep" gold. Buying amounts >$50K would be worth it to minimize transaction costs.
Sophie

Read through all the posts in this topic and did not find a concluding one from you as to what you ultimately decided to do.

Are you doing this with Fidelity?

If I am going to buy gold in tax advantaged accounts this is something I should be considering.

Therefore, quite interested in any updates from you (or, anyone else).

Thanks

Vinny
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vnatale
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Re: Holding gold in retirement accounts

Post by vnatale » Fri Jan 03, 2020 9:31 pm

sophie wrote:
Sun Jun 04, 2017 8:15 am
Not if they're in a retirement account. I don't hold ETFs in taxable. What's the point? Buy physical or something like Perth Mint instead.

DragonJoey, congrats on the decision, and it sounds like a good plan. I realized I have another alternative: right now I have an automated monthly contribution to each of the 4 assets in taxable. I can stop the cash contribution and redirect it to gold, then make up the missing cash with the annual Roth contribution combined with ETF sales, if needed.
Sophie,

As I'm rereading the relevant posts in this topic it appears that this could have been your chosen solution?

Vinny
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Re: Holding gold in retirement accounts

Post by technovelist » Sat Jan 04, 2020 6:59 am

vnatale wrote:
Fri Jan 03, 2020 9:18 pm
sophie wrote:
Mon May 29, 2017 5:02 pm
As dualstow observed, there's been quite a few discussions of gold recently. This question hasn't come up recently though, and I can't even remember any old threads about it.

Like everyone else, I hold a lot of gold ETF shares because there aren't a lot of options in tax-advantaged accounts, but I'm increasingly nervous about it. These funds often trade differently from gold price, and the discrepancy can be substantial. The recent takeover of GTU and the problems at some funds during the 2013 drawdown makes it clear that there's more to the value of ETF shares than gold price. Since gold is meant in part as protection for extreme situations, I'm not sure I want to be testing those waters further with ETFs. Gold is the one place in the portfolio where you really want to be ultra-conservative.

Putting all the gold into taxable, where there are much better options, would be great, but the math doesn't work out for me. I'm happy for cash and gold to dominate in taxable, but I don't want things to be too out of whack.

An option for retirement accounts that I'm considering as an ETF alternative is buying gold coins within an IRA. In most cases you'd have to open a special account and deal with astronomical fees, but Fidelity has recently made this a viable option, with fees not much higher than an ETF. The coins are kept in unallocated storage at the Bank of Nova Scotia. There is still some manager risk (i.e. you have to trust Fidelity and its partner bank), but there are fewer layers to worry about. I'd posted about this before but as kind of a side issue. Here's Fidelity's info page on its gold bullion program:

https://www.fidelity.com/trading/invest ... r-platinum

In a nutshell: buying + selling fees on amounts between $5,000 and 50,000 total 4.5%, and for transactions over $50,000 it's 2.98%. Annual storage costs are 0.5% (billed quarterly and you can pay from another account). These were lowered recently from 2-3% the last time I'd checked. In comparison, the bid-ask spread at Colorado Gold is 3.5%, IAU's ER is 0.25%, and GLD's ER is 0.4%.

Everbank has a similar program, but the fees are much higher than Fidelity's. Ditto for specialist precious metal IRAs. Frankly I'm amazed that Fidelity has been able to offer the program at these prices. It's almost too good to be true.

I was thinking I'd like to leave something like 20% of my gold allocation in ETFs, for ease of rebalancing, and put the rest into the Fidelity precious metals program as "deep" gold. Buying amounts >$50K would be worth it to minimize transaction costs.
Sophie

Read through all the posts in this topic and did not find a concluding one from you as to what you ultimately decided to do.

Are you doing this with Fidelity?

If I am going to buy gold in tax advantaged accounts this is something I should be considering.

Therefore, quite interested in any updates from you (or, anyone else).

Thanks

Vinny
I use GoldStar Trust (https://www.goldstartrust.com). They have fees of 10 basis points for storage and another 10 basis points for account administration, with the latter capped at $275.

They don't buy or sell, so you have to get your own dealer for buying and selling and pay those fees too. I have a dealer account with Dillon Gage (https://dillongage.com/) but I'm sure there are others you can use.
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Re: Holding gold in retirement accounts

Post by sophie » Sat Jan 04, 2020 10:10 am

Good question....

AAAU really changed the game. I am much more comfortable with that than with ETFs like GLD and IAU that are doing potentially risky things like loaning out their gold, or buying futures contracts or derivatives. That's what could potentially cause these funds to not behave like gold in a crisis situation. For taxable I'm sticking with either gold Eagles or the Perth Mint: 1% or 2% bid-ask spread, depending on whether you make lump sum or monthly contributions, and zero storage fees. Gotta love that, and I'm not sure it's really any less safe than allocated storage.
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Re: Holding gold in retirement accounts

Post by technovelist » Sat Jan 04, 2020 11:21 am

sophie wrote:
Sat Jan 04, 2020 10:10 am
Good question....

AAAU really changed the game. I am much more comfortable with that than with ETFs like GLD and IAU that are doing potentially risky things like loaning out their gold, or buying futures contracts or derivatives. That's what could potentially cause these funds to not behave like gold in a crisis situation. For taxable I'm sticking with either gold Eagles or the Perth Mint: 1% or 2% bid-ask spread, depending on whether you make lump sum or monthly contributions, and zero storage fees. Gotta love that, and I'm not sure it's really any less safe than allocated storage.
I think having physical gold coins or ingots stored in a commercial depository with a separation of custodian from administrator is probably the safest. 0.2% a year isn't that much if you consider it also includes record-keeping and other administrative expenses.
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