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
"I only regret that I have but one lap to give to my cats."
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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
"I only regret that I have but one lap to give to my cats."
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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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Re: Holding gold in retirement accounts

Post by vnatale » Sat Apr 11, 2020 5:04 pm

dualstow wrote:
Tue May 30, 2017 10:28 am
I have a Roth at Vanguard, and a Traditional IRA there, too. Long story, and I'll spare you, but I'm going to stick with building up the Roth. Don't want too many small accounts, and I mostly trade free in Vanguard.

FWIW, I think Barrett understood your post. I think where to hold gold and how much you have to hold/ want to hold are inextricably linked.

I suppose gold ETFs weren't so much of a problem when everyone was talking about rebalancing out of them. :-) Put in a little in an IRA, watch it grow, sell, no problem. I missed most of that, having started around 2010. Now that gold isn't doing so well, they're under more scrutiny, and justifiably so.

My main struggle is whether to make the pp a larger part of my total, which effectively means a bet on gold, buying more gold. What if I load up the truck and gold doesn't come back in my lifetime? What if I don't load up, and merely break even when gold soars once again?

If most of your invested capital is in tax-advantaged, I envy you. It seems like you're going to be stuck with ETFs, though, for the most part.
ETFs plus this new Fidelity plan. If you do trade coins at Fidelity, please do let us know how it goes.
Almost three years later what is the status of your "struggle"?

Vinny
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Re: Holding gold in retirement accounts

Post by dualstow » Sat Apr 11, 2020 5:37 pm

vnatale wrote:
Sat Apr 11, 2020 5:04 pm
Almost three years later what is the status of your "struggle"?
Dormant.
Luckin Coffee, another reason why I mostly stick to the domestic (U.S.) market
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Re: Holding gold in retirement accounts

Post by vnatale » Sat Apr 11, 2020 6:03 pm

dualstow wrote:
Sat Apr 11, 2020 5:37 pm
vnatale wrote:
Sat Apr 11, 2020 5:04 pm
Almost three years later what is the status of your "struggle"?
Dormant.
!!!!!

Vinny
"I only regret that I have but one lap to give to my cats."
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Re: Holding gold in retirement accounts

Post by ochotona » Sat Apr 11, 2020 7:07 pm

technovelist wrote:
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.
And you pay the fees with after-tax money, and you don't drain away your precious tax-free space.
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