Precious Metals IRAs
The law governing acceptable precious metals investments for IRAs mentions specifically only two gold and silver coins: American Gold Eagles and Silver Eagles. However, other forms of gold bullion and silver bullion became approved precious metals investments in 1997. The change was especially beneficial to IRA investors thinking of buying silver for their IRAs.
One-thousand ounce and 100-oz .999 fine silver bars carry much smaller premiums over spot than do Silver Eagles. The 1997 change means that precious metals IRA investors now can get much more silver for their IRA investments.
Another significant change was the inclusion of American Platinum Eagles, the most popular platinum bullion coins in the US. This change offers IRA investors the opportunity to diversify their investments.
As noted, Gold Eagles are the only gold coins specifically approved for precious metals IRAs. Other gold coins, to be eligible as IRA investments, must be at least .995 fine (99.5% pure) and be legal tender coins. This provision makes Canadian Gold Maple Leaf coins, Australian Kangaroo Nuggets and Austrian Philharmonics acceptable precious metals IRA investments. Conversely, many gold coins, such as Krugerrands (91.67% pure) and old Double Eagle gold coins (90% pure), are not legal investments for precious metals IRAs.
Silver Eagles are the only silver coins specifically approved for IRAs. For other forms of silver to be eligible for precious metals IRAs, they must be at least .999 fine. This requirement makes the Royal Canadian Mint's Silver Maple Leafs also eligible. (These Canadian silver coins are .9999 fine.) However, both American Silver Eagles and Silver Maple Leafs carry high premiums that could shrink in a rising market. For precious metals IRA investors who prefer silver, CMIGS recommends bullion bars. Pre-1965 US junk silver coins are not eligible for IRAs.
GoldStar Trust Company
CMIGS recommends GoldStar Trust Company for investors who want to own IRAs that will accept precious metals. Based in Amarillo, Texas, GoldStar Trust Company is an approved gold silver IRA rollover custodian, manages more than 10,000 accounts and has more than $400 million under management. GoldStar Trust is regulated by the Texas Banking Commission.
CMIGS has worked with GoldStar Trust (or its predecessor) for fifteen years and always has found that GoldStar Trust emphasizes customer services. Further, of greater interest to precious metals investors, GoldStar Trust-administered IRAs are economical.
How to put gold in an IRA with GoldStar Trust Company
Establishing a precious metals IRA with GoldStar Trust Company is a simple process. First, GoldStar Trust IRA forms can be downloaded. Or, GoldStar Trust IRAs from can be obtained by calling CMIGS at 1-800-528-1380, in which case we will mail them to you. If you want a Roth IRA forms, be sure to ask for them. The GoldStar Trust Roth IRA forms differ from the Traditional IRA forms. On obtaining the forms, follow three simple steps:
- Submit the completed paperwork;
- Fund the account;
- Direct CMIGS as to which precious metals to buy.
complete the paperwork and send, along with a check for $180 to GoldStar Trust. The $180 takes care of GoldStar Trust's first year's minimum annual administration fee ($50), the first year's storage ($90), and the initial transaction fee ($40.) A $40 transaction fee is charged with every buy or sell.
Actually, GoldStar Trust's annual fee is .08% of the fair market value of the assets in the account, with a minimum of $50 and a maximum of $250. If the funds being transferred to GoldStar Trust are more than $62,500, calculate the fee and include it in the check being submitted to GoldStar. If the funds exceed $312,500, the first year's administration fee will be $250.
The metals will be stored at HSBC Bank USA's New York precious metals depository, which is one of the world's largest precious metals depositories and is used by COMEX and other major commodities exchanges. (HSBC is one of the world's largest banks with more than 6,000 offices worldwide.) Annual storage fees are $90 a year regardless of the quantity of metals or the value of the metals. (See "Financial Disclosure" on the IRA Fee Schedule, which comes with the IRA packet.)
complete the proper forms to transfer the funds to GoldStar Trust. Normally, the funds are transferred directly from an existing IRA or Qualified Retirement Plan. When funds are to be transferred from an existing IRA, a Cash Transfer Request form needs to be completed, signed and sent along with the account application. When an investor has taken possession of IRA funds, funds from a 401K or other Qualified Retirement Plan, a Rollover Certification must be sent along with the application.
Finally, if transferring funds from an existing IRA, or funds from a discontinued plan, enclose a copy of the old IRA plan. This enables GoldStar Trust to verify that the funds are eligible to be in an IRA. Step #3: direct CMIGS as to which precious metals to buy. After CMIGS delivers the metals to the depository, GoldStar Trust pays CMIGS, and the IRA investment is complete. A CMIGS broker will gladly discuss with you which precious metals investments would best fit your IRA goals.
Investors wanting to discuss setting up an IRA with GoldStar Trust are encouraged to call CMIGS at 1-800-528-1380. All our brokers are knowledgeable about precious metals IRAs. If, after getting your questions answered, you want to proceed, you can download the GoldStar Trust forms needed to open a precious metals IRA. If you want, one of our brokers will discuss the forms with you.
If you do not have the capability to download GoldStar Trust's forms, CMIGS will mail them to you. If you want the forms mailed, please call us at 1-800-528-1380.
"Can I put gold and silver coins I already own in my IRA?"
No, IRS regulations concerning IRAs prohibit that.
"Can I hold the metals myself?"
No, IRS regulations require that the metals be held by an approved depository. Even GoldStar Trust cannot hold the metals; consequently, GoldStar Trust has arranged for HSBC Bank USA's precious metals depository to secure the metals.
"Why should I buy gold and silver?"
First, for diversification, which is the cornerstone of a solid investment portfolio. Until the mid-1990s, when stocks started producing fabulous profits, most investment advisors recommended balanced portfolios, with mixtures of stocks, bonds, and precious metals.
Stocks provided the opportunity for growth; bonds produced income, and precious metals protected against inflation and financial chaos. But, as the stock market climbed onward and upward, caution was thrown to the wind. Stocks came to dominate most portfolios, pushing bonds to the back burner and precious metals out of the picture. Now appears to be a prudent time to return to a portfolio weighed heavily toward precious metals.
The second reason for investing in silver and gold is that their prices are inversely related to stock prices over the long run. That is, when stock prices go up, precious metals prices go down. Past studies have proven this to be true. Likewise, when stock prices go down, gold and silver prices tend to rise or at least are stronger than stock prices.
"Should I buy gold coins or gold stocks?"
Instead of investing in gold or silver bullion, many investors opt for precious metals mining stocks because they normally yield higher percentage increases than gold and silver when metals prices rise. However, investing in precious metals stocks carries risks beyond buying gold bullion or silver bullion.
The risks are many and varied, and sometimes unforeseen problems can send stock prices plummeting, which, of course, is true of all stocks. Management mistakes cause most mishaps. With precious metals and other mining stocks, the sizes and grades of ore deposits can be overestimated or the cost of extracting the ore can be greater than expected, resulting in lower profits or even losses.
Additionally, businesses always struggle with economic downturns, interest rate increases, labor troubles, governmental interventions, and environmental requirements. Increases in energy costs, even energy shortages, could plague some mining companies, notably those operating in Nevada's famed Carlin Trend.
For disastrous management decisions, Sunshine Mining and Refining Company comes to mind. Once a favorite of silver stock investors, Sunshine traded at $13 in early 1998 on the NYSE. However, by 2000 Sunshine was in Chapter 11, and its stock has traded at less than a nickel on the NASDAQ.
In 1996, Sunshine's management borrowed $30 million and in 1997 an additional $15 million for development of its West Chance ore body at the Sunshine Mine, after which the company is named. Part of the borrowed funds were used to delineate what the company calls a "world-class" ore body in Argentina.
Although management claims the West Chance efforts were successful, management misjudged cash flow and was unable to meet interest and principal payments on the $45 million. Efforts to refinance were unsuccessful, and the lenders took control of the company and mothballed the famed Sunshine Mine. Shareholders wound up with about 3.6% of the company. Unfortunately, this was not Sunshine's only brush with disaster.
In 1972, a fire in the Sunshine Mine nearly destroyed the company. While Sunshine's stock price suffered, the company managed to survive. Now, Sunshine Mining essentially has been taken over by its creditors.
Ashanti Goldfields (Ghana) and Cambior (Canada), two gold producers, also exemplify what can happen to share prices when managements make bad decisions. In early 1996, Ashanti (ASL) traded at $25; in 2000, Ashanti's stock traded below $1.50. In early 1996, Cambior, traded at $16; in late 2000, Cambior's stock traded at twenty-five cents.
Both companies got caught up in forward sales, and their balance sheets were severely damaged by margin calls in 1999 when gold rallied from the $250s level to $338 on the announcement that 15 European central banks would limit gold sales and leasing for five years (The Washington Gold Agreement). Gold's price move caused Ashanti and Cambior to liquidate assets and/or convert loans to equity shares at rates that severely damaged the value of their stocks.
Precious metals stocks are a way to participate in precious metals bull market; however, compared to gold and silver bullion, stocks are risky. No one ever went broke holding a pure gold investment or silver investment. The same cannot be said of paper assets.