Since the economic crash of 2008-09, physical Gold IRA companies have been gaining popularity. It’s hard to miss their ads on television, radio, and online. The concept of having a hedge, or insurance against the dollar, stock market, and economic uncertainty makes sense as a part of a balanced portfolio, especially for those retired or close to retirement, who want to take less risk.
Many Billions of IRA dollars have gone into physical gold IRAs over the last decade, and countless companies have popped up offering this service. Unfortunately, the industry is unregulated, and many companies providing Gold IRAs are simply sales organizations, not licensed financial institutions. Most aim to sell specialty coins like Proofs, Exclusive, and Low-Mintage coins, which typically carry extremely high margins.
Understanding the ‘spread’ (margin) and its correlation to mark-up is vital to know how this model works.
Spread vs. Mark-up
Many specialty coins can carry a spread of 20-30% or more. A spread is the difference between the bid/ask or (buy/sell), similar to a mark-up but in reverse. For example, a $100 retail priced coin with a 30% spread means the buy-back price is $70. That also means that the actual value of the coin is $70, and the coin will need to go up 42% to break even. It can take years, if ever, to break even, let alone see a profit. The profit margin on a $100,000 account is $30,000 in this example.
For those who don’t fall for the specialty coin trap, there is the option of low-cost bullion coins and bars like American Eagles (NOT PROOF), Canadian Maple Leafs, and a variety of different size bars that are bought and sold near the spot price of gold. These are obviously better options for investors, mainly because the spread to overcome is much smaller, usually between 3-8%.
Premiums for retail coins/bars are on the rise
In today’s environment, even bullion coins and bars carry high premiums due to availability issues. One could pay several hundred dollars over spot for one ounce of gold when you combine the premium and the spread.
Regardless of the type of gold product and the spread of the investment, there is a real problem with liquidating physical gold assets within an IRA.
- Some companies will simply refuse to buy back the metals they sold. Yes, this does happen.
- In most cases, the current bid (buy-back) price is not posted anywhere, so you’re at the mercy of the dealer to make you an offer.
- Once a price is agreed on, it can take weeks to liquidate the gold investment into dollars in an IRA.
Gold is a 24 hour a day market, and having the ability to liquidate anytime is crucial. Also, always knowing what your investment is worth if you want to liquidate is basic investing 101.
iTrustCapital’s Gold IRA solves these problems
iTrusts’ service gives clients the ability to buy and sell physical gold 24/7. Clients place trades through iTrusts’ interface which are executed through precious metals leader Kitco. The client’s ownership is ledgered on the Tradewinds blockchain with Vaultchain ® Technology and securely stored at the Royal Canadian Mint.
iTrustCapitals’ clients get all the benefits of owning physical gold in their IRAs without the pitfalls of other Gold IRA models. No dealing with commission sales reps, no crazy mark-ups, no suffering from inferior liquidity when it’s time to sell.
iTrustCapital is an investment platform that allows clients to buy and sell cryptocurrencies and physical gold real-time, 24/7, through their retirement accounts. Launched in 2019, iTrust services thousands of clients seeking to diversify not just their portfolio, but also from the traditional financial system and take more direct control of their retirement assets.