- Seen as a safe investment during international strife, gold prices soar amidst U.S-Iranian tensions.
- Although prices are going up, market experts say investors underestimate the situation with Iran.
- If purchasing gold with retirement funds, be mindful of how to correctly store gold.
Gold prices soar amidst Iranian tensions, but should investors purchase more agressively?
It can be said that investors are discerning when it comes to tailoring their investment decisions in accordance to current affairs. For example, recession fears and the U.S.-China Trade talks had more investors turning to alternative assets over traditional ones. But according to CNBC’s Jim Cramer, investors are underestimating the rising tensions between the United States and Iran, unconscious of the negative consequences that may ensue.
Gold as a Safe Investment
We’ve seen this before, most recently with the U.S.-China trade wars: as retirement investors become fearful of what the future may hold, they turn to gold during political and international strife, as it’s seen as a safe investment.
Even Cramer, host of the CNBC finance TV show, Mad Money, said that “the key” to the market is “gold, gold, gold.” He’s certainly not alone in this sentiment: the price of gold soared for the ninth straight session, and on Monday Jan. 6, 2020, gold futures marked their highest settlement in seven years. Numbers don’t lie. There is an evident shift away from stock investments, toward gold.
Dow Futures Should Drop More
The price of gold late Monday was at $1,568.15 per ounce, a slight drop from $1,590 per ounce early Monday. Before the stock market opened Monday morning, Dow futures had dropped more than 100 points.
But according to Cramer, that isn’t enough of a drop, given the gravity of the current situation. Iran is not a “paper tiger”, Cramer said on Squawk on the Street, a CNBC show that follows Wall Street trading in the U.S. And Cramer believes that the futures should have gone down more – much more.
Despite its losses, the Dow remained roughly 1% lower than Thursday’s all-time highs. While more investors are purchasing gold in lieu of current events, Cramer seems to believe more investors should purchase gold and avoid less risky investments, such as stocks.
Gold Investments with a Self-Directed IRA
A Self-Directed IRA is much like a traditional IRA, but allows investors to make alternative asset investments, such as real estate and gold, along with traditional investments. Buying gold with your retirement funds is perfectly legal. In fact, it has been permitted since the inception of the IRA.
But even though you can use retirement funds to purchase gold, there are rules to consider when holding gold in a Self-Directed IRA.
- The Internal Revenue Code states that you cannot hold gold, silver or palladium bullion personally. You must go through a trustee or approved trust company to hold precious metals.
- Most tax practitioners believe precious metals, such as gold should be held by a trustee, as coins may also be bullion.
- If you have a Self-Directed IRA LLC, as manager of the LLC you can purchase gold coins. If you have a Solo 401(k), the trustee will have to purchase the coins for the benefit of the plan and coins should be held in a depository.
- If you have a Self-Directed IRA, you can hold gold coins in a safe deposit box, but it must be at a U.S. bank and in the name of the Self-Directed IRA LLC.
Learn more information on how to store gold and which precious metals are IRS approved.