Gold IRAs continue to grow in popularity with savvy investors who want to find a way to increase their gold exposure. They are especially popular for individuals who want to hedge against market volatility. There are certainly a lot of very attractive sounding ads promoting gold exposure and gold IRAs.

Most of the popular gold IRA advertisements promote the idea that you need them to both boost your retirement savings as well as insulate against future market volatility. For the most part, they promise there is little to no minimum investment requirements. Some of these ads go so far as to show you how to open a gold IRA account or give you tips for how to roll over your existing 401(k) into their gold IRA.

Most of these ads are trying to eloquently play on potential investors fears of financial collapse or a coming time of economic instability. Indeed, gold has a long history of helping to insulate against time of inflation or other economic issues that are driven by excessive national debt. They tend to pitch gold IRAs as a true investment, rather than just a paper promise.

This strategy is designed to play on the general concern investors have about the asset management world. They attempt to essentially frighten individual investors into thinking that their current holdings and investments could be lost in the blink of an eye.

The somewhat shady techniques of these advertisements raise additional concern, that the overly emotional messages they transmit, could mean that there is little truth to what they are saying. So, is it a good idea to invest in a gold IRA? Or are you better off riding the natural ebb and flow of the stock market? To really understand, we’ll need to take a deeper dive and a little bit closer of a look at gold as well as the benefits and risk of increasing your gold exposure.

Can Gold Help Keep My Investment Capital Safe?

Most IRAs diversify their investments into more convention assets like mutual funds and stock. There are also some that are self-directed or offer an alternative asset selection option. With these funds, physical gold and silver are sometimes allowed in the covenant of rules, but most aren’t open to all precious metal markets.

It’s also worth keeping in mind that when it comes to holding physical gold and other precious metals that the tax code also requires an IRS-approved custodian or trustee. You should be suspicious of any entity that promises a loophole around these regulations. There is also some mixed evidence on whether or not owning gold can really keep your savings safe.

To begin with, gold can provide a degree of wealth insurance against inflation. How strong it can be will depend largely on your timing as well as your patience. For the most part, gold does a very good job of holding onto its long-term value. However, there have been times when it has been volatile.

During a period of time from 1981 to 2000 inflation in the United States nearly doubled. Yet gold’s price per ounce largely stayed the same or simply went sideways. At the start of the 21st-century gold and many other precious and semi-precious metals started to take off.

In fact, gold rose by more than 500% from January 2000 to the end of the third quarter of 2011. This meant it went from roughly $280 per ounce to an astounding $1,900. During that same span of time inflation only increased by 34%.

Since the end of 2011 gold has decreased in value by roughly a third, to settle around $1,270 per ounce. In that same span of time inflation edged up slightly by nearly 8-percent. It’s also worth noting that silver had a similar performance during those same stretches of time.

Ultimately, the big question when it comes to investing in a gold IRA is to speculate on how gold is going to perform in the medium and long term. It also helps to contrast that prognostication against the stock market projections in the same terms.

Which Direction Is Gold Headed?

Gold’s history shows a relative amount of stability compared to other stock market options. This means most savvy investors and investment advisors will advocate 3 to 5% diversification into gold, silver or other precious metals.

Yet, it’s also worth bearing in mind that gold’s massive boost in the early part of the 21st century was in-and-of-itself outside of the historic norms for how the precious metal has behaved in the past. It’s speculated that if gold returned to its fair value compared to inflation over the next decade or so, then gold investors it would stand to lose around 4.5% per year.

The Treasury Inflation-Protected Security, which is also known as TIPS, notes that one significant difference between precious metals and other types of investments is that they have no income stream. There is no interest like you find on a bond or dividend produce from a stock.

Are There Less Costly Ways To Increase Gold Exposure?

Aside from potential tax issues that could come into play, when you cash out a precious metal investment, there are other cost-effective ways to add gold to your retirement portfolio. Before going whole-hog on a gold IRA you might want to also look into other things like investing in an Exchange-Traded Funds or ETFs.

There are entities like SPDR Gold Shares, ETFS Physical Swiss Gold Shares, IShares Gold Trust, that essentially trusts who own significant quantities of gold bullion. The advantage of a gold ETFs is that you can purchase and sell the shares just like a standard stock. You can also do things like holding them in a conventional IRA or even a 401(k) without having to develop and manage a new account.

Gold EFTs don’t have a minimum investment beyond the cost of a single share, which can range from as little as $5 to as much as $120. This is thanks in large part to their ability to purchase and store gold in bulk, which also helps to keep their operating expenses relatively low.