When economic uncertainty hits the stock market, such as the COVID-19 (coronavirus) scare, people view gold as a way to hedge (an investment to offset losses in another asset class) or as a safe haven (protect investments against a possible catastrophe). Gold is also used by many as an investment to combat inflation.
As you can see from the below gold historical date and inflation chart, gold rose as inflation kicked in during 2004. Following the great recession of 2008, gold continued to rise as people invested in it as a safe haven due to economic uncertainty. If you can recall, investors during this time were worried about the eurozone crisis, the Dodd-Frank Wall Street Reform Act and the debt ceiling.
Historical Gold Price Chart
Historical Gold Prices (2000 – 2020)
|Year Open||Year High||Year Low||Year Close||Annual
While any of these gold investing options may work for combating inflation or economic uncertainty in the long term, futures and ETFs/stocks can be used to take advantage of short term fluctuations in the price of gold.
Different Gold Investing Options
You can buy physical gold in the form of bars or coins. If investing in physical gold with an IRA, you will need to make sure you abide by IRS rules. This means the gold will have to be pure, the coin cannot be a collectible, and you cannot have personal possession of the gold. The gold will need to be deposited in an IRS-approved depository.
Gold Private Stock
Gold companies may be looking to raise funds in the form of private stock. For some companies, this may be an advantageous way to raise money as an IPO can be pricey and it allows the business owners to maintain full control of the operations. If you are looking to invest in a private gold company through your IRA, don’t go asking your brokerage to do so. It is unlikely that it is in their business model and they will not be able to hold the investment for you.
Private gold companies can be a much bigger risk as they are illiquid, require long investing time frames, may be in development stages and may never be profitable. Additionally, you may need to qualify as an Accredited Investor in order to participate in the offering.
Short to Long Term:
Gold ETFs and Stocks
If you do not want to own physical gold or want a short term investment, another gold investing option is gold stocks or ETFs. You can even make money when a gold stock or ETF goes down by shorting. While some brokerages may not allow you to short in an IRA account, you can profit when a gold stock or ETF goes down by investing via options. Options, like futures contracts, allow you to make bets via contracts gold stock or ETF is going down by buying what is called a Put Option. Options, depending on the stock/ETF, can be weekly or monthly.
A gold ETF is an exchange-traded fund that acts like a stock, as they are traded similarly and can be bought with a brokerage account. However, the fund itself does not actually hold physical gold; instead, it holds contracts that are backed by gold. A gold ETF is, therefore, a good way to give an investor exposure to the price movements of gold without actually owning physical gold. There are quite a few options when it comes to Gold ETFs. At the time of this article, there were 18 Gold ETFs to choose from. Some include Aberdeen Standard Gold ETF Trust (SGOL), Perth Mint Physical Gold ETD (AAAU), SPDR Gold Trust, (GLD), and iShares Gold Trust (IAU).
Gold stocks are not directly invested in gold but rather companies that mine gold. As a result, they are often more volatile than the price of gold as the share price will fluctuate based on the company’s operations. There are many gold stocks out there such as RGLD (Royal Gold, Inc.), KL (Kirkland Lake Gold Ltd), AEM (Agnico Eagle Mines LTD), SSRM (SSR Mining Inc), and SAND (Sandstorm Gold LTD) to name a few.
Short to Medium Term:
Another gold investing option is purchasing futures contracts. The futures market is a leveraged contract to buy gold at a specific day and price in the future, usually 3 months ahead. This gold investing option is mainly for speculation and an active investor as many future traders release their positions before the contract comes due.
Unlike physical gold, this gold investing option allows you to profit if gold goes down. All you have to do is buy a contract to bet the price of gold is going down. Trading futures also allows you to trade the price of gold without needing to own it in its physical form.
How Midland Can Help With Gold Investing Options
Midland specializes in holding alternative investments such as real estate, promissory notes, futures/forex accounts, precious metals, and private stock. Midland will be able to hold your investment and do the necessary record keeping and reporting to the IRS, allowing you to invest in alternative assets through your IRA. Although Midland specializes in Self-Directed assets, such as private placements, Midland does have the ability to hold a brokerage account as an asset within your Midland account. This will allow you to trade publicly traded stocks and ETFs while keeping everything within the Midland custodial umbrella.
Midland is not a fiduciary. Midland’s role as the administrator of self-directed retirement accounts is non-discretionary and/or administrative in nature. The account holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account. Midland has no responsibility or involvement in selecting or evaluating any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee endorsement, or certification of any investments.