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The “Home Storage” Precious Metals IRA Myth

The opinions expressed by columnists are their own and do not necessarily represent the views of

The internet is full of websites promoting “Home Storage” Gold IRAs, “Self Storage” Gold IRAs, “Home Delivery” Gold IRAs, and other enticing captions that lead consumers to believe current law allows them to store gold and silver held in their IRAs at home.

Unfortunately, these claims are not supported by the Internal Revenue Code. Storing qualifying coins and bullion purchased for an IRA account at your home is likely a violation of the Internal Revenue Code.

“An individual retirement account means a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries, but only if the written governing instrument creating the trust meets the following requirements:

The trustee is a bank or other such person who demonstrates to the satisfaction of the Secretary that the manner in which such other person will administer the trust will be consistent with the requirements of this section; Internal Revenue Code §408(a)(2).

We are not aware of, and it is hard to imagine a situation where the Secretary of Treasury and the Internal Revenue Service would approve an individual acting as a trustee for their own Precious Metals IRA. It is even harder to imagine the IRS approving a person’s home as a storage facility.

If the United States government intended to allow individuals to act as custodians or trustees of their own retirement savings this could have been easily accomplished. However, this was not demonstrated in the Internal Revenue Code.

An IRS audit of a taxpayer storing their Precious Metals IRA assets at home may result in the consumer paying federal income tax on all of the assets as well as a penalty of 10% if the consumer is under age 59 ½ .

Consequently, I recommend customers utilize an established custodian/financial institution that specializes in holding precious metals for IRAs in compliance with the IRS requirements.

Central Bank Shenanigans Are Driving Gold Up … and Down

Gold is down early this week partly because the Federal Open Market Committee (FOMC) is holding another one of its eight-times-a-year policy meetings to discuss whether to raise interest rates. The FOMC meets July 26-27 and will announce its decision on Wednesday afternoon, July 27. Most pundits say the Fed will NOT raise interest rates this week, but their language may be more “hawkish,” leaning toward a rate increase in September or later in the year. That assumption is based on the positive turn in economic statistics over the last month. (Positive growth tends to give the Fed “permission” to raise interest rates.)

However, the global trend is still toward lower interest rates. The giant Dutch bank ABN-AMRO has cleared the way to offer negative interest rates to bank depositors come October. Already over $12 trillion in sovereign debt is paying below-zero interest. Japan will make an announcement this Friday that they will lower their already-negative rates even further. As a result of this trend in Japan, individual Japanese investors are rushing into gold. First-half 2016 demand rose 62% over the previous six months and June demand for gold rose 60% over May’s demand at Tanaka Holdings, Japan’s largest bullion retailer.

Next Friday, when the Bank of Japan announces more easing (including negative interest rates and a promised stimulus package) and the European banks hear the results of their recent “stress test,” we may see a decline in the euro and yen, strengthening the dollar further. This could push prices of gold down in the short-term in dollar terms, but gold will likely rise strongly in Europe and Japan, fueling more buying.

Central Banks are Selling Gold into Strength

Speaking of central banks, it turns out that they are lousy market timers. In the 1990s and early 2000s, when gold was relatively low in price, central banks were net sellers of gold. They changed their mind in 2010, buying a little gold, but then they were BIG buyers of gold from 2011 to 2015, after gold peaked.

In other words, their market timing was terrible! They passed up all those profit opportunities from 1995 to 2009, when gold was under $1,000, but they bought lots of gold (averaging nearly 500 metric tons per year) when the price was over $1,000. This year, when gold is rising again, central banks sold gold. The World Gold Council reported that central banks were net sellers of gold from January through May, decreasing their total reserves by 8.7 metric tons – not a very large amount, but this trend represents a cooling of interest in gold among central banks. (We’ll see the first-half 2016 totals sometime in August.)

The biggest gold seller this year is Venezuela, which sold gold because it desperately needs cash to bail out their struggling economy and to fight runaway inflation. However, Venezuela would be better off retaining their gold as a monetary anchor while ditching socialism and allowing capitalism to flourish.

We don’t yet have second-quarter totals, but wouldn’t it be ironic if central banks stopped buying gold in 2016 – the year gold finally resumed its bull market after a correction lasting most of the last five years?

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