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AlDente67

Still stuck on the metals question

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Looking at my sad IRA yet again, still wrestling with the idea of converting some of the lackluster Mutual Funds into metals.  Most of the gold shills advertise that they have a method to convert IRA/401k money into physical metals.  I don't see how that is possible without invoking the withdraw penalty.

 

Following gold and silver over the past year, neither has done much of anything, which means even a shift into a gold fund would likely start off in the red if any fees/commissions are associated.

 

But assuming a physical transfer can take place at low cost, what do you do with the coins/bars?  If an event ever occurred where the metals were useful for transactions, how do you make change from a 1-oz coin to buy a loaf of bread?

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I know that I have seen advertisements for these IRA's but they may not be "approved" yet by the IRS: https://en.wikipedia.org/wiki/Gold_IRA

 

Maintaining some gold/silver for a SHTF situation probably makes sense. You do have the issue of it being stolen but I am guessing this is a little less likely with people on this forum.

 

But as an "investment" I leave speculation in gold/silver and trying to time the market to the so called experts (meaning that I don't) This is a huge risk in playing this game with any security/asset.

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There are companies that will act as custodians for your physical metal in a retirement account.

 

I do not have personal experience with them but my understanding is that you never take receipt of the metal. They maintain it for you.

 

As an aside, I'm not sure you'd want to convert your full retirement into precious metals. But that's just my take.

 

Sent from my ONE A2005 using Tapatalk

 

 

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Looking at my sad IRA yet again, still wrestling with the idea of converting some of the lackluster Mutual Funds into metals.  Most of the gold shills advertise that they have a method to convert IRA/401k money into physical metals.  I don't see how that is possible without invoking the withdraw penalty.

 

Following gold and silver over the past year, neither has done much of anything, which means even a shift into a gold fund would likely start off in the red if any fees/commissions are associated.

 

But assuming a physical transfer can take place at low cost, what do you do with the coins/bars?  If an event ever occurred where the metals were useful for transactions, how do you make change from a 1-oz coin to buy a loaf of bread?

 

>>how do you make change from a 1-oz coin to buy a loaf of bread?

 

The same way you always did.  You go to the money changer.     Despite the rhetoric "You can't eat your gold" there will always be someone willing to take precious metals and there will always be someone willing to make change for you for a fee.

 

If we are at a point where none of these things exist, there isn't going to be a baker willing to sell you bread for any reason but even in the warlord regions of Africa where there is no functioning government and hasn't been since the British left, you can still buy and sell things.

 

As a side note, PMs are a place to park money.  They aren't a good investment in which you intend to make money, specially if you buy at the peaks.    Converting your 401k/IRA/Whatever into PM funds or ETFs or whatever, isn't what I would do with my money.   Unless you can stand over it and defend it with a rifle, you don't own it.   Once you have physical, it isn't an investment, it's a hedge against inflation or government currency manipulation.

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So if your IRA investment portfolio went down and you want to switch to metals that got crushed too... What makes you think that when the metals start to recover your existing portfolio won't equally recover?

 

That's called market Beta. Don't be foolish and sell one thing at a loss thinking the other thing which probably went down also will outperform what you already own

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>>how do you make change from a 1-oz coin to buy a loaf of bread?

 

   Once you have physical, it isn't an investment, it's a hedge against inflation or government currency manipulation.

 

It was explained to me, by a person far wiser (and wealthier) than I, that gold and silver is NOT an investment.  It is insurance.

 

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So if your IRA investment portfolio went down and you want to switch to metals that got crushed too... What makes you think that when the metals start to recover your existing portfolio won't equally recover?

 

That's called market Beta. Don't be foolish and sell one thing at a loss thinking the other thing which probably went down also will outperform what you already own

Pms beta is much closer to 0. Slv vs spx over the last 2 years is.332

 

Gld is.252. I used the etfs but actual contract is very similar.

 

Sent from my ONE A2005 using Tapatalk

 

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I'm not a fan of PM in a certificate form.  If you want to invest in PMs for when the SHTF then just get silver quarters. Easier to use for trade.  Check out historical charts of gold and silver you would be hating yourself if you invested heavily in 2011.  

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Well you forgot one. Stocks are down 25% from the peak (Russell 2000) and metals are in the crapper. What scenario was that?

 

Metals are not really in the crapper, they've had a run up in the last couple of months, they just are not at the top of the insane bubble they were in a few a years ago. $1800 gold and $40 silver were never realistic numbers, not for the time.

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I have a few funds in Blackrock (one of which is supposed to include metals in their portfolio, but they still suck), a couple of Fidelity funds, one of which is a dividend fund.  All in all, the entire value has been flat for the last 3 years.  I'm not actively adding to it as it was an old 401k that I converted to IRA.

 

Oh, but to have a time machine to revisit the days of $300 gold, but that's true of anything.  If I had one super power to pick, it would be the newspaper from 7 days in the future, every day.  That would be fun.  :)

 

As an aside, I was working as a low level stock broker back in the 90's.  We administered a number of ESPP accounts and so forth.  I recall having a discussion one day with an older guy who had bought a bunch of Silver and got tired of the fees we charged to maintain the paper account.  So he decided he wanted to take physical possession of the silver and be done with any broker fees in the future.  Silver was stuck at around $5 per oz for what seemed like forever.

The way it worked back then was he had to drive to a depot of some sort in Delaware (the guy lived in Texas), back up the vehicle, and load up his bars/coins into a car and leave.  The brokerage charged a hefty fee for this service, of course.  From what I remember, he actually did that, but the stream of cursing over the phone was unbelievable when I explained the procedure (and fees).

 

Anyway, back to the physical use...I get that someone would make change, but I would assume a silver coin would have to be broken down into something else to make change for the proverbial loaf of bread.  I always come back to buying a diamond for X today, then trying to sell it back to the same store tomorrow and getting at best X-50%.  That's where the hedge concept runs into problems.

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Diamonds are a bad example. They are a captive market controlled by one or two companies, and NO ONE in the diamond industry wants you to sell them back to them.  

 

As for physical use .. we are in crazy land here, but there are actual model that have been proven to work. The chain model is one of them, you buy or convert your precious metals into jewelry type chain and you cut off the correct weight for a transaction.  This was used in parts of Eastern Europe during the currency collapses there after the fall of the Iron curtain (full disclosure: I was there to see it used). 

 

The other model is the market model. I haven't seen this used with metals but I've seen it used with foreign currencies which far exceeded in value the local cost of goods. The way this worked was that the market owner/organizer/enforcer would exchange the foreign currency (say dollars) for market script (think monopoly money that changed every day in printed pattern). Then market vendors and customers would do their business in the market script and then exchange it back to dollars at the end of the day. Usually the exchange rate was constant for the day. The very same model will work with metals as well. 

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Goldline is calling me every hour now.  They are relentless.  The approach they offer is to house the gold and charge a storage fee.  It is not clear to me if it is possible to take possession without violating the IRS rule on distributions, as with cash IRAs (since I'm too young to qualify for penalty-free distributions of cash).

 

 

They do offer a 3 month price protection plan at this level, for what that is worth, and they also say they throw in a bonus amount of about $2000 worth that they mail to you in several weeeks to offset the fees.  What is difficult is getting exact detail on the cost per ounce for smaller pieces.  They mention the margin is smaller on large pieces (I assume small bars instead of coins).  My issue, aside from that, is just buying a metals ETF within the IRA as it stands, else what is the difference if they hold most of it on paper and hit me with storage fees to some place in Delaware.  If the SHTF, it is a piece of paper in either case, aside from the bonus amount.

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I certainly hope you aren't considering selling all your IRA mutual funds and investing in PMs. Precious metals are a way to diversify PART of your overall investments. Theh aren't intended to be ALL your investments.

 

 

It sounds like you need to sit down with someone to go over things. What exactly you're currently invested in, what your goals are, what investments will help you reach those goals and to set up a plan to start gettimg there.

 

Simply buying a handful of mutual funds that you really don't know what they are and sitting on them isn't a sound plan. If these handful of funds haven't done anything over three years something is wrong.

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