A Precious Metals IRA Isn't Always a Secure Investment

The precious metals IRA has become a valid option for those who want to diversify away from traditional investments such as stocks and bonds. While it is a popular investment, it is not always as safe as many people would have you believe. Here are a few of the risks associated with this investment.

Custodian Theft

As much as you may not want to believe it, there are some unscrupulous custodians out there. In the precious metals market, there are a fair share of scams. Every now and then, you hear of a custodian cleaning out their customers' accounts and running away. With a precious metals IRA, this is a possibility if you are not careful about with whom you do business.

Third-Party Theft

Since you are dealing with an actual physical commodity with this type of IRA, there is a risk that it could be stolen. Someone could steal all of the precious metals that are backing your investment. 


Another risk that you have to watch out for is your custodian's filing for bankruptcy. IRAs are supposed to be safe from bankruptcy. However, if you are dealing with an unscrupulous investment firm, your account may not actually be considered an IRA with any kind of protection. In that event, you could potentially lose all of the money in your precious metals IRA.

Custodian Fraud

Another very common problem with precious metals is that the companies that sell you the precious metals do not actually have them. The actual gold and silver is supposedly kept safe in a very private facility somewhere. However, they could easily just print up some extra papers that say they have a lot more gold or silver than they actually have in their possession. If this happens, then you and several other investors could have a claim to the same precious metals. Therefore, if you ever try to cash in your certificate for delivery of the actual precious metal, you could be in for a surprise. 

Value Risk

While precious metals tend to rise in value, there is nothing guaranteeing that they will rise at a higher rate than what you could get from stocks. If you put all of your money into precious metals and they do not rise enough in value, you could be throwing away a lot of potential return in other markets. 

Rule Changes

Over the last few years, there has been some talk about the government changing the rules regarding precious metals IRAs. At any time, the government could pass a law that prohibits precious metals from being a part of IRAs. For example, you already cannot hold collectibles or life insurance in your IRA. Nothing is stopping the government from saying that you cannot buy gold or silver.

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