silver coins

Gold IRAs: What They Are, How They Work, and What Kind of Gold Goes Into Them

Although Rosland Capital does not provide investment or tax advice or the gold IRA itself, it does sell a range of IRA-eligible precious metals products. This includes gold, silver, platinum, and palladium in the form of coins and bars.

You’re probably familiar with traditional individual retirement accounts (IRAs), such as the SIMPLE IRA, SEP IRA, or Roth IRA, but did you know that you can add certain eligible gold products to a gold IRA? You can also add other precious metals to an IRA: silver, platinum, and palladium. 

Ever since the Great Recession that began in 2008, gold and other precious metals have enjoyed popularity and interest for holding value against market volatility and inflation. The quick recession and relative market volatility during the pandemic took the value of gold and other precious metals to record-breaking highs. 

It’s important to learn about gold IRAs and how they work because this can give you another tool for building and protecting the wealth you’ve built for retirement. Also, while many of the underlying rules for traditional IRAs and Roth IRAs also apply to precious metal IRAs, there are some crucial differences. Let’s take a look at what a gold IRA is, how it compares to traditional and Roth IRAs, and what kinds of gold and other precious metals you can contribute to an IRA.

What is a Gold IRA? How is it different from a traditional IRA?

A pile of gold bars.

Gold IRAs are individual retirement accounts into which the IRS allows the account owner to place and hold physical gold. Other precious metals IRAs include a platinum IRA, palladium IRA, and silver IRA. Only these four precious metals — gold, silver, palladium, and platinum — are eligible for inclusion in these unique, self-directed IRAs. 

With precious metals IRAs, the account owner typically exercises greater control in choosing which eligible assets to include in his or her accounts. This is compared to traditional IRAs and Roth IRAs, which are typically established through an employer and managed by a qualified financial professional who uses account owners’ contributions to buy pre-selected collections of stocks, bonds, and mutual funds chosen by their brokerage firm.  

Most people are more familiar with traditional IRAs and Roth IRAs. Traditional individual retirement accounts take different forms to appeal to different employment situations and financial goals. Some of the most common types of IRAs include:

  1. SIMPLE IRAs — a Savings Incentive Match Plan for Employees (SIMPLE) IRA is a form of traditional IRA retirement account that employers with under 100 employees can establish for employees. Employers must either offer a 3% matching contribution of the employee’s pay or a 2% nonelective contribution regardless of whether the employee contributed to the IRA or not.
  2. SEP IRAs — a Simplified Employee Pension Plan (SEP) IRA can be established by an employer of any size for an employee, but a SEP IRA is often used by self-employed individuals and freelancers because only the employer contributes to the account.
  3. Roth IRAs — these follow most of the same rules for other traditional IRAs, except for a few differences regarding contributions, tax rules, and distribution of funds. 

These kinds of IRAs only allow owners to contribute paper assets. In this case, paper assets include cash, stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other representations of wealth, as opposed to hard assets or physical assets such as physical precious metals or real estate.

A few similarities between traditional IRAs and precious metals IRAs include:

  • Tax benefits and incentives to encourage saving for retirement
  • Annual contribution limits 
  • Penalties of up to 25% for early withdrawal

A big difference between traditional IRAs and Roth IRAs compared to precious metals IRAs is that you can contribute physical gold, silver, platinum, and palladium to precious metals IRAs. This means you can purchase and hold approved gold bullion products in your gold IRA, for example. You can also roll over existing traditional IRAs into precious metals IRAs. This process involves converting paper assets into physical assets. Eligible precious metals include bullion in the form of coins and bars.

What Kind of Gold Can I Put In My Gold IRA?

The IRS describes the kinds of gold and other precious metals eligible to contribute to your gold, silver, platinum, or palladium IRA. IRA-eligible forms include “any gold, silver, platinum, or palladium of a fineness equal to or exceeding the minimum fineness that a contract market requires for metals which may be delivered in satisfaction of a regulated futures contract.” 

The following gold, silver, and palladium bullion coins are among the IRA-eligible precious metals products:

How Does a Precious Metal IRA Work and How Do I Start One?

The biggest difference about how gold IRAs work compared to traditional IRAs and Roth IRAs is that you need to have the physical precious metal. Most IRAs use a digital account indicating that you own a certain amount of stock. It’s important to be aware of the rules for storage of the precious metals you contribute. 

These metals must be stored and maintained by a trustee or custodian approved by the IRS in an approved depository. You can’t simply keep your gold and silver coins and platinum bars in a safe at home or in a safety deposit box and call it an IRA. This may lead to early withdrawal penalties.  

No one likes the idea of paying fees to store and maintain the physical precious metals for an IRA. But there can be value in diversifying a portfolio funding their retirement account. When market volatility and worries about inflation, interest rates, and the national debt threaten, it’s hard to put a price on the peace of mind that comes from taking steps to help guard your wealth and your future financial security.

I cannot overemphasize the need to do thorough research into the different kinds of IRAs available. Research and determine which option or options may be right for you. For example, begin with some basics such as researching spot prices and tips for buying gold and other precious metals. Then I encourage you to investigate the finer points about how gold IRAs and other precious metals IRAs work. Understand what fees may be involved.  Get more information about gold IRAs and IRA-eligible precious metals products from Rosland Capital.

Rosland Capital at Abu Dhabi Grand Prix

What’s the Difference Between Bullion and Numismatic Coins?

Is there a difference between bullion coins and numismatic coins? Yes, and when you’re in the market for coins, it’s important to know what you’re looking for and why you’re looking for it. Bullion coins and numismatic coins are different types of coins that are valued differently and for different reasons.

For some coins, you may be more interested in mintage and coin grading from grading services such as NGC and PCGS than in the price of gold or market value of silver bullion coins.

But there’s still some overlap, especially when considering well-known eagle coins like gold eagles that are minted from physical gold planchets, or silver eagles that have high silver content, both of which are impacted by precious metals prices as well as their mintage and collectible value. This can leave you asking, “How much is a gold coin?” The answer is: It depends on what kind of gold coin you mean. So, before you commit to working with any coin dealers, let’s explore the differences and the similarities, and what that may mean for you.

What is bullion?

What does the word “bullion” make you think of? Do you imagine the huge rectangular gold bullion bars stacked like bricks in a vault at Fort Knox? You’re not wrong. But that’s only part of the picture. Bullion coins are minted using those same highly refined precious metals such as silver, gold, platinum, and palladium. 

As Rosland Capital’s Precious Metals & Coins Glossary (by kind permission of Lorenz Books, publishers of one of our favorite books, The World Encyclopedia of Coins, written by Dr. James Mackay) succinctly states: “Bullion is precious metal whose value is reckoned solely by its weight and fineness.”

Regardless of the shape or size, bullion is all about the purity of the metal itself. Precious metal purity is graded according to millesimal fineness, or parts per thousand, and the standard varies by metal. For example, an assayer certifies the grade of fine silver only for silver bullion with a millesimal fineness of 999, or 999 parts per thousand. This translates to 99.9% pure silver. The same purity standard holds for gold bullion. This level of purity is called 24-karat gold, though that term is most commonly used with jewelry.

According to London Bullion Market Association (LBMA) purity standards for Good Delivery, platinum and palladium bullion must meet the minimum requirement of 99.95% pure platinum or palladium. Although we know that gold is mined along with other precious metals such as platinum to be used in jewelry, electronics, and sustainable energy industries, coins remain one of the most popular forms and uses. All these precious metals are available as bullion coins. Which brings us to our main question.

What’s the difference between bullion coins, numismatic coins, and semi-numismatic coins?

What are bullion coins?

Again, to quote the Glossary, a bullion coin is a coin struck in precious metal, now usually with an inscription giving its weight and fineness, whose value fluctuates according to the market price of the metal.

Some of the most popular bullion coins include ones minted in the U.S., Canada, South Africa, Austria, and the United Kingdom:

It is worth noting that different bullion coins can have different metal content. For example, the American Buffalo is 99.99 fine gold, while the American Eagle is 91.67% pure gold. The Eagle still contains 1 Troy oz of gold, because it weighs 33.931 grams, or around 1.09 Troy ounces.

As long as a bullion coin’s gold content and weight are known, and the issuing authority—in this case the US Mint—is trusted, these variances are of no import.

Although bullion coins are not now meant for use as currency, they are issued by a sovereign nation, have a legal tender value and could theoretically be used for purchases. The fact that the legal tender value is a small fraction of the metal content’s worth discourages that sort of activity.

You may also come across “rounds” that have the same metal content as a bullion coin of the same weight, but these are not legal tender coins whose production is authorized by a sovereign government.

While bullion coins can be seen to have a functional, transactional purpose, they are not immune to the tides of fashion. Before the US Buffalo coin was introduced, the Canadian Gold Maple Leaf, promoted as ’24-karat,’ was a particularly popular purchase. The arrival of the Buffalo, with its nostalgic use of the Buffalo Nickel design, and its homage to the incuse lettering of the $2.5 and $5 Indian Head coins, created a new favorite.

What are numismatic coins?

What does numismatic mean? 

Let’s check with our Glossary again. It says: “Numismatics (from Latin numisma, coin) is the study and collection of paper money, coins and medals.”

According to the American Numismatic Association (ANA), numismatists study money in any of its forms, often focusing on certain areas of numismatics, such as coins, tokens, or paper currency. For our purposes here, numismatics relates to coins. This often involves an interest in coins as currency, as part of human histories, cultures, and societies. 

Numismatic coins are essentially coins that are no longer in production, are in limited supply and, in the case of US coins, were minted before 1933. They were usually minted as bullion for use as currency and as a medium of exchange. They only acquired their ‘numismatic’ status later, once they became part of history.

One example would be the beautiful $2.5 and $5 Indian Head coins first issued in 1908. These have a recessed, or “incuse” design, and were initially not popular—people thought germs might hide in the crevices—but now they are beloved collectors’ items.

Coin buyers also seek coins minted up to present day, especially limited or special editions, sets such as the U.S. quarters featuring the fifty states, and the now-rare first euros released by each state that joined the European Union prior to standardizing the currency across nations. The scarcity of coins stamped with errors will always be a source of attraction and fascination for numismatists.

That’s not to say that value is unimportant. On the contrary, the value of numismatic and semi-numismatic coins can sometimes greatly exceed that of bullion coins with the same metal content. One difference between bullion coins and numismatic coins is what gives each its value. As we’ve seen, bullion coins are valued for their precious metal content and weight, whereas numismatic coin values also derive from factors such as rarity, historical context and importance, condition, and current demand for a particular coin.

The most valuable numismatic and semi-numismatic coins are worth far more than the spot price for their inherent metal value. One of the most famous numismatic coins is the United States $20 double eagle gold coin. This U.S. gold coin was the result of a collaboration between President Theodore Roosevelt and American sculptor Augustus Saint-Gaudens. While visiting the Smithsonian and seeing the ancient Greek coins bearing the image of Alexander the Great, Roosevelt had the idea to reinvent American coinage, introducing a higher caliber of artistic quality. Mission accomplished.

What are semi-numismatic coins?

While “numismatic coins” can be defined as older coins that are no longer made, semi-numismatic coins can still be in production. Along with “First Strikes”, semi-numismatic coins can include proof coins, which are specially minted coins produced in limited runs by some of the most popular mints and precious metals brands. These coins are usually double or triple struck and placed into protective casings without being touched by human hands or placed into circulation, leaving them in “mint condition” without scratch or blemish. 

Proof coins will have a highly polished mirror background, with their design rendered in frosted finishes, giving a cameo-like appearance – they are visibly different and often much more appealing than their mass-produced bullion cousins.

These uncirculated, collectible coins are often of the same metal content as bullion coins while also being relatively rare and unusual, and they draw value from both of these aspects. 

For example, the American Eagle Gold Proof, produced in limited quantities by the US Mint, is a popular item with coin enthusiasts, while the “Uncirculated” version of the same coin is minted in much larger quantities, and would be described as a bullion coin.

In general, semi-numismatic coins can add unexpected character and value to your portfolio. They are also available in a greater variety of sizes compared to coins designed for circulation.

Is it better to buy bullion coins or numismatic coins?

There’s no one answer to that question—it depends on your goals. Whatever you choose, it often makes sense to diversify your holdings and help solidify your portfolio. If you’re thinking about buying precious metals, whether gold, silver, or others contact our precious metals specialists at Rosland Capital.

First Look: Silver

Rosland Capital’s new silver commercial spot has been completed. Get a first look below as William Devane discusses how silver can benefit your net wealth!