Four Methods of Investing in Precious Metals

Estimated reading time: 2 minutes, 58 seconds

Did you know there are multiple ways to invest in an alternative asset? Just as there may be other ways to invest in a traditional asset than a direct purchase, you can hold certain alternative assets in more than one way as well.

For some investors, deciding on what to invest in is one of the easier decisions they make. Many perform extensive due diligence and are confident a particular alternative investment is right for them. For some, investing in precious metals is right for them. But not all of them know how they want to invest. You may hold a variety of precious metals assets, and you can invest in precious metals a variety of ways.

Kingdom Trust can custody precious metals investments via direct ownership by your IRA, including using an online trading platform, or indirect ownership via an IRA-owned single-member LLC or ETF.

Many investors know your retirement account may purchase gold, silver, platinum or palladium directly from a metals broker or dealer. Metals must be acceptable to be held by a retirement account and must be stored in an IRA-approved metals depository. You must find a broker or dealer and determine the quantity and type of metals to purchase. You then direct your custodian to send funds to complete the purchase. Once the assets are purchased, the broker or dealer will deliver the metals to the storage facility you’ve chosen.

Precious Metals InvestingSome precious metals dealers have also deployed online platforms allowing you to buy or sell precious metals online. You direct your custodian to move funds into an online IRA with your dealer. Then, with a few keystrokes, you can buy and sell approved metals. These online platforms also store the metals in IRA-approved depositories. And while you can make large one-time investments in metals, this method also allows smaller, fractional investments. Some see this investing method as a way to manage physical precious metals assets similar to holding stocks and bonds.

A third investing method is to hold metals indirectly via an IRA-owned single-member LLC. By opening a business checking account in the name of the LLC and using that account to invest retirement funds, account holders have immediate access to retirement account funds to invest in precious metals. Investing via this method may seem simpler and the account holder might save on transaction fees. However, holding precious metals inside an IRA-owned single-member LLC is usually more complex than a direct investment in precious metals.

Finally, you have the opportunity to indirectly own precious metals via an exchange-traded fund (ETF). Some investors believe ETFs tracking gold, silver or other precious metals make it easy to invest in fractional, undivided ownership interest in a trust closely mimicking the price of the metal (minus any fees and expenses, of course). This investment method could potentially also reduce processing times and reduce transaction costs when compared to direct ownership of metals.

Note: metals owned by the retirement account still must be held in an IRS-approved storage facility, even if indirectly held.

Many of the newer methods of investing in precious metals may provide easy access to the markets, may make it easier to monitor day-to-day activity and may have lower fees. At the same time, many have gravitated toward owning gold, silver, platinum or palladium with a retirement account because these are physical assets and because physical metals may be able to provide some degree of hedge against economic or geopolitical upheaval. Consult with your team of professionals to determine which investing method, and moreover which investment asset, is right for you.

For more information on these methods, check out our infographic above which details how each may differ.

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