A Gold IRA is a type of individual retirement account (IRA) that allows investors to own physical gold, silver, platinum and palladium. However, instead of the more common assets that regular IRAs are limited to, such as cash, stocks and bonds. Congress authorized the use of gold and other precious metals as assets in IRAs in 1997. A gold IRA can be a useful hedge against inflation, but it is also focused on one type of asset.
Compared to the more unpredictable stock market in recent years, gold has proven to be a source of stable and consistent growth. As a result, more retirees are turning to gold retirement accounts. This is done in order to diversify and insure your investments against market volatility and inflation. While most IRA investors invest their money in traditional assets such as stocks, bonds and mutual funds, tax laws allow the purchase of precious metals such as gold and silver through designated IRA accounts.
Can gold become an alternative to dollars and euros?
It all depends on your goals. Precious metals, of course, are not suitable for travelling to other countries and paying for goods abroad.
If we consider such investments as an alternative to savings in rubles, then investments in gold can partially replace foreign currency. This is explained by the fact that the price of gold in Russia directly depends on the exchange rate of the US dollar to the ruble.
When banks offer clients gold bars, bullion coins and metal accounts, they rely on the discount prices of precious metals. The Bank of Russia calculates them every working day based on London Stock Exchange quotes, where the cost of an ounce of gold is indicated in US dollars. The regulator then recalculates these prices into rubles at the official exchange rate.
You can also buy and sell gold through a broker on the Moscow Exchange. Trading participants also usually focus on world gold prices. How many transactions with gold and at what price took place on different days can be seen on the Moscow Exchange website.
That is, when the dollar rises in price against the ruble, gold in Russian banks and on the stock exchange automatically increases in price. And vice versa – when the dollar rate decreases, gold becomes cheaper. This was the case, for example, in 2022: in February-March, the dollar and gold jumped in price by 1.5 times, and by the summer they fell by 2 times.
It is important to take into account that the price of precious metals can also be affected by other factors, such as an increase or decrease in their production. Therefore, they will not become a complete replacement for currency.