Primary Risk Categories
Understanding these key risk categories is essential for making informed decisions about precious metals investments.
Market Risk
Precious metals prices can be highly volatile and subject to significant fluctuations
Specific Risks Include:
- Price volatility can result in substantial gains or losses
- Market conditions can change rapidly and without warning
- Economic factors may adversely affect precious metals values
- Supply and demand imbalances can impact pricing
- International events may cause price instability
Liquidity Risk
The ability to quickly convert precious metals to cash may be limited
Specific Risks Include:
- Market conditions may affect the speed of liquidation
- Spreads between buy and sell prices may be significant
- Physical delivery requirements may delay transactions
- Market hours and availability may be limited
- Finding qualified buyers may take time
Storage and Insurance Risk
Physical precious metals require secure storage and adequate insurance coverage
Specific Risks Include:
- Storage costs can reduce overall investment returns
- Theft, loss, or damage may occur despite security measures
- Insurance may not cover full replacement value
- Home storage presents additional security and insurance challenges
- Depository risks include business failure or operational issues
Tax Implications
Precious metals investments may have complex tax consequences
Specific Risks Include:
- Capital gains rates may be higher than other investments
- Tax treatment may vary by metal type and holding period
- IRA regulations are complex and violations carry penalties
- State and local taxes may apply differently
- Tax laws may change affecting future obligations
Precious Metals IRA Additional Risks
Precious metals IRAs carry additional risks and compliance requirements beyond traditional precious metals investments.
IRS Compliance Requirements
Precious metals IRAs must comply with strict IRS regulations regarding approved metals, storage, and handling. Violations may result in penalties and tax consequences.
Required Minimum Distributions
Traditional IRAs require distributions beginning at age 73. Precious metals may need to be liquidated to meet RMD requirements, potentially at unfavorable market prices.
Prohibited Transaction Rules
IRS rules prohibit certain transactions with IRA assets. Violations may result in the entire IRA being treated as distributed, creating immediate tax liability.
Custodian and Depository Risks
IRA precious metals must be held by approved custodians and depositories. Business failure or operational problems could affect access to your investments.