5 Common Gold IRA Scams And How To Avoid Them

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It’s common to invest in stocks, ETFs and other publicly traded assets for retirement. But one way to diversify your retirement portfolio is to invest in a gold IRA. 

A gold IRA is a special type of IRA that allows you to hold gold and other precious metals as a retirement investment. In addition to diversification, investing in gold can serve as a hedge against inflation.

But gold IRA investors risk falling victim to scams. Here are a few common ones to avoid at all costs. 

5 common gold IRA scams and how to avoid them

Precious metals investing isn’t immune to less scrupulous practices but a little knowledge can help you protect your investments and diversify your holdings.

1. Unusually high markups 

It’s not uncommon for gold IRA companies to mark up the price of gold to make money themselves. The bullion price you’re charged is typically based on the spot market price plus a markup between 5 percent and 10 percent, according to the Commodity Futures Trading Commission.

But some gold IRA companies exploit investors by charging excessive markups. In 2023, for example, the SEC sued Red Rock Secured for marking up its precious metals by as much as 130 percent but telling investors they were paying a 1 to 5 percent markup. Through this scam, investors were cheated out of about $50 million.

To avoid being charged an excessive markup, do your research. Check up on the price of gold and see if bullion prices for the same products are similar across custodians. If there’s a big difference, ask why.

Also, some gold IRA companies bury their markups in fee structures that are difficult to understand. Before moving forward, compare different offers. That will help you see if one dealer’s prices are exceptionally high. And also, make sure you understand the fees you’re being charged. 

2. Fake or lower quality products

While the IRS allows retirement savers to invest in gold, there are certain requirements that need to be met. Specifically, gold needs to be at least 99.5 percent pure to qualify as a retirement investment.

Some companies, though, might attempt to sell you gold that meets these purity standards when, in fact, it doesn’t. Worse yet, some companies might go so far as to deliver counterfeit gold.

To avoid this scam, only work with a reputable gold IRA company, and ask for documentation before agreeing to buy gold. From there, make sure the gold is produced by a reputable government mint or an accredited refiner, such as those on the Good Delivery List run by LBMA, a trade association in the bullion market.

3. Limited-time offers

It’s true that gold is a limited commodity. That’s part of the reason it’s often considered a wise investment and a hedge against inflation. 

But there’s no reason to give into the pressure to invest in a gold IRA immediately. If you’re being pushed to take advantage of a “limited-time offer,” it may be that you’re dealing with an illegitimate dealer.

4. Sky-high storage costs

One of the requirements for gold IRAs is that the gold itself be stored in an IRS-approved depository. Reputable gold IRA companies charge reasonable storage fees which may range from $100 to $300 per year, though $100 is typical for pooled storage. But some companies try to take advantage by charging excessive fees for storage.

To avoid overpaying, compare storage costs across a few gold IRA companies. And also, make sure the storage fee structure is clear. A storage fee may be higher with one company but there may not be any setup or maintenance fees, putting the total cost on par with other companies.

5. Fake home storage offers

Some gold IRA companies may try to offer you special home storage options for your gold. Don’t buy into these so-called money-saving offers. 

The IRS does not, under any circumstance, allow gold IRA assets to be stored at home. Any company that claims they have a special arrangement is likely taking you for a ride — and the tax implications and penalties could be hefty. 

Bottom line

Investing in a gold IRA — or gold ETFs through a regular IRA — can give you the benefits of diversification and protection against inflation. But make sure to research your options carefully to avoid being scammed out of your money. 

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.