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In this
week's interview with gold dealer Tom Cloud of National Numismatic
Associates, we cover one very timely topic - the sudden decline in gold
inventories - and one perennial question - how can an individual put physical
precious metals in an IRA.
DollarCollapse: Good to talk to you again Tom. Let's start with your
observation that the major gold wholesalers don't seem to have their usual
level of inventory. Why the sudden tightness?
Tom Cloud: Of the seven or eight major wholesalers that send me
price sheets, almost every one is having supply
issues. Some [coins and bars] I can get right away, but most take between a
few days and two weeks.
The
wholesalers don't necessarily know why this is, but some speculate that the
58 tons that China's central bank purchased in September was responsible, and
that [the Chinese] purchased at least that much more in October. When a big
seller elects to sell something they don't even put it in the market any
more, they just call up China's central bank, and we see the report four
weeks later, if we see it at all.
And it's not
just China. Central banks in general are buying. Until 2011 central banks
were selling gold but in the last two years hardly any are selling and many
are buying. I've been doing this for 35 years and last month made my first
sale to a central bank.
Another
factor is the new Basel
III agreement in which gold counts for what it's worth rather than
50% of what it's worth, which makes it a more attractive asset for banks. And
the final factor is that more Americans are moving into metals, which is
producing more small orders to go with the big orders from central banks.
It's different for each wholesaler, but the overall effect is to tighten
inventories.
DC: That's great news for gold bugs. Now, for those who
have money in an IRA and want to convert some of it to bullion, how can they
do that?
TC: We're starting to see people actually move physical
gold out of these ETFs. GLD, for instance, has been trading at a big
discount. Why would GLD be selling at a discount if there wasn't anything
wrong with the fund? Of course there's plenty wrong with it, as Andrew
McGuire has testified.
Instead of
bullion ETFs, a lot of people are choosing to set up self-directed IRAs that
can hold bullion directly. The first step is to find a government-approved
custodian. There are ten or eleven out there but I find the two most
user-friendly to be Sterling
Trust and Goldstar
Trust .
You get an application online, along with a rollover or transfer form, fill
these out and submit them, and your existing IRA is transferred to the
custodian. Then you use those funds to buy metals and have them stored.
You have two
fees per year: a custodian fee of around $75 or $80 annually, in return for
which they send you quarterly statements and 1099s for the years when you
take a distribution. Then you pay the depository, generally Delaware Depository Service
Corporation (DDSC), which stores the physical metal in your allocated
account, with your name on it. Their fee is $125 per year for anything
between zero and $100,000. For example, if somebody transferred $20,000 into
a precious metals IRA then they've got about $200 in fees, or about 1% a year.
The more you have the lower the percentage would be. When you get to $100,000
they'll charge 60 basis points on each dollar after that.
DC: Can you deposit your own bullion in this kind of an
account?
TC: Yes, but the amount has to be below what you can put
into an IRA in that year. The amounts differ for SEP and traditional IRAs.
DC: What if you want to take possession your metal?
TC: They'll deliver it to you. If you're old enough to
take IRA distributions there would be no penalty but it would be taxable and
they'd 1099 you. Here's an interesting point: Many dealers will pay above
spot for Gold Eagles and other major coins and bars. So let's say you want to
liquidate five gold eagles. You can ask the custodian to convert them to cash
at spot and send you a check. Or you can take delivery and sell them yourself
for the extra 2%.
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