Prudent investors have held precious metals in their portfolios for thousands of years. Since 1998, when precious metals first qualified to be held in IRAs, that trend has continued for the same reason - because precious metals are still the only form of money that is not simultaneously someone else’s liability.

Precious metals are sometimes assumed to be in the same category as stocks, bonds, mutual funds, etc., but they are not. Each of these investments can go to zero. Precious metals will always hold value. For this reason, whilst stocks and bonds, if managed well, may serve as useful investments, precious metals provide far more certainty as a store of wealth.

An IRA is All About Certainty

In the day-to-day investment world, individuals speculate, and some will even gamble, hoping to increase their level of wealth. However, an investment in an IRA is different. An IRA requires certainty – the knowledge that, however well or badly you do with any other investments, the IRA is certain to be there when it’s needed. Therefore, your IRA should be focused on those investments that, in bad times or good, will be solidly funded no matter what unpleasant surprises the market may create.

Typically, an IRA is invested in stocks, bonds and/or mutual funds. In good economic times, this isn’t a bad idea. It goes under the assumption that your investment dollars will build, as dividends will be reinvested in the IRA.

Unfortunately, in perilous economic times the reverse is true.

The Times, They Are A-Changin’

When Bob Dylan wrote that song title in 1963, he certainly wasn’t thinking about his retirement fund, but it fits today’s economic climate. The world’s foremost countries are far deeper in debt than they’ve ever been, and the methods being used to hold the house of cards together are rapidly approaching the desperation level. To exacerbate the situation, both the stock and bond markets are well into the bubble stage. They could pop a year from now, or they could pop tomorrow. That fact tells us that, if we’re invested in a retirement fund, we need, more than ever, to make sure that it will be unaffected by the crashes that are to come, since we’re unlikely to be forewarned of a crash.

Enter Precious Metals

Historically, whenever a major, long-term economic cycle approaches its end, precious metals once again become themonetary safe haven and are therefore essential for any IRA portfolio. It has been said that, “If all other investments were to fail, precious metals would be the last man standing,” and this is very much the case.

Finding a Safe Jurisdiction

Of course, when any country becomes so indebted as to be on the verge of insolvency, as so many countries are today, there exists a great danger that their governments will do all they can to save themselves. Historically, this has always meant increasing regulatory controls, currency controls, increased taxation and, if all else fails, confiscation of bank accounts. In the US today, the first three have already taken place and a law has been passed to allow the fourth, although it has not yet been implemented.

Until recently, many US citizens were comfortable holding their precious metals within the US, but as conditions have deteriorated there, investors are now moving their precious metals out of the US into those jurisdictions that provide the greatest measure of safety for their investment. This is now possible for precious metals held in self-directed IRAs as well.

Traditionally, the criteria for choosing a jurisdiction have been the following:

• No direct taxation: No taxes or duties that apply to the purchase, ownership, storage or sales of precious metals; no capital gains tax, no inheritance tax, etc.
• World-class national financial system to provide auxiliary services.
• Stable government with consistent history for economic stability that caters to international investors.
• Minimal wealth legislation and regulation, to assure a minimum of red tape in processing purchases, sales, transfers and shipment of metals.

In the past, this generally meant Zurich, Hong Kong and Singapore as the preferred jurisdictions in the Eastern Hemisphere and the Cayman Islands in the Western Hemisphere. However, recent developments have dictated that close proximity to the US has become essential for Americans, leaving the Cayman Islands as the top choice.