Upside in Gold and Silver – Interview with Gary Christenson at Crush The Street
Guest Post from Steve Hunt of Scottsdale Bullion & Coin
Why the Price of Silver Will Continue to Rise
Silver, a relatively inexpensive precious metal that was valued at just under $14.00 an ounce at the end of 2015, is currently worth nearly $20.00 per ounce today. Its value is close to a three year high, but more importantly, it has the potential to rise much higher. The CEO of one of the world’s largest silver mining companies is predicting that silver may rise to nearly $150 an ounce by the year 2019.
Following is a brief overview of why silver has gained so much value in recent months and what factors may spur its ongoing rise.
Understanding Silver’s Price Hike
There are several reasons why silver is currently on the rise. Financial instability on the European continent that began with the Greek financial crisis and was fueled by Britain’s recent vote to leave the EU has left investors feeling nervous about high levels of deficit spending, mounting debt and the overall fiat currency system. In these times of economic turmoil, many investors turn to precious metals to protect their assets.
Silver is used in various industrial and electronic applications, including phones, TVs, solar panels, electronic cars, circuit boards, alloys and solders. The need for electronic goods and services is growing thanks to rising income levels and the proliferation of electronic technology in developing nations, which means that demand for silver will likely remain high in the future.
China, the world’s most populous country, is also experiencing a high interest in silver that is exacerbated by the fact that government regulators have clamped down on other types of commodity trading in the country. Silver and silver futures are both extremely popular, and Chinese traders have clearly driven up the market during Asian trading hours.
Furthermore, silver’s demand is currently outpacing supply. It is becoming increasingly difficult to find scrap or recycled silver, as supply problems are likely to worsen due to a lack of investment in silver exploration.
Silver’s Continued Growth
A close look at the facts outlined above makes it clear why silver is rising and why it is likely to continue in the future. The world is not becoming a more stable place to live and work; to the contrary, fiscal and political problems are more widespread and complex than in times past. Silver is the most conductive metal and this means that industries and manufacturers of electronic goods will continue to require silver to create new products.
Another factor that indicates the price of silver will climb is this metal’s long-term trend of following gold prices. The current gold to silver ratio is about 70 to 1, which will decline as the bull markets in gold and silver extend. When silver increases in price it does so more rapidly than gold. Consequently the ratio will drop from the current 70 to 1 to perhaps 30 to 1, or less. Conversely, in a bear market the ratio rises as silver prices fall faster and farther than gold prices.
Now is an excellent time to invest in silver. While it has gained a great deal of value during 2016, it is still a relatively inexpensive precious metal that has the potential to gain considerably in the long term. If you aren’t certain which form of silver would be best for your investment portfolio, do careful research or consult an investment firm that is knowledgeable about silver buying options. Silver is a commodity that has been considered valuable for thousands of years and is one of the safest long-term investment options currently available.
Guest Post from Steve Hunt of Scottsdale Bullion & Coin
Thanks to Steve Hunt
There Is Only One Right Way to Do a Precious Metals IRA
By Clint Siegner, Money Metals Exchange
A small handful of outfits in our industry recently sprang up and started heavily promoting a so-called “self-storage” or “LLC” IRA. The pitch is for you to establish an LLC company to store the metals on behalf of your IRA in your home (or nearby).
At first glance, it sounds like an attractive option. Investors buy metals to increase privacy and control. Some do not want to rely on third-party vaults and would prefer having personal access to their metals 24 hours a day, 7 days a week. We totally agree with this sentiment when it comes to precious metals that you personally and directly own. But anyone considering this “self-storage IRA” scheme should be extremely careful and aware of the risks.
In short, the scheme appears likely to blow up. The IRS may one day disallow the whole thing and declare taxes immediately due on the entire IRA balance, along with any applicable penalties.
First, a little background on the IRA structure. The IRS requires the assets in your retirement account to be held by a third party.
The intent is to stop account holders from using or accessing IRA assets for personal benefit because doing so would be tantamount to a fully taxable distribution. There are also a number of prohibited transactions and disqualified persons.
The innovation these dealers promote involves IRA holders setting up a stand-alone LLC company which they personally manage. The investor takes possession of the metals on behalf of their IRA rather than personally, thereby supposedly meeting the third-party requirement.
LLC IRA promoters haven’t convinced the IRS or any court that, in the context of precious metals stored at home, the LLC company scheme can be reliably managed to avoid impropriety with regard to IRA rules.
As one expert frames it; “you can own a bakery with your IRA, but you cannot be the baker.” Owning a business with your self-directed IRA is okay. Hiring yourself and paying a salary is a definite no-no. Likewise it is perfectly fine to buy investment real estate, but your IRA cannot purchase your personal residence.
Creating an LLC company to purchase gold and silver coins and then storing them in your home safe – e.g. next to the rifles and some coins you inherited from grandma – hasn’t been found definitively to be a violation of IRS rules, but it sure looks like trouble, particularly because IRS rules do state that IRA assets cannot be commingled with other property.
IRS Has Signaled It Will Disqualify “Home Storage” IRAs
It is easy to imagine the IRS ruling against attempts to store IRA metals at home – nailing people with a huge bill for taxes and penalties. In fact, the agency is now issuing warnings. Laura Saunders of the Wall Street Journal recently covered the topic; “The Internal Revenue Service says it ‘warns taxpayers to be wary of anyone claiming that precious metals held in your IRA can be stored at home or in a safe-deposit box.’”
So, thanks to the recent hype, these schemes are now on the IRS’s radar. Although we are the last ones to say that the IRS is always right in their interpretation of the law, it does appear they will start going after “home storage” IRAs soon. We doubt many of our customers would want to be a test case for this iffy strategy.
Here are some other reasons to tread with caution:
- The rules around third-party management and control of IRA assets are highly complicated, and it would be easy to trip up and violate them.
- There can be significant costs of setting up and maintaining the LLC’s operating agreements and state LLC filings.
- Costs could be higher if the holder takes a bit more prudent course and has prospective transactions reviewed by an attorney and/or CPA.
- There is currently a lack of clarity on what coins, rounds, and bars can and cannot be held in the LLC IRA, even assuming the structure itself withstands legal muster.
If that still isn’t enough to give investors pause, we are also troubled by what we discovered when looking into some of the people who are aggressively marketing the “home storage” IRA scheme. Some of the characters involved are connected to shady, or even failed, rare coin dealers. They may tell you they have several letters from attorneys they’ve paid which declare the scheme is perfectly legal. They will charge what always amounts to huge set up fees. And they may try to sell you some of their overpriced “proof” coins to hold in the account.
But they may not mention any tricky nuances about what metal products might be allowed, assuming any would be allowed at all. They won’t focus on the complicated reporting and file keeping that is required in order to have a reasonable chance of defending the scheme against an IRS attack. And they certainly won’t take the fall for people when the IRS disqualifies the scheme and demands tax and penalty on one’s entire precious metals holding.
In our view, the hype underplays – or outright ignores – the potential risks. Investors should only go down this road with their eyes wide open. And do so only after consulting your own attorney and accountant.
Doing Your Due Diligence Is a Must
If you actually want to explore this, please do some additional due diligence. And don’t limit your investigation to IRS rules and guidance. Check out your prospective dealer as well. The internet is a great tool. You can check the Secretary of State’s website in the dealer’s home state to find out how long a firm has been in business. Look for the firm’s owners and key personnel, then do an internet search on those names.
If you do that, don’t be surprised to find complaints, lawsuits, or ties to a precious metals dealer that went out of business while facing a prosecution for deceptive business practices. You can also find out what people are saying about their experiences with the dealer online – at the BBB’s website and elsewhere.
There really is only one right way to own physical metal in your IRA. Choose a custodian and set up a self-directed account, purchase bullion from a reputable dealer, and store it in a professional third party vault. Many people can even find such a facility close to home.
At Money Metals, we help people to establish proper gold and silver IRAs daily. At a minimum, they save a fortune in coin premiums and set-up fees, and they are likely to save a whole lot more in taxes and penalties.
Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.
The Deviant Investor