Alternatives to a Gold IRA: ETFs, Mining Stocks and Physical Gold

A Gold IRA is a self-directed IRA that owns physical gold or other approved metals, held by a custodian. If you're new to the idea, start with what is a Gold IRA and how precious metals IRAs work. It is not the only way to add gold to your savings. This page walks through the main alternatives: what you actually own with each, what it costs, who holds the asset, how you sell, and how it is taxed.

None of these is right for everyone, and this page doesn't recommend one. The goal is to help you ask better questions of a qualified professional, such as a fee-only financial planner or a tax adviser.

What are the main alternatives to a Gold IRA?

There are four broad routes, plus the option of not holding gold at all:

1. Gold exchange-traded products (ETPs) bought in a regular IRA or a taxable brokerage account.
2. Gold mining stocks, or mutual funds and ETFs that own them.
3. Physical gold bought outside an IRA, which you store yourself or pay someone to store.
4. Gold futures, which are contracts rather than metal.
5. Keeping a regular IRA of stocks, bonds and funds, with no gold.

How do the alternatives compare?

How do gold ETPs work in a regular IRA?

An exchange-traded product (ETP) is an investment that trades on a stock exchange like a share. An exchange-traded fund (ETF) is one kind. For many people, an ETP is the simplest way to get gold price exposure inside the IRA they already have. FINRA and the CFTC note that commodity ETPs "come with their own fees and costs, you might be able to add them to your existing IRA, and they're fully regulated" (FINRA).

How the exposure works. Not all gold ETPs hold gold. The CFTC explains that commodity-backed ETPs "can own physical commodities such as gold or silver, be wholly backed by derivatives, or hold a combination of assets" (CFTC). Products that use futures contracts carry an extra risk: "The value of the shares in the commodity pool may not track the value of the underlying asset over time" (CFTC). The CFTC suggests questions to ask as you review "the prospectus or disclosure document" for a commodity ETP fund.

Costs. Funds charge an expense ratio, which is the yearly operating cost shown as a percentage of the fund's assets. The SEC adds that "ETF investors may pay their brokers sales commissions with each purchase or sale of ETF shares" (Investor.gov). Any storage costs for metal-backed products are paid by the product and show up in its expenses, as the prospectus describes.

Custody. You own shares, not specific bars. Whatever metal the product holds belongs to the product. For how this differs from metal held for your IRA, see do you own the gold in your IRA?

Liquidity. ETF shares are bought and sold "on national securities exchanges at market prices" (Investor.gov). The SEC notes that an ETF's "market price typically will be more or less than the fund's NAV per share" (NAV is net asset value, the value of the fund's assets minus its liabilities) (SEC).

One caution: that SEC bulletin covers only funds registered under the Investment Company Act of 1940. It says it "does not address other types of exchange-traded products that are not registered under the 1940 Act, such as exchange-traded commodity funds" (SEC). Some gold products, such as commodity trusts, may fall in that group, so the prospectus matters even more.

Tax. Inside an IRA, "amounts in your IRA (including earnings and gains) aren't taxed until distributed" (IRS Publication 590-B). Outside an IRA, it depends on how the product is set up. The tax code treats "any gain from the sale of an interest in a partnership, S corporation, or trust which is attributable to unrealized appreciation in the value of collectibles" as collectibles gain (26 U.S.C. 1(h)(5)(B)). Check the tax section of the prospectus and ask a tax professional how a specific product is treated.

We compare this route with a Gold IRA in more depth in Gold IRA vs gold ETF in a regular IRA.

Are mining stocks and gold funds the same as owning gold?

No. A mining stock is a share in a business. The SEC defines a share of stock as "an ownership position (called equity) in a corporation, and a claim on its proportional share in the corporation's assets and profits" (Investor.gov).

How the exposure works. A mining company's results depend on the gold price, but also on its costs, management, debt, the mines it owns and the stock market as a whole. So a mining stock carries company and stock-market risk, not just gold price risk. It can fall when gold rises, and the reverse.

Funds. A mutual fund "pools money from many investors," and "each mutual fund share represents an investor's part ownership" (Investor.gov). A fund that owns mining shares spreads your money across several companies. It is still a stock fund. Some funds called "gold" or "precious metals" funds own mining shares, some own metal-linked products, and some own both. The fund's prospectus says which.

Costs. For individual stocks, mainly brokerage commissions. For mutual funds, the expense ratio and possibly a sales load, a fee you "might pay" when you buy or when you sell (Investor.gov).

Liquidity. Listed stocks and ETFs trade on exchanges. Mutual fund shares are "redeemable," meaning you can "sell shares back to the fund at NAV minus any fees" (Investor.gov).

Tax. Inside an IRA, the same deferral applies. Outside an IRA, shares of a company are not on the list of collectibles in the tax code, which covers tangible things such as art, metals and coins (IRS). Gains follow the regular rules in IRS Topic 409.

What about buying physical gold outside an IRA?

You can buy coins or bars from a dealer and keep them yourself. Your money doesn't go through a custodian, and you choose where the metal is stored.

Costs. The dealer spread works the same way as in a Gold IRA: "A dealer will always sell metal above the spot price and buy it back below the spot price" (FINRA). You also pay for your own storage and insurance, whether that's a safe, a bank box or a private vault. The CFTC warns that "the transaction costs for bullion can be high" (CFTC).

Risk. The CFTC also says physical metal "is not risk-free" and that "spot prices... can be volatile."

Tax. This is the biggest difference from a Gold IRA. The IRS says: "Net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate" (IRS Topic 409). The tax code defines collectibles for this purpose by pointing to the IRA collectibles definition "without regard to paragraph (3) thereof" (26 U.S.C. 1(h)(5)(A)). Paragraph (3) is the exception for IRA-eligible coins and bullion. In plain terms, the bullion exception that lets an IRA hold gold does not take personally held gold out of the collectibles rate. This rate applies to long-term gains, on metal held "more than one year" (Topic 409).

Why not keep IRA gold at home instead? Because then it wouldn't qualify. The bullion exception requires that "a bank or approved non-bank trustee keeps physical possession of it" (IRS). See home storage and Gold IRA vs buying physical gold outside an IRA.

Watch for financed and stored-for-you offers

Some sellers offer to finance a purchase or keep the metal for you. The CFTC says: "It is illegal for dealers to offer leveraged or financed purchases unless your metal is delivered within 28 days" (CFTC). It describes frauds that "charged customers extra to store bullion in far-away vaults that didn't exist." If someone else holds metal for you, find out exactly what you own and how you can check it. See financed and leveraged metals schemes.

Are gold futures an alternative for most savers?

Generally not. A futures contract is "an agreement to buy or sell a particular commodity at a future date" (CFTC). It does not give you gold. The CFTC explains that futures "do not convey ownership in the asset itself" and "are also time-limited and cannot be held indefinitely waiting for prices to rebound" (CFTC).

The CFTC's own wording on risk is blunt: speculating in futures "is a volatile, complex and risky venture that is rarely suitable for individual investors." It adds: "Many individuals lose all of their money, and can be required to pay more than they invested initially" (CFTC). Some gold ETPs use futures, which is one reason to read a product's prospectus. For more, see physical gold vs paper gold.

Is keeping a regular IRA without gold an option?

Yes. Many people decide not to hold gold at all, or to keep only a small amount. The same IRA tax rules in Publication 590-B apply whether a Traditional or Roth IRA holds metal or stocks and bonds. It avoids metal storage fees and dealer spreads, and stocks and bonds can produce dividends or interest. Precious metals, the CFTC notes, "do not pay dividends, create earnings growth, or compound, like other assets" (CFTC).

What you give up is the physical metal, and whatever role you wanted gold to play in your mix. See Gold IRA vs Traditional or Roth IRA and Gold IRA pros and cons.

Examples: how the choice can look in practice

These are made-up cases to show the trade-offs. They aren't advice.

• Linda, 61, has an IRA at a brokerage and wants some gold price exposure without a second account. A gold ETP in her existing IRA avoids a new custodian and storage fees. The trade-off: she owns fund shares, not specific bars, and needs to read how the product holds its gold.
• Robert, 68, wants metal he can hold in his hands. He buys coins outside his IRA with savings. He accepts dealer spreads, his own storage costs, and the collectibles tax rate on long-term gains when he sells.
• Maria, 55, considers a fund of mining stocks. She learns that it is a stock investment whose price depends on the companies, not just gold, and treats it as part of her stock holdings rather than as metal.

Common mistakes when comparing alternatives

• Assuming every "gold" product holds gold. Some hold metal, some hold futures, and some hold mining shares. Read the prospectus.
• Treating mining stocks as a stand-in for metal. They are company shares with business risk.
• Comparing fees but not spreads. For physical metal, in or out of an IRA, the gap between dealer buy and sell prices can be the largest cost.
• Buying under pressure. The CFTC warns that some frauds "promise 'safe' investments" while selling metal at inflated prices (CFTC).

Where to get help deciding

The right choice depends on your goals, timeline, taxes and the rest of your savings. A fee-only financial planner or a tax adviser can help you weigh whether you want metal or only price exposure, the all-in cost of each route, and how each would be taxed in an IRA or a taxable account.

Related questions

Can I buy a gold ETF in my current IRA?

Often, yes. FINRA notes that commodity ETPs might be added to "your existing IRA" (FINRA). Ask your IRA provider which products it offers. See Gold IRA vs gold ETF.

Is a gold mining stock safer than gold?

Neither is safe from losses. A mining stock adds company risk on top of gold price risk. The CFTC says precious metals prices are "just as volatile as those of other assets" (CFTC). See Gold IRA vs gold mining stocks.

Is gold in a Gold IRA taxed like gold I keep at home?

No. Inside an IRA, gains aren't taxed until distributed, and Traditional IRA distributions "are taxed as ordinary income" (Publication 590-B). Long-term gains on gold you hold personally are taxed at the collectibles rate (up to 28%). See Gold IRA taxes.