At the IPMI’s 50th Annual Conference, Ed and Rich sat down with Scott Schwartz, Executive Vice President and General Counsel of FideliTrade Incorporated, to discuss precious metals inside retirement accounts, the risks investors should understand, and why some Gold IRA buyers end up paying dramatically more than the actual value of the metal they purchase.

The conversation covers everything from bullion versus collectibles to portfolio diversification, IRA storage rules, silver demand, cybersecurity, and the importance of understanding exactly what you are buying before placing precious metals inside a retirement account.

Precious Metals as a Real Asset

Scott begins by making an important distinction between traditional investments and precious metals.

Stocks, bonds, and cash are often viewed as paper assets, while gold, silver, platinum, and palladium are tangible assets that can physically exist outside the financial system.

Precious metals have also been held by sovereign nations as reserves and have maintained a role in the financial system through recessions, periods of high inflation, market crashes, and other periods of economic uncertainty.

Scott describes precious metals as a potential component of a broader portfolio because they represent a real asset rather than simply a financial claim.

Why Bullion and Collectible Coins Are Not the Same Thing

One of the biggest risks Scott identifies in the Gold IRA industry is the difference between bullion and collectible or semi-numismatic products.

Under Internal Revenue Code Section 408(m), certain precious metals can be held inside an IRA as an exception to rules that generally prohibit collectibles.

The issue arises when a product technically meets the purity requirement for bullion but is sold at a price dramatically above the intrinsic value of the metal inside it.

According to Scott, some firms have sold products at premiums of 100% over the spot price or even higher.

At that point, the question becomes whether the investor is truly purchasing bullion or effectively paying collectible-level pricing for a bullion product.

Why Paying 100% Over Spot Can Hurt Retirement Investors

A large premium becomes especially important inside a retirement account because the investor may never recover that premium when the metal is eventually sold.

Scott explains that people can spend decades building retirement savings. If a large portion of those savings is transferred into precious metals at a huge markup, the investor begins the transaction at a significant disadvantage.

A coin may meet the technical purity requirement for an IRA, but that does not automatically mean the price being charged is appropriate for bullion.

Understanding the spot value of the metal and the premium being charged above it is therefore critical.

What Precious Metals Can Be Held in an IRA?

Scott explains that retirement accounts cannot simply hold any collectible asset.

Items such as art, wine, rugs, and sports cards generally do not qualify. Precious metals, however, receive specific treatment under federal tax rules.

Certain forms of:

• Gold
• Silver
• Platinum
• Palladium

can qualify when they meet the applicable fineness requirements.

American Eagle coins are also specifically permitted, while other products must satisfy applicable purity standards.

Precious Metals and Portfolio Diversification

Scott also discusses the role precious metals can play in risk management.

Historically, gold has often behaved differently than stocks and bonds. That lower or negative correlation can make precious metals useful as a diversification tool within a broader portfolio.

Scott emphasizes that he is not providing investment advice, but notes that some investors maintain a relatively small allocation to gold or other precious metals as a way of diversifying their exposure.

The idea is not necessarily to perfectly time the top or bottom of the gold market. Instead, precious metals may serve as another asset category alongside traditional investments.

Investors Are Showing Strong Interest in Silver

The discussion also turns to what types of precious metal products investors are currently purchasing.

Scott says Fidelitrade sees activity in products such as:

• Silver Eagles
• Silver Maple Leafs
• Silver rounds
• Fractional Gold Eagles
• One-ounce gold bars

Larger silver bars can become difficult for smaller retirement accounts simply because of their dollar value.

Scott gives the example of a 1,000-ounce silver bar valued around $75,000 at the time of the conversation, which is substantially larger than many individual IRA balances.

How Precious Metals Became Available in IRAs

Scott also walks through some of the history behind precious metals retirement accounts.

The Tax Reform Act of 1986 initially allowed certain Gold and Silver Eagle coins in IRAs.

Then, in 1997, the rules expanded to allow qualifying gold, silver, platinum, and palladium products that meet applicable fineness requirements.

That opened the market to additional bullion products, including qualifying coins and bars from a broader range of mints and refiners.

You Cannot Store IRA Gold at Home

One of the most important distinctions in the episode involves physical possession of IRA precious metals.

Scott explains that precious metals held inside an IRA cannot simply be stored in a safe at the investor’s house.

He references a Tax Court case involving approximately $200,000 in retirement assets that were treated as distributed after the investors personally stored the metals.

The Internal Revenue Code requires qualifying IRA bullion to remain in the physical possession of an appropriate trustee or custodian.

That means precious metals purchased personally outside a retirement account can be physically possessed by the owner, but metals held within an IRA have different custody requirements.

Why Regulated Custody Matters

Fidelitrade operates as a depository, and Scott explains that the company became a trust company because it believes retirement metals should remain under the control of a properly regulated institution.

For investors, this distinction matters because the metals represent retirement assets that may need to remain properly structured for years or decades.

Improper custody can create tax problems and potentially turn what was intended to be a retirement investment into a taxable distribution.

Cybersecurity Is Becoming a Major Precious Metals Risk

The conversation then moves beyond investing into one of Scott’s major areas of expertise: cybersecurity.

Scott describes cyber risk as one of the greatest threats facing businesses today, including companies operating in the precious metals industry.

His message is that businesses should operate under the assumption that phishing attempts and other attacks will eventually occur.

Employees need to understand how to recognize suspicious communications, while businesses need clear systems for identifying, isolating, containing, and recovering from a cybersecurity incident.

Every Business Needs an Incident Response Plan

Scott stresses that companies of every size should have an incident response plan.

If a cyberattack occurs, businesses cannot afford to begin figuring out responsibilities after the breach has already happened.

Companies should already know:

• Who responds to the incident
• How affected systems are isolated
• How the threat is contained
• How operations are restored
• How customers are notified if personal data is compromised

For precious metals companies, cybersecurity is especially important because an operational shutdown can immediately interrupt transactions and revenue.

Know Your Vendor

Another major area of concern is vendor risk.

Companies often focus heavily on their own internal security while overlooking the third parties that have access to their systems or information.

Scott recommends thinking in terms of KYV — Know Your Vendor.

Businesses should understand what information vendors receive, how that information is protected, what happens if the vendor experiences a breach, and whether that vendor can continue operating following an attack.

A company’s cybersecurity can ultimately be only as strong as the outside partners connected to its systems.

Precious Metals Remain a Unique Asset Class

The central takeaway from the discussion is that precious metals are a unique asset class, but investors need to understand how the market works.

Buying gold or silver inside an IRA is not simply about deciding whether metal prices will rise.

Investors also need to understand:

• Whether they are purchasing bullion or a collectible-style product
• How much they are paying above spot price
• Whether the metal meets IRA requirements
• Where the metal will be stored
• Who will act as custodian
• How the eventual resale value compares with the original purchase price

A precious metal can be a real, tangible asset, but the structure of the transaction matters just as much as the metal itself.

For anyone considering precious metals inside a retirement account, understanding premiums, custody rules, and exactly what is being purchased can help prevent an expensive mistake.

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