Q: I have a question for your Q&A day on Wednesday. I have been diligently trying to GOTS for several years now. I have been a Jim Sinclair student for many years and have succeeded for the most part in preparing for what is to come. My one remaining concern is my 401k, which I need to protect in some way. Not being retired yet but turning 59 ½ soon, is a gold-backed IRA in my best interest or should I draw it all out, pay the tax, and go 100% in hand-held precious metals? I’m already pretty heavy in the metals so I’m a little concerned with diversification. Thanks and God Bless for a great website! – Rod
David Schectman’s Answer:
We don’t give tax advice and even if we did, you didn’t present enough financial information for me to prudently offer you advise to use to base your decision on.
What I can tell you is Sinclair’s GOTS is good advice for many people. But you have to believe that a collapse of the economy is eminent. Bill Holter, who wrote for me until recently, and now collaborates with Jim Sinclair, is of the opinion that we will wake up one Monday morning, in the near future, and the banks will be closed and it will be too late to buy gold or silver or sell your stocks. If you are concerned about this happening then that is reason enough to opt out, without taking into consideration the financial aspects of such a move.
There are, of course, tax implications and in general, focusing on just those consequences, it makes the most sense for people who expect to pay more taxes down the road than they would pay now. However, as you probably know, an early withdrawal is costly. There is a substantial penalty, in addition to the taxes you will pay. And since you said you are already “pretty heavy in metals (outside the IRA)” you should think carefully whether this benefits you.
A friend of mine recently closed out his gold IRA and took possession of the physical coins and paid the taxes. But he did not have any gold or silver outside of his IRA. In his case it made sense. The reason to Get Out Of the System (GOTS) is because you run “the risk” of never being able to get the metals held for you by your custodian, but that is not a concern unless the system collapses. In your case, it would probably not be a game changer.
Like I said at the beginning of this discussion, it really depends on your mindset. If you are worried and lose sleep over the possibility of losing your IRA then go for it. If not, think it through very carefully.
And remember, if you are really worried about GOTS, taking possession of your gold and silver is just half the battle. Get it out of the country, at least a significant portion of it for ultimate safety. As you know, we personally use Brinks in Canada, a storage program we set up together for your protection.
Q: I have a question for your Q&A day on Wednesday. I have been reading lately about the massive amount of physical silver that JPM has acquired. I also see that India and China have also made huge purchases. However the price of silver has either stayed the same or dropped a little, Is there so much physical silver around that huge increases in demand have no bearing on price? Or is the paper market so dominate that silver has to be completely depleted before the price starts to increase? I am very disappointed as i have been waiting patiently for a new source of huge demand like JPM to enter the silver market, Only to find out new demand no matter of size has no effect on price, Or has the purchases made by JPM been greatly exaggerated or fabricated altogether? Thanks, David
Andy Hoffman’s Answer:
We have written of this topic for years – of how paper naked shorting has suppressed the price, but at the expense of the extremely limited global inventories and the mining industry’s ability to keep producing enough to satisfy demand which is clearly at or near record levels, for both gold and silver.
This is why, mathematically, the Cartel is “running on fumes”; and why, like all other prior attempts to hold prices down – particularly with un-backed paper contracts – their efforts will inevitably, spectacularly fail.