Adding to the insult, some said the octogenarian might be losing Midas touch — a cheap shot, considering he held his view since he was a much younger investor. Buffett avoided the ups and downs of the "gold boom" in the late 1970s as inflation roared and gold soared. But as a peerless equity investor, he has always maintained that value comes from corporate earnings streams and not inert metals. Over the long term, he’s been right. Gold sank into a three-decade depression circa 1980.
But the decade-long rally is hardly a short-term phenomenon, and gold still holds its allure for some. It has a place in diversified portfolios, Pearson said, but it is best taken in limited doses. “Five percent is plenty, in a diversified portfolio,” she says.
But there is “no real need” to put it inside a tax-free retirement account. “It’s a “low priority” at best, she says. IRAs should be for securities with predictable income streams that can better use the tax protection.
Indeed, many advisers say gold backers have gone way too far in peddling precious metals to retirees as a sure thing for the future.
When Investors Should Beware
“Watch for the warning sign — when they say it is ‘an IRS approved investment’ for your IRA they are wrong. The IRS does not approve anything. All it says is that that it allows certain assets for a tax protected account,” saidEd Slott, who heads the retirement consulting firm Ed Slott and Co.
The IRS ruled clearly in 2007 that bullion can be part of an IRA. So can real estate and other alternatives to stocks and bonds. “Anything but life insurance and collectible,” says Slott. Since the ruling, there has been an explosion of gold-related exchange traded fundsthat make it easier than ever to put gold into a retirement fund.
For bullion to be part of an IRA it must be held by a custodian and certified as 99.5 percent pure. Some sellers have made “IRA approved” a part of their sales pitch. In response, the IRS issued a stern directive saying anyone making the claim that IRS has sanctioned any specific investment are committing fraud.