Gold is a diversifying tool in investment portfolios because it moves the opposite direction of currency, Ed Moy, chief strategist at Morgan Gold and former director of the U.S. Mint, told PLANADVISER. If the dollar loses value with inflation, gold value normally increases, he explained.

Moy said now is an optimal time to invest in gold because of the country’s debt crisis. Moy and others devised a gold price predictability model, studying several hundred correlations. They found that since September 2008, gold prices correlate about 95% with how close the U.S. comes to hitting the debt ceiling.

Investors can expect gold prices to rise if the debt limit of $16.4 trillion is raised, he added. It is difficult to predict how volatility could affect gold prices, but in individual retirement accounts (IRAs), investors are not buying for quarterly gain anyway and should instead be focused on the long-term outcomes, he said. “It’s a good time to buy gold, but not if you’re looking for quarterly return,” he added.

John Hummel, president of AIS Group, said he believes gold is in a multi-decade bull market, commencing relative strength in 2002 when the U.S. dollar began to weaken.

Despite its advantages, gold has been slow to take hold with investors for two reasons: stereotypes about gold investors being “high-pressure” types who feed into hype; and the complicated process of physical gold investments, Moy said.

“There’s kind of an institutionalized prejudice in the United States against gold ownership, kind of an academic prejudice,” Hummel said.

The “gold bug” stereotype, however, seems to be diminishing, and companies are making gold investing more seamless for the customer, Moy said. Typically when investing physical gold, the customer must buy the gold, find a custodian for the account, find an IRS-approved depository to store the gold, and transfer the gold to the depository.

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Some companies like Morgan are improving their systems to make it easier to invest in physical gold, Moy said. Gold investors can now receive all necessary forms from self-directed IRA services, and Morgan will transfer the gold to the depository. “So with that success, there are more entities … who are getting into the market, and you’re seeing a larger inflow of gold to IRAs right now,” he added.

In 401(k) plans, the option to invest in gold depends on whether the plan sponsor wants to provide it, Hummel said. It may be frustrating for an investor who would like the option to diversify his portfolio with precious metals but does not have the option in a 401(k) plan, he said. 

In order for gold to gain footing in 401(k) plans, participants will have to request it, he added. AIS Group offers a mutual fund TAAP (tactical asset allocation portfolio) fund that Hummel said is “excellent for 401(k)s and IRA rollovers.” TAAP invests in individual stocks, long-term treasury bonds, gold and cash equivalents.

The TAAP strategy uses only physical gold, gold ETFs or gold futures depending on account size. It does not use gold mining stocks, although AIS uses them in other strategies. 

Chris Blasi, president of Neptune Global Bullion Exchange, said investors tend to distrust gold ETFs because they would rather own it directly. Gold is one of the only assets investors can own directly without a financial instrument between them, he added.

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It is possible for plan sponsors to offer physical gold in 401(k) plans, he said, but there is no doubt it is difficult because of the physical aspect. Blasi’s company has also streamlined the process to make it easier to deposit gold.

Gold Bullion International (GBI) has also made it easier for gold investing, with its recent launch of a physical precious metals platform for registered investment advisers (RIAs). The online platform, GBI Advisors (GBIA), enables independent advisers to buy, sell and store physical precious metals on behalf of their clients. Bars and coins of gold, platinum, silver and palladium can be stored in six global, insured vaults (see “N.Y. Firm Rolls Out Precious Metals Platform”).

Moy said investors are safer buying gold coins than bars because coins are backed by the U.S. Mint; bars are not generally backed by the government. “That’s why coins are generally more popular than gold bars,” he added.

Moy cautioned there are instances in which it is not advisable to invest in gold: if the national debt is reduced, if the dollar increased in value or if the economy is extremely strong. However, these instances do not appear to be happening any time soon, he concluded.