Precious Metals IRA: What It Is and How It Works

A precious metals IRA is a self-directed individual retirement account that holds IRS-qualifying physical bullion — gold, silver, platinum, or palladium — instead of stocks and funds. Everything else about it is ordinary: the same contribution limits, the same traditional-or-Roth tax treatment, the same required minimum distributions. Only the contents change. The tax rulebook, with citations, lives at Gold IRA Tax Rules.

Precious metals IRA vs. “gold IRA” — a difference in name only

If you have seen both terms and wondered which one you want, the answer is that they describe the same account. “Precious metals IRA” is the accurate umbrella term, because the law allows four metals. “Gold IRA” is the everyday shorthand, because gold is what most people actually buy. There is no separate account type, no different application, and no different rulebook — a “gold IRA” is simply a precious metals IRA that happens to hold gold. Our companion explainer at What Is a Gold IRA? uses the shorthand; this page uses the wider term. They are interchangeable.

The four eligible metals and their fineness floors

The statute at 26 U.S.C. § 408(m)(3)(B) sets a minimum purity for each metal:

• Gold — 0.995 fine
• Silver — 0.999 fine
• Platinum — 0.9995 fine
• Palladium — 0.9995 fine

There is one important carve-out. 26 U.S.C. § 408(m)(3)(A) separately lists American Eagle coins, which is why the 22-karat (0.9167) Gold Eagle qualifies despite missing the bullion fineness floor. That is why the familiar 22-karat American Gold Eagle is allowed even though it sits below the bullion floor. Collectible and numismatic coins, by contrast, do not qualify — a point worth repeating, because high-margin “rare coins” are the classic upsell in this industry. The full product lists, eligible and not, are at IRA-Eligible Gold. Gold and silver do most of the work in practice; if you are weighing a two-metal build, Gold and Silver IRA covers it.

The three-party structure

Every legitimate precious metals IRA involves three separate parties:

1. A custodian — the IRS-qualified trustee that administers the account and files the paperwork.
2. A depository — the insured, non-government vault that physically holds the metal.
3. A dealer — the company that sells you the bullion. This is who the “free kit” ads come from.

The dealer is the only one of the three doing marketing, which is why choosing a dealer gets all the attention. But the law cares most about the custodian and depository: the metal must be held by a qualifying trustee, not by you.

The core rule — and the home-storage myth

The governing rule is 26 U.S.C. § 408(m)(3): Bullion escapes the IRA collectibles prohibition only if it meets a minimum fineness (gold 0.995, silver 0.999) and is held by a qualifying trustee — not by you personally. (statute text)

That last clause — held by a qualifying trustee, not by you personally — is where the “home storage precious metals IRA” ads collide with reality. The U.S. Tax Court has already ruled on this fact pattern. In McNulty v. Commissioner, 157 T.C. No. 10 (U.S. Tax Court, 2021), Taking personal physical possession of IRA-owned metals — including ‘home storage’ via a checkbook LLC — was treated as a taxable distribution. In plain terms: taking possession of the metal means the IRS treats it as distributed to you — taxable now, and penalized if you are under 59½. No clever LLC structure has survived scrutiny. If a company pitches one, treat it as your cue to leave.

What it costs

A precious metals IRA carries costs a brokerage IRA does not. The figures below are typical industry ranges, not any one company’s schedule, and no company publishes a full fee schedule on its homepage:

• Setup fee (one-time): $50–$200
• Annual custodian fee: $75–$300
• Annual storage fee: $100–$300
• All-in annual carry: $200–$600
• Dealer spread (markup over spot when you buy, markdown when you sell): 2%–10% over spot

The spread is the least visible and usually the largest cost, so always ask for it in writing. How the numbers compare, and which are verified versus merely reported, is broken down at Gold IRA Fees & Costs and Best Gold IRA Companies.

Honest pros and cons — and who it suits

The case for: physical metal cannot go to zero the way a single stock can, sits outside the banking system, and has historically drawn buyers during inflation and crisis periods. For some savers, holding a slice genuinely reduces anxiety — and anxiety causes bad selling.

The case against: metals pay no interest or dividends, prices are volatile over the horizons retirees actually live through, fees and spreads compound against you, and the sector’s marketing runs on fear. Platinum and palladium add thinner, more volatile markets on top of that.

Neither side cancels the other. Advisers who use metals at all tend to treat them as a modest slice, often cited in the 5%–15% range of a portfolio — a diversification slice, not a core holding. Whether any of it fits your situation is a question for a licensed fiduciary who can see your whole picture, not a checkout button.