When should you open a gold IRA?

Concerns about inflation, interest rates and economic policies have many investors on edge recently. As a result, these investors are turning to gold, known for holding its value during tough economic times. Gold prices are climbing, prompting more people to consider gold IRAs for their retirement plans. The latest price record came in early October when the price of the metal hit a new record of $4,000 per ounce.

But is investing with a gold IRA the right move, and if so, when's the best time to open one? We asked financial experts to share their thoughts. Their insights can help you decide if and when a gold IRA makes sense, and what alternatives to consider if it doesn't.

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When should you open a gold IRA?

Economic conditions and individual investment goals can influence the timing of opening a gold IRA. But "the decision to open [one] should primarily be driven by a desire for portfolio diversification," stresses Henry Yoshida, co-founder of Rocket Dollar.

If you're seeking such diversification, he sees potential in the current market, thanks both to recent price records being met and additional ones now appearing increasingly likely for the future.

However, you shouldn't make your decision based solely on market trends. Alex Ebkarian, COO and co-founder of precious metals dealer Allegiance Gold, emphasizes the importance of having a long-term perspective. Look into a gold IRA if you believe gold will grow in value over time and are ready to hold onto it for several years, even despite the recent surge in price.

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When shouldn't you open a gold IRA?

While gold IRAs can make sense for some, they're not the right choice for everyone. "Novice investors or those with limited investable assets may not be well-suited for opening a gold IRA," cautions Yoshida.

He explains that proper diversification requires a certain level of assets to spread risk effectively. If you're just starting out or don't have a large investment portfolio yet, it might be better to stick with more traditional options.

Ebkarian adds another important point: "A gold IRA isn't for someone [who] wants to day trade or take withdrawals in the next few months or year." In other words, this route may not be the best if you think you'll need to access your money soon.

Gold IRA alternatives to consider

A gold IRA isn't the only way to invest in the precious metal. Below are four popular alternatives worth considering:

Physical gold

Gold bars and coins are tangible assets you can buy from precious metal dealers, pawnshops or online marketplaces. It's promising if you prefer to hold your investments physically, but you must consider storage and insurance.

Gold ETFs

Gold exchange-traded funds (ETFs) track the price of gold. "[You can buy them] through most stock brokerage firms," advises Yoshida. They're easy to buy and sell, making them more liquid than physical gold. Gold ETFs may be suitable if you want gold exposure without the hassle of storing gold bars, coins or jewelry.

Gold mining stocks

"[Gold] mining stocks [give you] exposure to gold prices with the potential for higher returns, albeit with more risk due to market fluctuations in the mining industry," explains Josh Katz, founder of Universal Tax Professionals. They can be more volatile than gold itself — only consider it if you're comfortable with more risk.

Gold futures and options

Ebkarian suggests looking into gold futures and options if you're a sophisticated investor with years of experience trading derivatives. These are complex investments that let you bet on gold's future price. The risks are higher, however, so it's not recommended for new investors.

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The bottom line

Opening a gold IRA is a big step that should fit into your broader financial plan. First, consider the potential benefits of investing in gold now, as waiting could mean facing higher prices in the future if gold continues to appreciate. But timing isn't the only factor to consider when making this decision.

Equally important is choosing the right gold IRA company to work with. Look out for providers with positive reviews and comprehensive services. "[Find reputable] companies that integrate custody, gold purchase/sell capabilities and depository holding capacity within the same organization," recommends Yoshida.

Finally, speak with a financial advisor who understands gold IRAs before making any gold moves. They can help you determine if a gold IRA will be beneficial, how much to invest and which type of investment fits your goals. And remember to follow the general advice of limiting your gold investment portion of your portfolio to a maximum of 10%. This will better allow you to benefit from the features gold provides without interrupting the income-producing features other assets provide at the same time.