Topic: Mining Stocks

Gold investing: Gold stocks and 2 other ways to put gold in your RRSP

gold investing

Before we discuss ways you might put gold in your RRSP in 2017 (despite last year’s volatility), let’s look more closely at those price fluctuations. In 2011, gold shot up to a high of $1,950 U.S. an ounce. Gold prices have fallen  since then, and now trade at about 1,187.

In the longer term, gold could well regain its 2011 highs. This will simply reflect the vast expansion in the U.S. money supply that has taken place since the financial crisis struck in 2008.

Meanwhile, prices could move still lower in what some market observers might refer to as “capitulation”—when investors simply give up on a long-held position. That’s when the next big rise in gold is likely to start.

Gold’s low price has prompted more investors to ask us about gold investing. One question we’re sometimes asked is how to hold gold bullion and other forms of the metal in an RRSP.

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We continue to recommend that you hold speculative investments like gold outside your RRSP. That’s because, if you hold speculative investments inside your RRSP and they drop, you not only lose money, but you lose the opportunity for tax-free compounding of the money within your RRSP.

However, if you want to hold gold and gold investments in your RRSP, here are three ways to do so:

  1. High-quality gold mining stocks: Whether or not you invest in gold inside or outside your RRSP, we continue to recommend that you limit your gold investing to gold stocks, and avoid buying gold bullion, gold coins (unless you collect them as a hobby) or certificates representing an interest in bullion. That’s because commodity investments such as gold bullion do not generate income. Instead, they come with a continuing cash drain for management, insurance, storage and so on.
  2. Hold bullion in your RRSP directly: The 2005 Canadian federal budget made investment-grade gold or silver bullion bars eligible to be held in an RRSP. Bullion bars are eligible for RRSP gold investing if they are produced by a metal refinery that is accredited by the London Bullion Market Association. Accredited metal refineries include the Royal Canadian Mint and Johnson Matthey. You can also buy bullion bars from the Bank of Nova Scotia.
  1. Hold gold and silver coins in your RRSP: To be considered eligible for RRSP investment, gold coins must be at least 99.5% pure, and silver coins must be at least 99.9% pure. As well, only legal-tender coins produced by the Royal Canadian Mint are RRSP-eligible.

However, to hold coins or bullion bars in your RRSP, you need to find a third-party custodian of your coins or bars who will verify that you indeed hold the amount of bullion claimed, and report that to the Canada Revenue Agency on your behalf.

The Questrade “Gold RSP”: Questrade, a Canadian online discount broker, introduced its “Gold RSP” in January 2006. This investment meets all of the Canada Revenue Agency’s specifications, and makes it practical to hold coins or bullion bars in your RRSP.

To access the Questrade Gold RSP, you have to open a Questrade account. You can open an account with as little as $1,000. Kitco Metals buys the gold from the Royal Canadian Mint, and the gold is stored at the Mint, as the Canada Revenue Agency requires. You can buy and sell gold bars or coins if you want to bet on gold price fluctuations.

Note: This article was originally published in 2010 and was last updated on Jan 2, 2017.


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