Gold RRSP Guide: Diversify Your RRSP with Gold

Since its inception in 1957, the Registered Retirement Savings Plan has allowed Canadians to build a solid foundation of savings for their retirement needs.

The dual tax advantages of using pre-tax dollars for contributions and deferred taxes on earnings inside the plan are instrumental in helping working Canadians save more of their earnings and accumulate more savings than with a taxable savings of investment account. 

Changes made in the 2005 Federal Budget allow buying and holding physical precious metals in RRSPs. Eligible retirement savers can now establish a self-directed RRSP account, also referred to as a gold RRSP, to purchase gold and silver bullion for their accounts on a tax-advantaged basis.

When buying physical gold with pre-tax contributions, plan holders are able to purchase more quantities than if they used post-tax money in a taxable account.

Gold as a Retirement Plan Investment

While it hasn't always been the case, gold has outperformed stocks handily over the last two decades. During the period 2000 through 2022, gold gained nearly 450% while the Dow Jones Industrial Average index returned 318%.

Much of the recent surge in gold prices has occurred during the last five years during the economic turmoil of the pandemic-induced recession of 2020, the surging inflation between 2021 and 2023, and the geopolitical upheaval caused by the Ukraine war. 

But that is all the more reason why gold can play a critical role in a retirement portfolio. As long as there is geopolitical uncertainty and a potential for economic strife throughout the world, gold will continue to reign as the primary store of value for institutions and individuals.

Under that premise, investing in gold requires that it be viewed in terms of its ability to preserve wealth rather than as an appreciation vehicle. Gold continues to be an excellent hedge against inflation, and, depending on your outlook, it still holds substantial appreciation potential.

But more than that, it holds an eternal store of value that can't be replicated, and for that alone, it is priceless.

Related: The Gold/Silver Ratio Explained

Pros and Cons of Investing in Gold

As with any investment, gold has both upsides and downsides. The key to weighing the pros and cons is to have a clear understanding of your investment objectives, time horizon, and risk profile so you can determine if investing in gold is right for you. 

Pros

Portfolio diversification: Diversification is the recognition that it's impossible to predict which asset class will outperform another at any given time. That's why it's essential to include non-correlating assets in your portfolio.

As an asset, gold is not closely correlated with many other assets. So, when stocks are underperforming, gold may outperform. This has the effect of smoothing out volatility over time and providing your portfolio with more resilience. 

Potential inflation hedge: Prolonged inflation can erode purchasing power and asset value. Generally, inflation results from too much money chasing too few goods. Because the central banks can print all the money they want, it reduces the value of money.

Unlike dollars, there is a finite supply of gold, which is still recognized as a reserve currency. However, gold has no credit or counterparty risks, making it a source of trust in any economic environment. For that reason, many investors turn to gold as an inflation hedge.

Safe haven: People have been investing in gold for centuries. Whereas paper assets such as stocks and bonds can become worthless, gold has a proven ability to retain value, making it a safe haven for investors. 

Tangibility: Unlike paper investments like stocks, bonds, and mutual funds, gold is a tangible asset—people like that they can see it and hold it in their hands. 

Cons

Cost: Gold is not cheap. It is a precious metal that has climbed in price, topping $2,000 an ounce recently in 2022. The high price, along with all the other costs associated with owning gold, can be a barrier to the average investor. 

Storage issues: Investors who like to own gold as a physical asset need to consider how to store it. If you want to store it in your home, you need a secure location with a safe. You can pay for storage which requires hiring a company to transport and store it.

Liquidity: Investors in physical gold and silver bullion don't have access to a ready market like the stock exchange. If they want or need to sell their gold, they must find a buyer and then arrange for shipping the gold.

If they sell to a gold dealer, they can expect to receive what the dealer is willing to pay for it, which may be well below the spot price. Gold investing alternatives such as gold ETFs might make more sense for investors with liquidity concerns. 

No income: Unlike stocks that pay dividends or bonds that pay interest, gold does not generate any income for investors. That can be a problem for investors relying on their investments for income in retirement. 

Speculative: The price of gold is based primarily on what the market is willing to pay for it. Gold doesn't have intrinsic value and doesn't generate any value on its own. Investors buy gold because they believe someone will be willing to pay more than they paid for it. That makes it a speculative asset. 

For serious, long-term investors, gold is quickly becoming a "must-have," especially if you harbor any concerns about the global economy or a prolonged bout of inflation.

Knowing your options for gold investing will enable you to plan the investment allocation of your RRSP around your financial profile and outlook for the future.

And gold is one of the few commodities that the Canada Revenue Agency (CRA) allows to be held in RRSPs. While they are similar to other RRSPs, it would be important to understand the ins and outs of gold RRSPs. 

Related: Why Does Gold Have Intrinsic Value to Investors?

How a Gold RRSP Works

Generally, gold RRSPs are governed by the same rules as any RRSP. They're subject to the same yearly contribution limits as determined by your Notice of Assessment from the CRA, and their tax treatment is the same.

Contributions are made with pre-tax dollars, earnings inside the plan are tax-deferred, and withdrawals are taxed at your marginal rate. 

However, gold RRSPs are also guided by specific rules regarding the type and purity of gold or silver bullion that can be held in the account. Plus, it must be purchased from approved sources and stored in approved vaulting facilities. 

RRSP Approved Precious Metals 

The CRA has established specific requirements for which type of gold can be held in an RRSP. According to CRA regulations, the metal in gold must be at least 99.5% pure, while silver coins must be 99.9% pure.

These legal tender coins can only be sourced from the Royal Canadian Mint. The CRA will levy a 50% penalty on any other type of coin held in the account, such as proofs, collectibles, or commemorative issues are not allowed. 

Gold and silver bars have the same purity requirements as coins, but the CRA allows for purchases from any LBMA (London Bullion Market Association) accredited refinery. 

Screenshot courtesy of SilverGoldBull.ca

Gold and Silver Coins in an RRSP

Here is a list of the more popular gold and silver bullion coins offered by the Royal Canadian Mint. 

Gold and Silver Bars in an RRSP

 The complete list of accredited refineries for purchasing physical gold and silver bullion bars is available on the LBMA website, but these are some of the more well-known bullion bar producers carrying bars with weights ranging from 1oz up to 1kg.  

How to Store Gold Purchased for an RRSP

The CRA requires that physical precious metals be stored at an approved vaulting facility. To do otherwise will result in a loss of tax benefits and a tax penalty. The Investment Industry Regulatory Organization (IROC) has approved seven facilities for housing RRSP gold bullion purchases. 

Typically, the gold RRSP specialist dealer you purchase from will facilitate the shipping and storage of your gold, for which you can expect to pay additional vaulting and maintenance fees.

Depending on the vaulting facility and the size of your holding, you might pay either fixed fees or a variable fee based on the value of your metals. 

How to Add Gold to an RRSP or TFSA

Technically, any RRSP can hold precious metals, but many RRSP custodians or providers have the capacity to facilitate the purchase, shipping, and vaulting. It's best to look for providers experienced in working with bullion. 

For the best outcome, you should work with a gold RRSP or gold TFSA specialist dealer. 

We recommend working with Silver Gold Bull. The company specializes in these gold RRSP accounts. They've facilitateded over $4 billion in sales between the U.S. and Canada in their 12+ years of business and have earned over 286,000 5-star reviews across the internet.

They not only have the capacity to help you with the entire process, but they also have established relationships with approved refineries and vaulting facilities to ensure your gold is properly shipped and stored at the most reasonable cost. 

In addition, they have the expertise to guide you on which type of metals you should own. 

All you need do to establish a gold RRSP is contact a gold RRSP specialist dealer like Silver Gold Bull, and they will guide you through each step of the process.

They can work with an existing RRSP or help you open a new one, including transferring existing investments. Click here to contact Silver Gold Bull and learn more.