Are you using precious metals in RRSPs and TFSAs?

Gold, silver, and real estate are great hedges against inflation in this volatile market

Are you using precious metals in RRSPs and TFSAs?

A recent survey showing that almost one-quarter of Canadian adults have invested, or plan to invest, in gold or real estate as a hedge against inflation didn’t surprise its authors, but they are urging advisors to inform their clients about new ways they can use precious metals as they hold their own in this volatile markets. 

“Given the current geopolitical uncertainty, inflation, and pandemic, we knew people were looking for ways to diversify their retirement portfolios and real estate, gold, and silver were viewed as a hedge against the stock market,” Amine Rahal, Chief Marketing Officer of Gold RRSP, told Wealth Professional.

“People want to hear about all the different options they have, but they also tend to trust an asset class that has such a long track record. Given these results, it should convince advisors to present all the options to clients, and then explain the pros and cons of each option, so they can offer their clients advice about how to use their existing retirement account to invest in precious metals.“

Gold RRSP, launched in 2015, offers a free personal finance education website that explains how investors can diversity their retirement savings plan (RSP), locked-in registered account (LIRA), and tax-free savings account (TFSA) accounts with previous metals, such as gold and silver bullion, which the Canada Revenue Agency has allowed for about 15 years

Gold RRSP’s previous national survey showed that respondents didn’t know they could use all or part of their RSP and TFSA accounts to buy physical gold and silver or transfer their current savings in those accounts into those assets, tax-free. While Rahal said Americans have been choosing this precious metal option for awhile, it’s just picking up in Canada as investors learn they can buy more than their bank’s products – stocks, bonds, mutual funds, and exchange-traded funds (ETFs). 

“People in Canada are just starting to discover there is a legal, CRA-approved way to use their savings account to invest in precious metals, so these results reinforce what we’re doing,” said Rahal. “We’re teaching people how to do it step by step, and then showing them all the different companies that can help them in the process.”

Rahal said Scotiabank is one of the few banks that helps investors invest in precious metals, but Gold RRSP’s site offers several companies that advisors can partner to provide this service. Some would even pay advisors a commission for a referral.

Gold RRSP’s new study surveyed 1,506 Canadians, aged 35 and over, from across the country on May 10 and 11. It showed that:

  • 85% of Canadians are worried that inflation will make everyday life less affordable
    • 23.6% of those surveyed reported having invested in, or planned to invest in, real estate or gold to combat the effects of inflation
  • age, gender, and geography impact how Canadian investors are addressing inflation:
    • 64% of younger investors, aged 35 to 44, said they were more likely to invest in gold than their older counterparts
    • more women (53.2%) than men (46.8%) preferred real estate investing
    • 18.9% of Atlantic Canadians surveyed were most likely to invest in gold, while 17.6% of British Columbia residents were most likely to invest in real estate.

The recent survey also found that real estate was the most popular asset for investors (13.6%) to hedge against inflation, followed by precious metals (13.2%), with gold at 9.6% and silver at 3.6%.  Cryptocurrencies were a distant third, with only 6.5% of Canadians surveyed investing Bitcoin or Ethereum. It showed that real estate bonds (RRBs) have fallen out of favour, with only 2.9% of the Canadians surveyed investing in them to hedge against the declining dollar.

Rahal noted that, unlike other assets, precious metals are holding their own. Gold is ranging between 1800 and 2000, while silver has remained in the $23 range.

“You don’t invest in precious metals to get rick, quick, overnight. It’s not that type of asset. It’s more of a long-term investment that will hold its value over time,” said Rahal. “It’s just a question of supply and demand. There is only a limited amount of gold and silver on earth. It’s not something you can create like you can print money.

“Gold and silver have this advantage, like oil and all commodities, where we know there’s a limited amount of it on this planet and we know there’s a high demand from various industries, whether it’s electronics, architecture, dentistry, medial industry, or the jewellery industry. So, there’s always going to be a demand for it. These assets will never go to zero.”

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