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Keep bullion premiums low

It is tax time. If you haven’t given Uncle Sam his due, you have until April 17 to do so.

One way of reducing income taxes is to contribute to an Individual Retirement account and deduct the allowable limit from your income for the year.

In the last few years, more and more holders of IRAs have been investing in American Eagles and other acceptable bullion coins in precious metals IRAs. Demand for these coins from account trustees tends to rise in the weeks leading up to the annual contribution deadline as a result.

This rising seasonal demand can push up the premiums attached to these coins.

Naturally, precious metals retirement accounts have looked appealing during the recent years of financial upheaval and declines in the stock market.

The potential danger to owners of precious metals IRAs is less market fluctuation and more the sense that they are playing with free money and they do not watch their costs closely enough.

Most coin collectors are very conscious of price. It is that eagle-eyed focus on costs that helps them spot bargains or market anomalies quickly.

Owners of precious metals IRAs will do well to follow the example set by collectors. It is important to remember that the point of the investment is to maximize the quantity of gold or silver being purchased. The higher the premiums in percentage terms over bullion value, the more the coins in question should be scrutinized and perhaps alternatives found.

Avoiding taxes is only half the battle for holders of precious metals IRAs. The other half is to avoid unnecessary costs by overpaying for the gold and silver coins.