What Counterparty Risks Should I Know About in a Gold IRA?

Dealer fraud is the most documented and historically costly counterparty risk in the Gold IRA space. The fraud patterns are well-established:

• Phantom gold: Dealers collect funds and report holdings that do not exist at the depository. Investors receive statements showing holdings; the metal is never purchased. Discovery typically occurs when investors request an in-kind distribution or when regulators conduct audits.
• Product switching: Dealer recommends and invoices for standard bullion but purchases cheaper or ineligible products and retains the difference. The depository holds something different from what the statement shows.
• Excessive markup + disappearance: Dealer charges excessive markups for years, then ceases operations, leaving investors with metal below their purchase cost and no recourse against a defunct entity.

Mitigation: The depository verification step is the key control. Calling the depository directly — using a phone number from the depository's own website — and confirming that your sub-account shows the specific items and quantities described on your custodian statement verifies the metal exists independently of what the dealer or custodian reports.

An IRS-approved custodian's primary obligation is administrative: maintaining accurate records, filing required IRS forms, and executing your instructions (buy, sell, distribute). The physical metal is held at the depository — not at the custodian's offices. If a custodian becomes insolvent or loses IRS approval:

• Your metal remains at the depository, titled in the custodian's name for your benefit
• A successor custodian (appointed by you, by the IRA's beneficiary, or by a court) takes over the administrative function
• The transition process may take weeks to months, during which access to your account may be restricted
• You do not lose the metal — but you may not be able to direct transactions during the transition

Mitigation: Choose a well-established custodian with substantial operating history, verifiable IRS approval, and adequate capitalization. Equity Trust Company (decades of operation, IRS-approved) presents lower custodian risk than a newly formed custodian with minimal track record.

Major IRS-approved depositories (Delaware Depository Service Company, Brinks, IDS, CNT, Equity Trust's affiliated facilities) carry full-replacement-value insurance on all stored metal through institutional insurance carriers (typically Lloyd's of London syndicates for precious metals). This insurance covers:

• Theft, robbery, and burglary
• Fire and other physical destruction
• Employee dishonesty/internal theft
• Mysterious disappearance

The combination of professional vault security and full-replacement-value insurance makes depository failure-resulting-in-investor-loss extremely unlikely for major, established depositories. The primary depository risk is operational disruption (natural disaster, extreme weather affecting the facility) that might delay access without causing loss — similar to a bank being closed for a few days following a storm.