Roth IRA – The Basic Principles of Roth IRA

Posted on August 19, 2011 by Alex Roth

Roth IRA or Individual Retirement Account is a retirement investment account which is advantageous from the tax free side. It’s basically almost the same as traditional IRA or the regular 401k retirement plan, but in order to benefit from this type of investment, people need to pay attention to the certain rules.

This type of investment is different from the general individual retirement management. The ideas about this type of investment originated from Senator William Roth, with the purpose to benefit the account holders in financial ways.

People won’t need to pay up for the advancement tax, even when they have had the account for less than five years and they have withdrawal period around 59 years old. The benefit of having this type of retirement plan is that people can have different retirement adjustments and settings, and all of them are possible. There’s no such thing as impossible planning when it comes to this investment management. The primary fund is able to be withdrawn freely without the account holders have to pay for the tax usage. Unlike the traditional IRA or the regular 401k, this retirement type doesn’t have any distribution setting or doesn’t have any minimal or lowest withdrawal limit.  The remaining funds might be distributed to friends or families once the account holder dies.

When people start having this retirement account, they need to know the basic principle and the guidelines. The IRS has come up with quite easy to understand rules. As long as the following rules are met, everything is considered okay.

  • Tax
  • Income
  • Income limitation
  • Age

It’s also important to pay attention to the contribution restriction, distribution of the withdrawal, and also types of investments they want.

Basic IRA Withdrawal Rules

These are the basic rules concerning Roth IRA withdrawals

  • The primary contribution for the Roth IRA can be withdrawn anytime, without holders have to pay for the penalty fee, considering that the investment has reached the proper withdrawal period.
  • Once the holder reaches 59 years old, they can withdraw the earnings. Before that, they can’t do it or they have to pay up the penalty fee.
  • The holders have to invest for their contribution earning for about five years.
  • There’re several exclusions for the rules.

Withdrawing Roth IRA Fund before 59 Years Old

When the account holders withdraw their fund before they reaches 59 years old, they will have to pay for the penalty, which is about 10% of the total investment.

Withdrawing Roth IRA Fund after 59 Years Old

When the account holders withdraw their fund after the due date, they won’t have to pay anything – tax or penalty – considering that they have reached minimal five years holding account period.

Investing the Roth IRA for Five Years

When the account holders want to withdraw their fund without paying any tax or penalty fee, they need to really pay attention to the conversion or contribution process of the investment where they need to turn the earlier tax five years before the withdrawal period.

Exceptions of Withdrawing Roth IRA Funds

The account holders won’t need to pay for the 10% penalty fine if these particular circumstances happening to them

  • The original account holder passes away and the beneficiary close the account
  • The account holder is considered incompetent based on IRS regulations
  • The account holder has to use the money for the initial house purchasing purpose
  • The account holder needs to reimburse medical care cost
  • The account holder has to buy health insurance and he doesn’t have any job
  • The account holder has to repay his tax debt due to Roth IRA levy tax
  • The account holder has to pay his or other family members’ educational cost

Roth IRA Calculators and How to Count Everything

When people want to know the benefits they can get from having this particular retirement investment, they can always count everything from the beginning. In that way, they can imagine how much money they will spend and how much money they can gain from having this particular account. They can plan and manage their retirement purposes and objectives and also count everything, with the help of special Roth IRA calculator. If they’re going to plan everything, they need to consider about the following things:

  • Think and determine the amount of money they need to contribute based on annual time plan.
  • Think about the annual charge and benefits they can get.
  • Think about the benefits and usage of additional annual contribution, if there’s any.

If they’ve managed to consider about everything thoroughly and they’ve managed to count their loss and benefits, they can decide proper amount to start their retirement investment right away. If they already have traditional IRA, they can also change it into Roth IRA, which is more profitable.

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Gold ETF outflows drag on metal as holdings drop to 4-year low

Posted on May 18, 2013 by Alex Roth

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The U.S. Comex gold futures fell 3.46% week-to-Thursday to $ 1,386.90, just $ 64 above the worst level reached in mid-April this year. Year-to-date, the gold futures dropped 17.24%, compared to a rise of 15.73% in the S&P 500 Index, 6.48% in the Euro Stoxx 50 index and 12.66% in the MSCI Developed World Index. The Dollar Index is also up 4.79% this year.

Softer Economic News but Higher Stock Prices

While Japan’s Q1 real GDP, driven by higher private consumption, jumped a higher-than-expected 3.5%, the Euro-area’s April inflation rate dropped to a three-year low to 1.2% while the Q1 real GDP declined 0.2%, its sixth quarter of contraction. The weekly jobless claims in the U.S. increased by 32,000 to 360,000. The Philadelphia Fed index and the New York’s manufacturing survey also unexpectedly contracted as the fiscal cuts have taken effect. Nevertheless, about 39% of the stocks in the S&P 500 Index reached their 52-week high according to Bloomberg. The Japanese Nikkei Index is also approaching a five-year high. The strength of the stock markets has surprised many investors who are still under-allocated to equities and are skeptical of the economic future.

Gold-Backed ETP Holdings Continued to Drop

As inflation is low and equity markets are rising, gold-backed ETP investors have been rotating out of gold. The SPDR Gold Trust holdings dropped to a four-year low to 1,041 metric tons yesterday after reports show that investors such as Soros, Northern Trust and BlackRock have cut their holdings between 12% to more than 50% in Q1. Credit Suisse predicted that gold will trade at $ 1,100 next year, citing that gold is relatively expensive compared to other hard commodities. The World Gold Council reported that while gold-backed ETPs dropped 176.9 tonnes in Q1, total bar and coin demand surged 10 percent from a year ago to 377.7 tonnes while jewellery demand climbed 12 percent to 551 tonnes. Central Banks continued to add gold by over 100 tonnes for the seventh consecutive quarter. The tug of war between the physical buyers and the paper gold investors will likely continue.

What to Watch Next Week

Next week, various U.S. regional Fed Presidents will speak about the economy on May 20, 21 and 23. On May 22, Japan will announce its Target rate, Ben Bernanke will make his testimony and the latest US FOMC minutes will be released. The U.S., Euro-17 and China will release the flash manufacturing PMI index for May on May 23. Germany will report its IFO business climate index on May 24.

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Quitting QE: What’s at risk?

Posted on May 18, 2013 by Alex Roth

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End to QE could unleash massive volatility

Central banks saved the world with unconventional monetary policies such as quantitative easing, which at the very least stopped the banking system from collapsing, but according to the IMF it’s a policy that might be approaching its sell-by date. But unwinding it will unleash intense volatility across forex and asset markets.

The IMF warned in its Global Financial Stability Report and World Economic Outlook on Thursday May 16 that unconventional monetary policies if carried on against a backdrop of relative economic stability could create volatility in the financial system and asset bubbles.

One of the unusual market features stemming from nearly four years of aggressive monetary policy from leading central banks such as the U.S. Federal Reserve are the synchronized rallies across all the main asset classes. This is largely because the pricing mechanisms of markets have been distorted by torrents of central bank money as they cease to reflect fundamental factors. 

Therefore a withdrawal of extreme easy money is also likely to spur synchronised bear markets across those same asset classes with gold, silver and the risk currencies likely to suffer considerably. This time commodities including gold, copper and oil have not mirrored the recent equities rally. And during May even the 10-year U.S. Treasury yield started rising, so investors are beginning to anticipate some sort of change.   

Ending QE would mean more downside for gold

For much of this year the Fed has made public that it is mulling over winding down its quantitative easing program and the Bank of England has, for the time being, decided not to start a new one. The IMF’s warnings over asset bubbles add to this mood music and are helping pave the way for a change in market sentiment.

The U.S. dollar is likely to be the big winner as the Fed would lead the way in the withdrawal from unconventional monetary policies. The U.S. economy is growing at least, whilst the U.K.’s is hobbling along, the Eurozone remains mired in recession and Japan is still playing catch-up.

Some risk currencies are already heading lower

Equity markets remain remarkably complacent judging by sentiment measures, such as the VIX index. But also currencies such as GBP, which has managed to stabilize recently with the Bank of England ceasing to talk it down and because it is putting new QE programmes on hold.

The EUR is likely to fall further and commodity currencies such as AUD, NZD and CAD are already in full retreat vs. U.S. dollar. The newly debased JPY, may turn out to be a little less vulnerable as Japanese investors typically repatriate funds during periods of high volatility and that means buying their own currency. It remains to be seen if the Bank of Japan has decisively changed the mindset of the Japanese investor with its attack on JPY.

However, the little growth there is in developed countries has been achieved on the back of these vast liquidity injections. The question is could the U.S. economy maintain some sort of growth without it, particularly with sequestration – tax rises and government spending cuts – gathering momentum.

The rout in equities and possibly bond markets that would follow a tightening of monetary policy would also concern policy makers who attach so much importance to the ‘wealth effect’ created by rising asset prices. It could also cause stress on the balance sheets of commercial banks due to their mandated large holdings of government bonds and other funding strategies, which depend on cheap money. That would mean more expensive credit for the real economy.

Any return to recession in the U.S. would swiftly lead to an end of talk of cancelling QE. There may even be an unwinding of QE by the end of the year, but given the sluggish nature of the U.S. recovery it is likely that QE will once again be deployed. But in the meantime, an attempt to withdraw it will unleash intense volatility across currencies and asset markets as they realign themselves for a new monetary reality.

However, one thing is for sure is that the world will eventually have to learn to live without QE as continuing to use it fosters potentially damaging financial bubbles, which could lead to another global crisis.   

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Gold falls as speculators pile into short positions

Posted on May 18, 2013 by Alex Roth

This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, click the “Reprints” link at the top of any article.

There was a determination in the paper markets to get the gold price down. Open interest on Comex rose on falling prices, as all categories of speculator have been increasing their short positions in the August future, giving the bullion banks the opportunity to go long: Hence the rise in August’s open interest of more than 35,000 contracts in the last five sessions (some of which admittedly is roll-overs from the June contract). Note that this is despite the fall in the price, and is reflected in the chart below.

So what’s driving the price? Well, all categories of speculator are closing their longs, which is hardly surprising given some hefty margin calls. Furthermore, there are new shorts being opened, as speculators sell into the trend. All the bullion banks have to do is to pick up the pieces as profitably as possible.

Meanwhile in silver open interest appears to have found a floor at 145,000 contracts, and the bullion banks are having great difficulty closing their bear positions.

A feature of this week’s trading has been price weakness during London trading hours, which suggests possibly two things: There is a high level of coordination between London and Comex in working prices lower, and there may be some physical gold being made available to relieve the squeeze on supply. In the latter case, this suggests some behind-the-scenes intervention by central banks, possibly by taking Spanish or Italian gold as collateral and selling it into the market. This would be redolent of the “carry trade” in the 1980-90s, when gold was leased, sold and the proceeds invested in government bonds. Could this explain the ridiculously low yields for Spanish and Italian bonds?

To my mind, Spanish and Italian gold reserves are the dogs that don’t bark in the night. Meanwhile, in Asia the Shanghai Gold Exchange has seen deliveries dry up, with virtually nothing in May so far, compared with 297 tonnes in March before the gold price was smashed. In Dubai it is reported that an additional 50 tonnes have been bought since mid-April, compared with consumer demand of 51.8 tonnes for the whole of 2012. In India demand has also surged. The result is that premiums are opening up for deliverable gold in all Asian markets.

Next week

Perhaps the key statistics to watch next week are premiums in Asia for real gold over paper gold in the West. They need to rise to the point where it is worth taking the risk of non-delivery and arbitraging between low-priced paper and hungry physical markets. That should bring some price control back to physical markets.

The big day for announcements next week is Thursday. The focus is likely to be on the question whether or not there is economic recovery, and how it will affect U.S. dollar exchange rates. Here is the list.

Monday. Japan Leading Indicator (final).
Tuesday. UK Consumer Price Index.
Wednesday. Eurozone Current Account. UK PSBR, CBI Industrial Trends. US Existing Home Sales, Fed’s FOMC Minutes (for 30 Apr/1 May).
Thursday. BoJ Monthly Economic Report (May). Eurozone Flash Composite and Manufacturing and Services PMI, Flash Consumer Sentiment. UK GDP (second est.) and Retail Sales. US Initial Claims, Flash Manufacturing PMI, New Home Sales.
Friday. US Durable Goods Orders.

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Gold bears revived as rout resumes after coin rush

Posted on May 17, 2013 by Alex Roth

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Gold bears are dominant again after prices resumed their slump and billionaire George Soros joined investors selling holdings in exchange-traded products that have retreated to a two-year low.

Seventeen analysts surveyed by Bloomberg expect prices to fall next week, with eight bullish and three neutral, the highest proportion of bears in two weeks. The analysts were divided a week ago after gold rebounded as much as 13% from the two-year low of $ 1,321.95 an ounce on April 16. ETP holdings slid 16% to 2,207.1 metric tons this year, the lowest since July 2011, data compiled by Bloomberg show.

Prices that rallied as much as sevenfold in the past 12 years entered a bear market last month after some investors lost faith in gold as a store of value and equities rallied on mounting confidence the U.S. economy is improving. The slump spurred a surge in demand around the world, with coin purchases from the U.S. Mint rising to a three-year high in April. This month’s sales are on course to be 65% lower and global ETP holdings increased on just one day in the past six weeks.

“The momentum has slowed significantly,” said Jeremy Baker, a senior commodities strategist who oversees about $ 800 million of assets at Harcourt Investment Consulting AG in Zurich and who forecasts prices may drop as low as $ 1,200 in six months. “The safe haven has definitely lost its gleam. We are in a declining phase here.”

Standard & Poor’s

The metal fell 18% to $ 1,371.57 in London this year and is trading 29% below its September 2011 record. Gold is the second-worst performer this year in the Standard & Poor’s GSCI gauge of 24 commodities, after silver. The S&P GSCI dropped 2.4% since the start of January and the MSCI All-Country World Index of equities rose 11%. Treasuries returned 0.1%, a Bank of America Corp. index shows.

Demand in India and China, the two biggest gold consumers, surged after prices slumped. The U.S. Mint, which said April 23 it ran out of its smallest gold coins, sold 42,000 ounces of American Eagle bullion coins so far in May, compared with 209,500 ounces in April, its website shows. Prices may fall to $ 1,100 in a year as the metal “is going to get crushed,” Ric Deverell, head of commodities research at Credit Suisse Group AG, told reporters in London yesterday.

Bullion fell in six of the past seven months as the S&P 500 Index of U.S. stocks rose to a record, the dollar reached a nine-month high against six major currencies and unprecedented money printing by the world’s central banks failed to spur inflation.Expectations for consumer price increases, as measured by the break-even rate for 10-year Treasury Inflation Protected Securities, fell 8.4% this year, reaching an eight-month low yesterday.

Goldman Sachs

Gold demand fell 13% to the lowest in three years in the first quarter as record ETP sales outweighed an increase in buying from China and India, the London-based World Gold Council said in a report yesterday. A further drop in ETP holdings will probably mean lower prices, Goldman Sachs Group Inc. analyst Jeffrey Currie wrote in a report dated May 14.

Soros Fund Management LLC cut its stake in the SPDR Gold Trust, the biggest gold ETP, by 12% to 530,900 shares now valued at about $ 71.1 million in the first quarter, a Securities and Exchange Commission filing showed May 15. The 82-year-old reduced his holding by 55% in the fourth quarter. Funds run by Northern Trust Corp. and BlackRock Inc. cut their stakes by more than half in the latest quarter, filings showed.

Biggest Holder

Schroder Investment Management Group bought 2.1 million shares in the SPDR fund, a filing showed. John Paulson, the largest investor in the product, maintained a stake that lost about $ 165 million in the first quarter. The billionaire is standing by the metal even after his Gold Fund saw declines of about 47% this year, two people familiar with the matter said this month. Global gold ETP holdings tracked by Bloomberg are valued at $ 98.1 billion, from $ 147.7 billion in October.

The metal gained 57% since the end of 2008 as the Federal Reserve was joined by central banks in Europe and Japan in seeking to boost economic growth by buying bonds. Bank of America says policymakers cut interest rates more than 500 times since June 2007. Prices may rebound to average $ 1,650 in the fourth quarter, Commerzbank AG said in a May 7 report.

“When the fundamentals are the same but the price lower, it strikes me that gold is on sale,” said Adrian Day, who manages about $ 140 million of assets as the president of Adrian Day Asset Management in Annapolis, Maryland.

Central Banks

Central banks may help boost demand for bullion as they expand reserves. Nations from Brazil to Russia added 534.6 tons last year, the most since 1964, and may buy 450 to 550 tons this year, according to the World Gold Council. TD Securities Inc. estimates consumers will sell about 1,550 tons of used gold this year, the least since 2008, curbing a source that typically accounts for about one in every three ounces of global supply.

Almost two-thirds of the likely drop in ETP holdings has probably already happened because most institutional investors have made their sales, Deutsche Bank AG said in a May 14 report. Hedge funds and other managers cut bets on higher prices on Comex by as much as 80% since October, U.S. Commodity Futures Trading data show.

In other commodities, six of nine people surveyed expect raw sugar to fall next week and three were neutral. The commodity slid 14% to 16.86 cents a pound on ICE Futures U.S. in New York this year.

Lower Corn

Fourteen of 29 surveyed anticipate lower corn prices next week and nine said the grain will gain, while 15 said soybeans will fall and eight expect higher prices. Fifteen traders predicted declines in wheat and seven were bullish. Corn slid 8.1% to $ 6.4125 a bushel this year in Chicago as soybeans added 1.3% to $ 14.28 a bushel. Wheat is down 12% at $ 6.8375 a bushel.

Eight traders and analysts surveyed expect copper to drop next week, six were bullish and two were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, slipped 7.8% to $ 7,317 a ton since the start of January.

While the S&P gauge of raw materials fell 7.4% since Feb. 14, it’s still above the five-year average. More than half of those contacted in a May 14 survey of investors, analysts and traders who are Bloomberg subscribers said the U.S. will be among the markets offering the best returns over the next year.

“There seems to be a view that growth is picking up in U.S. but inflation is not picking up,” said John Toohey, the San Antonio, Texas-based vice president of equity investments at USAA Investments, which manages about $ 54 billion of assets. “That is the worst for gold. Prices will remain under pressure unless we see something that leads people to think there is inflation in the system or there is going to be more monetary easing or you see a large institutional buyer of gold.”

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Pension funds seen selling gold ETFs

Posted on May 17, 2013 by Alex Roth

This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, click the “Reprints” link at the top of any article.

Gold prices failed to hold a rally above $ 1,380 per ounce in London on Friday morning, trading 5% down for the week as world stock markets held steady.

Both the Euro and British Pound also cut their mid-week rallies against the Dollar, holding gold prices at €1070 and £904 per ounce respectively.

New data overnight showed Japanese machine orders leaping 14% in March from February, while China’s leading economic index rose slightly for last month.

Eurozone construction output sank 8% in March from a year earlier.

“A spell of Dollar weakness looks like gold’s only salvation at the moment,” says one wholesale dealer in a note.

“So another disappointing data point could encourage more short-covering [when bearish traders close their position] ahead of the weekend.”

The US Dollar crept towards a 10-month high vs. a basket of major currencies this morning.

US consumer sentiment data were due for release Friday at 09.55 New York time.

“Bullion’s price break below the psychological $ 1,400 an ounce level may introduce additional near-term pressure on gold,” says bullion market-maker HSBC’s James Steel.

“However, physical demand is likely to pick up further given the price drop, to help stem potential losses.”

Over in India – the world’s biggest gold buying nation on an annual basis – “There is no supply,” Reuters today quotes Prithviraj Kothari, head of Mumbai importers Riddhi Siddhi Bullions Ltd.

Thanks to this week’s sudden imposition of Indian gold import restrictions, supply is so tight some distributors are charging up to $ 20 an ounce above international benchmark London prices, Kothari says.

Hong Kong premiums have jumped this week to record highs of $ 5 per ounce, with the kilogram gold bars favored by China’s investment market now “hard to come by” according to one Singapore dealer.

Even so, “Many people are waiting on the sidelines,” reckons Singapore dealer Brian Lan at GoldSilver Central Pte, “as they are expecting another drop” in global gold prices.

Amongst Western money managers, “We’re seeing some of the pension funds selling via the

ETFs,” reckons analyst Daniel Smith at Standard Chartered bank, “which is a bit of a worrying sign.”

Exchange-traded trust funds backed by gold shed yet more metal on Thursday, with the two leading US funds – the GLD and IAU – dropping 7 tonnes between them to reach the lowest combined level since April 2010 at 1,233 tonnes.

Since Dec. 2012′s all-time peak, the GLD and IAU have lost 21.4% of their combined gold ETF holdings.

“The price of silver in 2013 will primarily be determined on the demand side,” says the latest Commodities Weekly from French investment bank and London bullion dealer Natixis, forecasting “relatively stable” supply with a slight dip in recycling.

On the industrial side it says, and “despite promising expectations from the rest of the world, we expect a slight drop in [photo voltaic] installations due to weak European [solar panel] demand” thanks both to low subsidies from government and the continued Eurozone crisis.

Silver ETF holdings have yet to follow gold trust funds sharply lower, Natixis notes – primarily because private investors own the former, as opposed to money managers in gold.

“[But] at some point these retail investors are likely to start selling.”

Total silver ETF. holdings of 19,400 tonnes currently equate to 60% of last year’s total market supply, the bank’s analysis adds, and “an outflow…could introduce substantial downside risks for silver prices.”

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