Before we discuss ways you might include gold investing in your RRSP, let’s look more closely at price fluctuations.

Gold is the only commodity that rarely if ever gets permanently lost or consumed. This means that virtually every ounce of the metal that has ever been produced may one day come back on the market. That’s why it’s a mistake to try to predict gold prices as you would wheat prices, for example, by comparing estimates of supply and demand for the coming year.

Gold mining production is somewhat predictable, like the production of any commodity: It varies with how miners react to operating costs and market prices. Still, gold demand also depends in large part on investor psychology. Investors may choose to buy or sell gold, depending on how they feel about the outlook for the economy or inflation.

Practical matters can also influence gold buying and selling. With interest rates still at relatively low levels, investors don’t miss out on much interest income if they hold gold. If interest rates further move up, however, some investors may sell their gold and use the proceeds to buy interest-paying securities.

Because it depends on investor psychology, gold can go through huge speculative booms and busts. Gold soared in the 1970s, starting from about $42 an ounce, after the U.S. legalized gold ownership by U.S. investors. It hit a peak at around $850 an ounce in 1980. At that time, gold enthusiasts were certain that higher U.S. deficit spending—and any resulting increase in the money supply—guaranteed much higher gold prices in the coming years and decades. While federal budget deficits stayed high, gold moved downwards for the next two decades.

In 2011, gold shot up to a high of $1,950 U.S. an ounce. Gold prices have fallen since then and spent much of 2017 moving back up. The precious metal now trades above $1,276.

In the longer term, gold could well regain its 2011 highs. This will simply reflect the vast expansion in the U.S. money supply that has taken place since the financial crisis struck in 2008.

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Meanwhile, prices could move still lower in what some market observers might refer to as “capitulation”—when investors simply give up on a long-held position. That’s when the next big rise in gold is likely to start.

Gold’s low price has prompted more investors to ask us about gold investing. One question we’re sometimes asked is how to hold gold bullion and other forms of the metal in an RRSP.

We continue to recommend that you hold speculative investments like gold outside your RRSP. That’s because, if you hold speculative investments inside your RRSP and they drop, you not only lose money, but you lose the opportunity for tax-free compounding of the money within your RRSP.

However, if you want to hold gold and gold investments in your RRSP, here are three ways to do so:

1. High-quality gold mining stocks: Whether or not you invest in gold inside or outside your RRSP, we continue to recommend that you limit your gold investing to gold stocks, and avoid buying gold bullion, gold coins (unless you collect them as a hobby) or certificates representing an interest in bullion. That’s because commodity investments such as gold bullion do not generate income. Instead, they come with a continuing cash drain for management, insurance, storage and so on.
2. Hold bullion in your RRSP directly: The 2005 Canadian federal budget made investment-grade gold or silver bullion bars eligible to be held in an RRSP. Bullion bars are eligible for RRSP gold investing if they are produced by a metal refinery that is accredited by the London Bullion Market Association. Accredited metal refineries include the Royal Canadian Mint and Johnson Matthey. You can also buy bullion bars from the Bank of Nova Scotia.

3. Hold gold and silver coins in your RRSP: To be considered eligible for RRSP investment, gold coins must be at least 99.5% pure, and silver coins must be at least 99.9% pure. As well, only legal-tender coins produced by the Royal Canadian Mint are RRSP-eligible.

However, to hold coins or bullion bars in your RRSP, you need to find a third-party custodian of your coins or bars who will verify that you indeed hold the amount of bullion claimed, and report that to the Canada Revenue Agency on your behalf.

The Questrade “Gold RSP”: Questrade, a Canadian online discount broker, introduced its “Gold RSP” in January 2006. This investment meets all of the Canada Revenue Agency’s specifications, and makes it practical to hold coins or bullion bars in your RRSP.

To access the Questrade Gold RSP, you have to open a Questrade account. You can open an account with as little as $1,000. Kitco Metals buys the gold from the Royal Canadian Mint, and the gold is stored at the Mint, as the Canada Revenue Agency requires. You can buy and sell gold bars or coins if you want to bet on gold price fluctuations.

Do you currently hold gold stocks in your RRSP?

Note: This article was originally published in 2010 and is regularly updated.