A depository is required for a precious metal IRA because the Internal Revenue Service (IRS) regulations state that all precious metal held in an IRA must be stored in an IRS-approved depository. The purpose of using a depository is to ensure the safety and security of the assets in the precious metals IRA, and to provide an independent third-party storage solution for the precious metals.
The role of the depository is to hold and protect precious metals, and to provide periodic statements and valuation reports to the custodian and the IRA owner. The depository is also responsible for the proper insurance and security of the precious metal, including any necessary measures to protect against theft, loss, or damage.
By using an IRS-approved depository, the assets in the retirement funds are kept separate from the custodian’s own assets and are protected in the event of bankruptcy or other financial difficulties. Additionally, having the precious metals held in a depository helps to ensure that they meet the individual retirement account rules and regulations for self-directed IRA.