Counterparty risk is the risk that another party in a financial arrangement fails to meet its obligation – a company defaulting on a bond, a bank failing, a stock’s issuing company going bankrupt. Physical gold you actually hold doesn’t carry that kind of risk, because its value doesn’t depend on any other party fulfilling a promise to pay.

That changes somewhat inside a Gold IRA specifically: the metal itself is still counterparty-risk-free in the traditional sense, but you are relying on the custodian and depository to properly store, insure, and account for it – a different, narrower kind of institutional risk, not the same as a bond issuer defaulting.

Under IRC Section 408(m), that custodian and depository structure is a legal requirement for IRA-held gold, not optional – the tradeoff for the account’s tax advantages is accepting that operational reliance on a third party to hold the metal.