Gold investors have taken it on the chin in recent years, as the price of the yellow metal has fallen dramatically from its 2011 highs. Yet for those who believe that stocks are overdue for a big move downward, investing in gold still seems like a smart move. Many investors would prefer to invest in gold through a tax-favored IRA but don't know how they can do so. Below, you'll learn three ways to have the gold IRA you want with exactly the type of exposure to the yellow metal that matches up with your investing strategy.

1. Investing in physical gold.
IRAs generally are designed to hold financial assets, with a blanket prohibition against owning most types of collectibles. If an IRA invests in a collectible, the amount spent is treated as a distribution of IRA assets in that amount, with the resulting taxes and penalties that occur whenever a distribution occurs even if the IRA legally holds title to the collectible good.

However, the IRS has an exception for gold and other types of precious-metals bullion. In particular, the exception falls into two categories. First, bullion coins that are issued by the U.S., including gold American Eagle coins, or by individual states in the U.S. are not treated as collectibles and therefore eligible for holding within an IRA. In addition, other types of gold bullion are also allowed within an IRA if the quality of the metal meets or exceeds the minimum levels of purity required by futures market regulators and if a qualified trustee manages the IRA and physically holds the bullion.

That last point is the key to investing in physical gold in an IRA. Most financial institutions that manage IRAs don't want to deal with the hassle of gold bullion, so they won't allow you to invest in physical gold. You might have to go beyond your regular institution to find one that will let you have a gold IRA that owns gold coins or bars.

2. Going the gold ETF route.
In order to avoid the hassle of dealing with specialty gold IRA trustees, some investors have simply turned to substitutes for gold bullion that offer similar performance without actually involving physical ownership. Exchange-traded funds like SPDR Gold (NYSEMKT:GLD) and iShares Gold (NYSEMKT:IAU) offer shares to their investors, and each share matches up to a certain amount of gold in the ETF's possession. The prices of these ETFs have done a good job of tracking the price of gold over the long run.

One thing to keep in mind, though, is that these ETFs have expenses. Because gold doesn't produce income, the amount of gold that each ETF share represents will fall over time as the fund uses its gold holdings to pay its ongoing expenses. With annual expenses of just a fraction of a percent, though, the slow erosion in value is almost imperceptible except over longer periods of time.

3. Choosing gold-mining stocks.
Finally, some investors prefer to invest in the companies that mine gold rather than in gold bullion itself. Either by picking mining companies directly or by using an ETF like the Market Vectors Gold Miners ETF (NYSEMKT:GDX), you can put together a portfolio of companies with gold-mining assets that can thrive when the gold market is healthy.

The risk with gold-mining stocks is that other factors also play a part in the value of a given company's shares. For instance, a mining accident or other site-specific issue can send a company's stock plunging even when gold is performing well. In addition, although higher gold prices usually help a miner's profitability and therefore send shares higher, some companies choose to hedge their gold market exposure by locking in selling prices in advance. That can make a mining company less sensitive to gold price movements in either direction, and while that's good in a downward moving market, it can hurt returns when gold does well.

A gold IRA can let you benefit when the gold market performs well without some of the tax hassles involved in owning bullion or gold-related stocks outside a retirement account. By knowing the rules, you can make sure that your gold IRA will give you the results you want without any unexpected problems along the way.

Dan Caplinger has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.