What is an in-kind distribution?
A distribution doesn't have to be cash. In a metals IRA you can instruct the custodian to ship you the actual coins or bars, an in-kind distribution. Ownership moves from the IRA to you personally.
The tax bill is the same as cash: the metal's fair market value on the distribution date is ordinary income. What changes is what you hold afterward, metal instead of dollars.
Why do metals IRA holders use in-kind distributions?
To keep the metal. If you bought gold to own gold, selling it to satisfy a distribution or RMD defeats the purpose. In-kind lets the metal come home while the IRS gets its share through the tax on the distributed value.
This makes in-kind distribution the natural RMD answer for metals holders with outside funds to cover the tax: distribute a coin, pay the tax from cash, keep the coin.
How does an in-kind distribution show up in practice?
You instruct the custodian, which values the metal, reports the distribution to the IRS, and arranges insured shipment from the depository to you. From then on the metal is personally owned, home storage is finally fine, because it's no longer IRA metal.