Turning to gold as an investment vehicle can seem like a daunting prospect for anyone who is used to dealing with paper assets. Even experienced investors can find the markets challenging when considering the type of investments available; whether to opt for gold bullion, gold bars or gold coins. When you weigh up the changing price of gold, the options for tax free investments (Capital Gains Tax and VAT) as well as where and how to store your holding, there seems to be plenty to consider. Which is why finding a gold investment broker in whose services you can trust is important.
Gold Investment Brokers
Investors need a partner they can rely on to provide a bespoke and personal service that is suitable whether they are making their first gold investment or are an experienced investor.
We are investment brokers that provide clients who are looking to invest in gold with tax-efficient and secure solutions. As experienced dealers in both gold and silver, we can supply a range of options for our investors to offer diversity and balance in a portfolio as well as secure investment opportunities.
Gold is perhaps the most popular commodity of all history. Since it was used in early civilizations as a form of status and to honour the gods to being used as currency, gold has been a constant shadow of the evolution of human cultures from the ancient to the modern world.
There is no culture or era where gold cannot be seen to have a high value. From ancient Egypt to the Aztecs, China’s many dynasties and the Grecian and Roman treasure hoards gold is synonymous with power and wealth. Both a form of currency as well as a standard of wealth, gold was the basis upon which the global economy as we know it stands today. Without gold, a monetary standard would not have been possible and the prosperity of trade that depended upon it.
Gold and the Dollar….
The United States Congress passed the Mint and Coinage Act in 1792. This act put in place a fixed price of gold with parity to the US Dollar. The act had a far-reaching impact on the modern history of gold as a precious metal. As per the new legislation, gold and silver coins were considered legal tender in the US. Gold, which is today 75 times the price of silver, was only 15 times dearer than silver at the time. The US mint therefore bought and sold silver and gold at a ratio of 15:1. However, the coming of the American Civil War changed that ratio. Since the US was unable to meet its debts using gold and silver, paper currency was introduced for the first time in the US in1862. The paper currency was known as a fiat currency, or one which is not convertible on demand at the existing fixed rate. Eventually, in 1873, silver was removed altogether from the US mint’s fixed rate system and a bill called the Coinage Act of 1873 was passed to officialise the removal of silver dollars from the US monetary system.
The 1800s witnessed a spate of gold rushes, as speculative adventurers rushed off to uninhabitable areas in search of the precious metal, in the hope of becoming millionaires if they struck gold. The notable gold rushes across North America at the time were North Carolina in 1799, San Francisco in 1848 and Klondike in Canada, 1896. Australia too witnessed a number of gold rushes in the latter half of the 19th century from 1850. Infact, the gold rushes helped populate areas of the great Australian outback, which had not been occupied by humans earlier. Today, these places are burgeoning cities and they owe their existence to the coming of the speculators in the 1800s.
The important part….
Another important point in the modern history of gold is the Bretton Woods agreement. The two world wars had devastated the international financial markets and at the end of World War II, the global leaders came together to create a gold exchange standard for the world, linking it to the US Dollar. At the end of the war, the US emerged as the strongest nation, both militarily as well as economically. So, the US Dollar was chosen under the Bretton Woods agreement and this made the US extremely powerful on the international markets. The move is one of the most important points for the price of gold and for the US economy, as it paved the way for the US to become a global superpower.
As a commodity and a currency, the history of gold investment is a complex one and is relatively modern. Whilst accumulating wealth (and investing) is not a new human proclivity, the mechanisms for a standard benchmark of gold pricing relative to paper currency only emerged in the last few centuries. Europe was the first continent to implement gold standards at the end of the 19th century with the US following suit after WWII. All nations have since adopted a fiat currency system though most hold gold as central reserves or as commodity money.
Gold is a commodity and therefore in investment terms is very similar to investing in any other valuable resource. Its price (and other commodities) is driven by supply and demand, with higher prices expected when either demand rises, or supply falls. However, the spot price of gold can be impacted by many other complex factors including geopolitical factors, global inflation, speculation and psychology.
So what’s the spot price?
The spot price refers to the exact price of one ounce of gold at a particular point in time and dictates the price of transactions in the international market. Future prices of gold, on the other hand, are contracts that define the price of gold for future delivery of the commodity. These contracts are listed through various exchanges. Futures provide investors and producers with an avenue to mitigate price risk when investing in the commodity. However, futures do have an important impact on the spot price of gold. Infact, the spot price of gold is determined by the futures contracts of the following month. The contract with maximum volume in the next month impacts the current spot price of gold.
What about the role of COMEX?
The global discovery process of spot prices takes place around the clock, across exchanges that trade in commodities that include precious metals like silver and gold. The popular international exchanges include New York’s COMEX, the London exchange, Zurich, Shanghai, Hong Kong and the ABX global exchange in Australia. Out of these, perhaps the most significant is New York’s COMEX and spot prices of gold are derived from futures contracts that are traded on COMEX.
However, because there is a finite amount of gold on the planet there is a constant positive influence underpinning investment. Whilst the price can fluctuate at any given time, particularly if mining slows down as a result of external factors or new mining ventures start-up, the bottom line is that the demand is constant or rising. Combined with a finite supply, the price of gold is, therefore, a matter of simple market economics; static supply vs growing demand.
As the above example shows, there’s no doubt that gold can be an attractive investment opportunity for many individuals, but why do people invest in gold over other commodities, or instead of stocks or cash investments?
The reason many people invest in gold is mainly to do with the investment principle of ‘Diversification’. This is the practice of spreading your investments across different asset classes, usually with the aim of protecting your assets against potential losses in any one class.
For example, many people will likely hold some cash investments, which accrue wealth based on interest rates. Interest rates have been poor in the UK since 2009, which means these cash investments may have fallen in value when inflation is factored in. Similarly, if you own stocks and shares, they’re also vulnerable to poor performance at times of market uncertainty, such as the global economic situation we’ve experienced since 2008.
Gold is seen as a savvy way to diversify from such holdings. Commonly referred to as a ‘hedge’ to these other types of investments, it has historically performed well in market downturns, providing overall portfolio balance.
Once you’ve decided that you want to invest, we offer plenty of investment solutions from bullion and bars to rare and collectable gold coins. Your gold can then be stored in our secure storage facility (depending on the size of your holding), or shipped to your address via a secure, insured service. The option which is right for you will depend on how much gold you’re purchasing, your reasons for buying and your access to secure storage.
Like any form of investment and any commodity, investors make money from by buying and holding the metal until the point at which it reaches a favourable price. If you purchased gold in 1970, for example, then you may have been able to acquire it at around a price of £15 per ounce. If you sold that gold in 2010, then you may have been able to secure a price of £912 per ounce! And, depending on what form of gold your investment took, the profits on this may have been free from Capital Gains Tax.
Most people use investment brokers to help them to access tax efficient opportunities to diversify their portfolios and good investment brokers will be able to offer further value with access to volume discounts.
When you have decided to invest, there are still some considerations you will need to make about how to invest. These will largely depend on whether you are seeking long-term financial security or a more flexible investment.
Individual purchase or sales
A lump sum purchase of gold coins, or gold bullion, can be suitable for those wanting to add gold to their portfolio immediately. Many purchases, bought through us are completely tax-free, and you can take advantage of our 0% commission rates and Buyback Guarantee. There are also special discounted purchase rates for those buying larger volumes.
Just like saving into a cash account, such as an ISA, it’s possible to gradually build your holding over time, through regularly scheduled, gold investments with our Gold Bundle monthly saver. This makes an investment affordable for all, providing greater flexibility when it comes to growing your holding.
Like other forms of investment, such as shares, it’s also possible to hold gold as part of your Self Invested Personal Pension (SIPP). This places investment bars as part of your pension funds, locking away the value until you need it for your retirement years. Investing in gold via your pension is similar to other investment options and it can also be held in the same pension as stocks, bonds and cash.
Contacting Physical Gold
Contact Physical Gold today to discuss the best approaches for your circumstances for gold investment. Call us today on 020 7060 9992, or view our other contact details here.
Buying gold coins can be an excellent investment for those seeking portfolio balance. Owning gold in the form of coins, means you have the flexibility to sell small parts of your holding. Sticking to the main bullion coins such as Sovereigns, Krugerrands and Britannias, will enable you to buy at low prices and sell easily. Buying UK gold coins additionally benefits UK investors because any gains made on the sale of the coins is free from tax.
Buying a gold ETF can be a good investment to provide a safe haven element to your overall portfolio. The value of the ETF should rise when stock markets fall, providing a sound hedge against market downturns. As an electronic investment, it benefits from efficient buying and selling margins, but also poses additional counterparty risks that coins and bars do not.
It’s actually most prudent to own a mix of both gold and silver. Gold is a more established safe haven asset, so tends to gain more from market downturns and volatility. Silver can also perform well in these circumstances but also benefits when industrial demand for silver increases as it’s used so widely in electronics. While silver certainly has more opportunity for huge growth, gold is the steadier of the two.
The best gold investment for beginners is to focus on the well established UK bullion coins such as Sovereigns and Britannias. Premiums are low on these coins and it’s difficult to go wrong as they’re so easy to sell at excellent prices. Avoid buying proof coins or boxed collectors coins which will cost far more.
Gold has been considered an excellent medium to long-term investment for hundreds of years. Unlike cryptocurrencies, gold investment is a well-established two-way market. Gold investing is unique as the price tends to increase when many other asset classes fall, so it provides a balance to your wealth. Owning physical coins and bars is particularly appealing to those worried about owning paper assets like stocks or bonds.
The idea behind gold investment is that the underlying value of gold increases over time. Historically this rate of increase is higher than inflation, so the value of your investment increases in real terms. Investing in gold can take the form of physical bar and coins, gold equity funds, mining shares or ETFs.
Both investments operate outside of the established fiat money system and both work based on capital appreciation rather than paying an income. Apart from that, they pose very different risk profiles. Gold investment has existed for thousands of years and is generally used to protect wealth from inflation and market downturns. Bitcoin, on the other hand, is far less established and understood. While it provides the chance of huge gains, it also threatens to lose you everything.
The best UK gold investment is to buy Sovereigns and Britannia coins. Physical ownership means you have no counterparty risk. The bullion coins represent great value compared to proof coins or collector’s coins, and both benefit from a strong second-hand market, so they’re easy to sell. As UK legal tender, and profits from selling these coins is also free from Capital Gains Tax.
If you’re wondering where to buy gold for investment, then the best bet is to focus on specialist dealers. These brokers should be a member of the British Numismatic Trade Association (BNTA), have a track record and positive customer reviews. Many of these dealers will have an online shop with live pricing and offer quantity discounts on investments. The best ones will also provide free advice and guidance as to which are the most suitable coins and bars.
Please read our detailed article on this topic, which can be accessed by clicking here.
For most, buying coins is better than bars for gold investment. Coins provide more flexibility to sell small parts of the holding and can fetch higher prices when you wish to sell. In the same way that larger bars are cheaper per gram than small ones, buying gold coins in bulk will also achieve price discounts. UK investors also benefit from legal tender coins being tax-exempt, whereas gold bars are not. Owning part of a very large portfolio in 1kg gold bars can achieve modest price savings.
2018 is a good year to start in gold investment as gold prices are significantly lower than at the height of the market. Gains may not be straight away, but 2018 is a prudent starting point with Brexit still looming, equity markets due to a large price correction, and credit bubbles brewing in the background. The gold price would likely increase in any of these events.
The gold price can go down as well as up, depending on supply and demand. Over the short term, there’s the risk that your investment could fall in value. Over the medium to long term, gold has proven to increase in value quicker than the inflation rate, proving to be a reliable store of wealth. Buying in paper form, like ETFs, gold futures or gold shares, poses further risks with leverage and counterparty exposure. Owning gold investment coins and bars negates both these risks.
Overall gold is better than cash in the bank. Fixed deposits such as cash ISAs and bank deposits promise an explicit and predictable return. Gold investment, on the other hand, can go down or up in value and at various rates. The current low-interest rate environment means that fixed deposits offer 1% or lower returns. This can even be taxed if outside of an ISA, reducing the yield still further. These rates are well below inflation which means the value of your money is diminishing in real terms. Gold is riskier in the short term but has the ability for high returns and at a minimum, has proved to beat inflation, successfully acting as a store of wealth. Buying UK gold coins is also tax-free.
As of March 2018, the gold price was around 20% off its all-time high, and around 13% off its high from the past 12 months. This provides a great buying opportunity to buy more gold for the same money. Many experts predict a significant stock market correction any times in the next 18 months which would propel the gold price upwards.
Unless you’re an expert with years of experience, diamond investment poses huge risks that you could pay over the odds. The diamond market is also far less liquid than the gold market, meaning you may not get the price you want hen it comes to selling, and it may take some time. Gold is a far more structured market place with transparent pricing and dealers who can help guide you. Gains can be large with diamonds, but gold acts more as a market hedge and security.
If you’re wondering how to buy gold investment, then the simplest and safest way is to buy online from a reputable dealer. Research into the broker first and ensure they have a track record. They may be able to offer you guidance as to which coins and bars to buy. You can either receive the gold yourself or have the dealer store it for you. When the price has risen over time, sell the gold at a profit.
Firstly decide on your objectives. If you wish to trade in and out of the market and depend on timing, then electronic gold like ETFs may be the most efficient method. If you have a high risk appetite, then buying gold mining shares could provide enhanced returns if that mining company outperforms the market. For those seeking, security and low risk, with tax-efficient returns, then buying physical gold as an investment is best, which can be achieved through a reputable gold dealer.
If you know which coins to buy, then simply purchase them online from a trustworthy broker. If you need guidance as to which gold investment coins to buy, then any good dealer will be able to advise you. Generally stick to bullion finish coins, rather than proof finish, and only buy really well-known coins. In the UK, Sovereigns and Britannias are best as they’re also tax free.
Gold investment bars should be bought from a professional dealer only. If you want to buy gold bullion bars, then they should also come with a serial number and certified and be of at least 999.9 purity. Don’t be tempted to buy lower grade bars or from eBay.
Gold investment can take several forms. The most obvious is to purchase physical gold coins and bars. Gold investment can also be achieved through buying Gold ETFs, gold mining shares, and gold mutual funds. Generally, the aim is for capital appreciation in line with the gold price and to profit from selling the gold at a higher price than when bought. As well as outright profit, motivations for investing in gold can be to provide balance and protection to other assets, and as a store of wealth to beat inflation.
ETF Gold investment is the purchase of units in an exchange-traded fund (ETF) which tracks the underlying gold price. Each ETF unit will represent a set unit of gold weight. While the fund is backed by 24-carat physical gold bars, the units are not fully collateralised with gold, allowing for some leverage of the fund. Buying gold ETFs can be an efficient way to actively trade the market rather than the buy and hold approach to physical gold bullion.
Both investments tend to appeal to the same people as they share their tangible nature and appeal to those worried about the true value of paper assets. Both perform extremely well over the long term but can be volatile. This volatility can provide buying opportunities in both gold and property investment. The UK property market has taken a significant hit recently due to stamp duty increases. Owning both asset classes can work well together to spread risk.
Paper gold investment refers to the purchase of an asset which isn’t tangible but instead represented on paper. This can take the form of gold mutual funds such as the Blackrock Gold & General Fund, individual mining shares, spread betting on the gold market, gold futures and gold ETFs. Those seeking tangible investment need to buy gold bars or coins.
While deemed as low risk, gold investment isn’t completely risk-free. The first risk is that the gold price moves lower in the time you hold the gold, known as market risk. This becomes less likely over the medium term, as any market volatility is ironed out. If buying paper gold, there are further risks such as possible leveraging of the asset and counterparty risk.
Gold investing follows the common rules of buying the investment at a low price and selling at a higher price. There is no interest received for holding gold, so profits are only made on capital appreciation. The gold price tends to rise when the economy takes a downturn and other investments fall in value. In that way, it offers protection to an investor who owns several assets. The gold price can move down as well as up, so it’s advised to hold the gold over the medium to long-term.
Traditionally platinum has traded at a higher price than gold, but this dynamic has reversed in recent years. You could argue that platinum represents great value in that respect. However, the platinum investment market is far less developed than gold. This means that there’s considerably less choice is products to buy and more importantly, spreads between buying and selling prices are less competitive and therefore wider than with gold investment.
For UK investors, the best gold coins for investment are Britannias and Sovereign coins. Both are relatively cheap compared to many non-UK coins and even small bars. Buying gold Sovereigns provides a huge choice of options from the age of coins to size. Stick to bullion coins rather than proof finishes which are more for collectors. Liquidity is excellent for these UK coins so you’ll be able to sell easily at a competitive price. As legal tender coins, any profits are also tax free.
Gold investment should be for at least the medium term and act as a permanent part of an overall investment strategy. This is for two reasons. Firstly, gold performs extremely well during times of crisis and economic turbulence. By always owning some gold, you’ll be prepared for sudden market downturns. Reacting to events is too late as the gold price would likely have already risen. Secondly, the gold price can be volatile, so short-term investing can lead to losses if the timing is unlucky.