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With tensions in Syria reaching boiling point, a few years ago, it hasn’t gone unnoticed that the price of gold had steadily risen at the time as the world prepared for conflict. Since then, a plethora of myriad challenges has hit the world economy. It has now been a long 12 years since the days of 2008 when the world faced its most severe financial crisis.
The US sub-prime housing market collapse triggered off a chain of events that eventually brought global financial institutions down to their knees. The period witnessed the demise of Lehman Bros and a large number of global financial institutions followed suit. But, economists all over the world had hoped that in time, the crisis would dissipate, and the world economy would be buoyant once more.
This was not to be. Instead of a healthy recovery, the global financial markets simply settled into a bearish and sluggish phase that lasted for most of the decade. A change of guard at the helm of the great nations could not provide a viable solution to the problem. On the other hand, geopolitical events around the world continue to queer the pitch for a recovery.
The uncertainty surrounding Brexit and government debt across Europe created a problem. Of course, there was a renewed escalation of conflict in the Middle East, along with the increasing threat of global terrorism that led to greater levels of economic uncertainty. This was further compounded by other factors like the US-China trade war.
At the height of the recession, gold reached its highest ever peak in August 2011, when the spot price of 1 ounce of gold touched $ 1900. This rise was attributed to wary investors moving away from market-linked instruments and hedging their risks by investing in gold. Now, in 2020, we can once again see the spot price rising all the way up and it has already reached above the $1600 mark. Investors are once again depending on the safety of gold.
The reliable safe-haven investment is now technically in a bull run again after gaining more than 20% from its June lows. Tracking the tax-free gold price is essential if you’re to time your entry into the market well and maximise returns.
Tax regimes can vary dramatically around the world, so we’ll just focus on the tax treatment of gold in the UK. All investment grade gold is VAT exempt, meaning you’ll pay no tax when you buy. To qualify as investment grade, the gold needs to be 22 carats or higher in purity and in the form of a bar or coin. So this instantly discounts the merits of lower grade jewellery, or gold in the form of dust as tax-free gold.
Owning physical gold bars and coins doesn’t produce any dividends like a gold mining share might, so a holder also avoids paying any tax while holding them.
The final piece in the jigsaw is whether any tax will be applicable upon sale – known as Capital Gains Tax (CGT). Generally speaking, any profits you’ve made are liable for CGT once you’ve breached your annual allowance. So, if you sell gold bars or foreign coins such as Krugerrands, you may have to pay CGT.
However, the amazing loophole lies with British coins. Namely UK Britannia and Sovereign gold coins are actually legal tender in the UK. As such, the Treasury can’t tax you on their movement, essentially rendering them CGT free! So if you want to avoid paying tax when buying, holding and selling gold – Sovereign coins are a great place to start.
There are several variables which contribute to the price of Britannia and Sovereign coins. Firstly, the age and condition of the coins. Generally, brand new coins will trade at a 1-2% premium to circulated coins. In my opinion, older coins offer better value as you’re unlikely to receive the same premium you paid when you come to sell brand new coins.
Secondly, the number of coins you’re looking to purchase will impact the price you pay. Generally speaking, you should benefit from economies of scale with the premium you pay shrinking as you buy more.
The fact that the UK gold coins are real and tangible, rather than simply paper gold like ETFs or mining shares, means that supply and demand will also influence the gold price. If the market experiences high demand and/or restricted supply, then you may find yourself paying higher premiums for the same coins.
Finally, the place from which you source your gold coins will have an impact on price. Buy direct from the Royal Mint and you’ll pay over the odds due to packaging and presentation. However, purchasing from a reputable gold dealer should keep premiums to a minimum.
If you don’t want to have to call a gold dealer every 5 minutes to gauge prices, it’s useful to be able to trace the approximate price on the internet. There is a relatively easy way to do this. Reputed gold dealers will display the current price of gold on their websites.
As you may be aware, the price of gold is a dynamically moving number and is usually reflected on a ticker, which is displayed at the top of the website. The display gets automatically updated every minute. By checking the ticker, you can stay up-to-date with the current price of gold. Also, in today’s day and age, there is an app for just about anything. Several gold apps in the market can also track the price of gold in real-time and keep you updated.
If you’ve already bought gold coins, you may simply want to track their value. While the factors discussed above will determine the exact price, it is possible to estimate its value from the gold spot price. This price moves throughout the day and is fixed twice daily – known as the London fix. These fixes can be found on the LBMA website or the live price with a gold dealer such as Physical Gold Ltd. You can then simply add a premium of between 7-12% to obtain a decent guide to the price of tax-free gold.
At Physical Gold, we have a specialist team who can advise you on all matters related to the sale and purchase of precious metals. This includes guidance on the price of gold and how to invest in tax-free gold. We are one of the most reputed online precious metal traders in the country. Call our gold experts today on (020) 7060 9992 or simply reach out to us via our website. Our friendly customer service team is always at hand to ensure that you make the right investments when it comes to gold and silver.
Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.