Britannias versus Sovereigns
For UK investors especially, these two coins are the go-to choice when putting together a gold portfolio.
But which ones are better? The Britannia or Sovereign? I’ll look at 5 factors to compare the two coins.
Let’s start at the most obvious place, with the price. The Britannia is around four times bigger than the Sovereign, weighing 1 troy ounce. That means, its price is far higher, so for those with very modest means, the smaller Sovereign coin provides access to the market where perhaps the Britannia is out of reach.
For most investors though, a larger allocation to gold is granted, so the price per gram between the two coins can be compared. With its larger size, the Britannia’s production cost is lower as a percentage of the price, allowing for a lower price per gram. So if you’re looking for the most gold coin weight for your money, then gold Britannias are the better choice.
While there is the occasional special edition gold Britannia launches, usually, there is one type of coin to choose from – the standard 1oz bullion coin. Fractional versions also exist, allowing the investor to buy half, quarter and tenth ounce version, but these can be expensive for the privilege.
As Britannias have only been around since 1987, no coins really have historical or numismatic value. Yes, coin designs are updated every few years, but the variety with gold Britannias is very limited.
But it’s the variety in age and monarch which really creates investment options. Sovereign coins can be bought with the current Queen on the front, but also there is a strong market in gold Sovereigns featuring King George, King Edward and Queen Victoria. The latter coins even vary between 3 different types of design, the Young head, jubilee head and old head versions and can be worth substantially more than newer Sovereigns.
Owning a variety of Sovereigns adds balance to an investment portfolio. It varies your upside potential between just owning bullion coins and perhaps also benefiting from numismatic gains.
I’m a strong believer in mixing the coins your own rather than owning all of one type, as it creates other profit opportunities.
One of the most overlooked aspects of buying physical gold is obtaining divisibility within your portfolio.
This is one of the main reasons investors opt for gold coins rather than bars, it gives them the flexibility to sell small parts of their holding when they need.
Clearly, gold Sovereigns offer four times the divisibility of the standard 1oz Britannia. Yes, you can buy quarter and half ounce gold Britannias, but they’re a less economic method of obtaining flexibility than owning Sovereigns and Half Sovereigns.
So if you’re putting together a modest portfolio of coins – say £2-£5k – then we’d always recommend gold Sovereigns so that you can own a variety of coins and keep flexible.
However, for those looking to invest larger amounts, say £10k+, then you could still buy enough gold Britannias to achieve a great degree of divisibility.
Winner: Sovereign, unless you’re investing £10k+
4. Tax Efficiency
This one’s simple. Both the Sovereign and Britannia are VAT exempt when buying them as they qualify as investment grade gold.
In a similar way, any profits made on either coin are also free from Capital Gains Tax. That’s because both coins feature a face value and so qualify as legal tender in the UK. Selling any legal tender currency is free from Capital Gains tax.
The second-hand market in any asset class is crucial when considering its merits as an investment. You can buy the best asset for capital gains in the world at a great price, but if no-one wants it when you come to sell, it fails as an investment.
Luckily, both the Sovereign and Britannia are highly sought and liquid coins globally. In the UK both coins are popular due to their tax free status. They can be sold in a matter of hours.
Globally, the Sovereign is better known as it’s been around for a lot longer than the Britannia. But the playing field is quickly changing. Since 2013, the Britannia has been minted as a 24 carat coin. While this doesn’t make any difference to gold content, it opens up the lucrative Asian market. In a land where only 24 carat appeals, the growing Chinese market love the Britannia but are more tentative towards the 22 carat Sovereign.
However, liquidity when buying is switched. While the latest year’s issue of either coin is plentiful and easy to obtain, buying pre-owned coins is a different matter.
If you wish to buy second-hand Britannias, they’re not always easy to buy when you want them. That’s because they’ve only been around for 30-odd years so there are less on the market.
In contrast, with the Sovereign’s long trading history, you’re able to obtain most types of gold Sovereign from any age, more or less when you want.
Conclusion – gold Britannias or Sovereigns?
So there you have it, we’ve looked at 5 of the most important considerations when choosing gold coins for investment.
Ideally, owning a mixture of both, and in a range of ages and sizes, produces the most balanced portfolio. But that’s not always attainable for everyone’s financial means.
For the smaller investor, Sovereigns is the best starting point. For those seeking simplicity and lowest purchase price, Britannias are the choice.
Either way, you won’t go wrong when investing in gold Britannias or gold Sovereigns.
Contact a gold investment expert when buying Britannias and Sovereigns
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