Gold has remained a popular asset class over the years. Due to its inherent stability and value it provides, the yellow metal has found preference amongst investors who want to hedge their risks. The move towards gold is particularly prevalent during times of economic turmoil. In 2011, we saw gold reaching its highest peak ever. The spot price shot up above $ 1900 per ounce. Of course, this was also the peak of a global recession that started in 2008.
Interestingly, we are heading into, yet another recession and gold prices are already in excess of $1500 per ounce. So, let’s look at a common question that gets asked by most investors who are interested in building a gold portfolio. “Should I buy coins or bars ”
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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.
Planning is an important activity when building a gold portfolio. As a savvy investor, you just can’t go about buying a bunch of gold coins and a few bars. An unplanned approach can be disastrous for your portfolio. First of all, you need to set your objectives before making a purchase. Do you want to invest in gold and make quick gains from price rises in the near future As stated above, investing in coins can be advantages in this scenario. However, if you wish to amass large volumes of gold at the cheapest possible price, you may be better off investing in bars. This could be part of a long-term investment strategy for the purpose of wealth building. You don’t necessarily need to buy large bars. Investing in smaller bars can help you attain liquidity and divisibility for your portfolio.
Both coins and bars are excellent for tax saving, albeit with a few subtle differences. All investment-grade gold is VAT free in the UK, so coins and bars would both qualify under this umbrella. But you may require to pay capital gains tax (CGT) on gold bars. This could apply at the time of sale. Investing in UK legal tender coins like the gold Britannia can save you VAT and CGT. Clearly, certain gold coins are a better investment from a tax perspective.
Storing your gold is yet another factor that influences your decision to buy coins or bars. When you buy a large number of gold coins, you can avail of a large discount and they come packed in monster boxes, which make it easy to store. Many investors prefer this. Bars can be stacked on top of each other but may require a larger storage solution.
At Physical Gold, our friendly investment advisors can discuss your investment objectives with you and guide you on whether you should buy coins or bars. If its coins, you’re after, they can help you formulate a strategy and ensure that you buy the right coins. Contact Physical Gold on (020) 7060 9992 or simply drop us an email. A member of our advisory team will be happy to call you back and help you take the right steps in building a strong gold portfolio.
Image Credit: Osmar Valdebenito
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.