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Should investments in gold be for the long term

Gold is an incredibly versatile precious metal. It is possibly one of the most liquid asset classes. Gold can be sold in the secondary market and converted into cash quite quickly. If you have invested wisely and distributed your investments across small sizes of gold, this can provide flexibility to your portfolio. This simply means that you can sell the required part of your holdings and raise money to fund your cash flow requirements. But a key dilemma that many investors have on their minds is – how long should the investment horizon be

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.

Insider's Guide to gold and silver

Gold – a solid and stable safety net

Most asset classes are dependent on a strong global economy to boost their performance. However, gold investing is different. Investors tend to move to gold when the global economy goes into a downward spiral. Back in 2011, the world witnessed the highest peak price of gold ever at the height of a global economic crisis that eroded currency markets and the capital markets worldwide. Have you been following the spot price of gold recently As we brace ourselves for yet another period of economic turmoil, the gold price has been steadily rising and has reached the $1800 mark on the US exchange. Investors who built up their gold portfolio five or six years ago are ready to rake in their profits.

Should investments in gold be for the long term
This Hungarian gold coin dates back to 1491 and may be rare, but difficult to sell immediately

The multiple benefits of investing in the long-term

Gold investments aren’t just about protecting yourself from global economic woes. The yellow metal provides a healthy dose of balance, liquidity, and insurance for your investment portfolio. Gold creates balance by hedging the risks you may otherwise have faced when investing in other asset classes. Certain asset classes like real estate cannot be sold instantly. Gold is one of the most liquid forms of investment that can be sold into the secondary market at any point in time, providing much-needed liquidity for your portfolio. There are other benefits of investing in gold as well. Adverse economic forces over which you may have no control like inflation, counterparty risks and currency deflation can impact the overall value of your investments. Gold provides insurance against these risks by beating the rate of inflation and reducing volatility through predictable returns.

Should investments in gold be for the long term
The gold Krugerrand is a liquid coin, but not tax efficient in the UK

Tax efficiency

Tax bills play an important role in determining the total value of returns on your investments. Investments in most asset classes are taxable and the taxman axes the profits you make over time. Investments that may appear to have a strong performance can suddenly look pale when your tax bill is factored in. Gold, on the other hand, is a hugely tax-efficient investment avenue. In the UK, all investment-grade gold is VAT free. Additionally, gold coins that have a face value and are considered legal tender in the UK are exempt from Capital Gains Tax (CGT). As an investor, you can save CGT on a threshold of £12,000 in profits in a single tax year. This is a significant amount of tax relief and if you hold onto your gold investments over time and plan any sales by factoring in CGT exemptions year-on-year.

Call Physical Gold to discuss your gold investment horizons

At Physical Gold, we are continuously studying the gold market and we can advise you on the right times to buy and sell. Please call us on (020) 7060 9992 to discuss your investment objectives and horizons. You can also reach us online by visiting our website.


Image credits: Wikimedia Commons and Wikimedia Commons



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.

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