Types of Gold
While our focus is physical gold bars and coins, it’s important to consider all different types of gold when considering an investment. Gaining exposure to the gold market can be achieved in many ways, each with its merits and likely one may suit your objectives more than others. We evaluate each option available here. But if you conclude that physical gold appeals to you the most, then this guide is the right place for you.
When people think of types of gold, they usually imagine huge brick-like gold bars in vast, elitist bank vaults. Or they might imagine pirate-like treasure chests full of gold coins. Others imagine nuggets of gold, prized from the earth, or some various expressions alluding to gold dust. But what types of gold can you encounter in the world of investments? We look at four common types of physical gold.
Our most frequent encounter with gold is with jewellery – whether it be gold rings, necklaces or bracelets. Gold jewellery as an investment differs from gold coins and gold bars in several ways. Firstly, it has a use. You can gain pleasure from wearing jewellery. Apart from running your fingers through it, gold coins and bars don’t have an actual use (although owning them still provides pleasure!). Secondly, gold jewellery has a design element that can make each piece unique. Further down, we discuss the pros and cons of gold jewellery as an investment in more detail.
We also see gold in leaf form (usually 22 karat gold) more often than you might think. Very thin layers of gold are used for gilding and have been used throughout history to adorn fine artwork and decoration (e.g. on book covers). At a microscopic level, gold is also available as gold dust, this has value if enough can be accumulated into one piece.
Gold coins have long been a popular choice for investors and collectors alike. They represent a tangible asset and carry historical and numismatic value. Some of the most renowned gold coins include the Gold Eagles, Gold Britannias, Gold Maples, Gold Sovereigns and Gold Krugerrand from South Africa. Each coin has its unique design, weight, and purity, making them sought-after items in the gold market. When investing in gold coins, it’s essential to consider factors like authenticity, condition, and market demand.Later in this article, we explain the importance of ensuring your gold coins and bars qualify as ‘Investment grade’.
Unlike coins, gold bars are typically valued solely for their gold content and weight rather than any design or historical significance. They range in size from tiny 1-gram bars suitable for individual investors with limited capital, to larger kilogram bars for more accomplished investors and institutional buyers. One of the primary advantages of investing in gold bars is the lower premiums compared to coins. However, you must ensure the gold’s purity and authenticity, often verified through hallmarks and certificates.
The design element means the value of the gold jewellery is subjective. The price you pay for jewellery far exceeds the value of the gold content itself. That’s why gold necklaces and bracelets are less effective as investments than gold coins and bars. If the gold price rises, your jewellery will appreciate slower, as its value consists of subjective design value, not just gold. The only way gold jewellery will ever rise in value faster than gold bars or coins is if the designer becomes renowned or the piece becomes very rare.
The biggest problem with investing in gold jewellery is the fabrication charge. Essentially, this is the cost associated with the production process, which includes design.
Labour costs are involved with this that cannot be recovered when you sell that jewellery back into the market. Dealers only pay for every ounce of gold that’s actually in the jewellery.
Moreover, 24 karat gold is no good for crafting jewellery. It’s too malleable to retain shape and bring out all the detail in the design. So, 18 or 14 karat gold is the material of choice for making jewellery. This means that when you’re buying jewellery, you’re not getting gold with 999.9 purity.
In addition to the above, you need to consider wastage charges. To create attractive gold jewellery that boasts stunning designs, there’s unwanted gold that’s removed and discarded as scrap. However, the customer, i.e. you, still have to pay for this.
So, you’re paying for gold that doesn’t actually come to you. Wastage charges may be as much as 5 to 7% and could vary with each job. Interestingly, as most jewellery is crafted today using precision technology and high-quality machines, not a lot of gold should actually be wasted.
But jewellers continue to charge customers ‘wastage charges’ as a percentage of the actual cost of making the jewels. It’s also important to remember that gold,as a precious metal, can simply be melted down and used again by the jeweller. So, in essence, the customer ends up paying for gold that the jeweller reuses.
The actual costs of ordering custom made gold jewellery from a jeweller can be calculated as the total amount of gold to be used, priced at the spot price on that day, labour and making charges, wastage charges and VAT. If your jewellery includes precious stones, that’s another component you must include within the pricing.
You also need to be sure of the exact karat of gold being used. If you’re not careful, you could end up paying for 18 or 22 karat gold, while your jewellery could be made out of gold with lesser purity. Customers are often at sea when it comes to all this because they don’t understand the intricacies and mechanics of the gold jewellery industry.
Most customers wouldn’t own professional equipment for measuring the purity of the metal or stones. All of this adds to the uncertainty and risks of investing in gold jewellery. Of course, gold jewellery remains evergreen, as it symbolises the status and power of the person wearing it.
It’s true; there are many different types of gold for investment, but it doesn’t have to be confusing. When investing in physical gold, it’s important to establish which form offers the best value as an asset and which will be the easiest to sell at the highest price. In the same way as trying to sell an unusual house, realising your profits on an obscure form of gold could prove to be difficult.
The world of jewellery transforms gold into various colours for several reasons:
Even though we focus on investments in physical gold, you should have an understanding of other options that are available to investors. Sometimes, people decide that physical gold isn’t the right investment for them and enter the waters of paper gold instead. That means you don’t own the gold physically and don’t need to think about the storage. Some of the most common forms are:
Gold ETFs offer investors a way to gain exposure to the gold market without storing physical gold. These funds track the price of gold and are traded on stock exchanges, much like individual stocks. They provide liquidity, ease of trading, and a direct link to gold prices. However, potential investors should be aware of management fees and the fact that they don’t own the physical gold backing the ETF.
These are standardised contracts to buy or sell a specific amount of gold at a predetermined price on a set future date. They allow investors to speculate on the future price of gold. While they offer a way to leverage one’s position and potentially amplify returns, they also come with increased risk. Understanding the mechanics of futures trading and the potential for significant losses is essential.
Part of our process is helping you choose the gold investment type to meet your goals. Whatever your circumstances, you should always stick to the recognised forms of investment gold.
The HM Revenue & Customs definition is gold in the form of a bar or coin with a minimum purity of 995 thousandths for bars and 900/1000 for coins (minted after 1800). In short, that’s 22-karat gold coins and 24-karat gold bars.
There are a few benefits of focusing on investment-grade gold. The quality and purity of gold are assured and consistent. You always know exactly what you’re getting. I like to think of it as buying a bottle of wine from the supermarket, which is a brand you know, and the alcohol content is clearly stated. Compare that to buying alcohol in the prohibition era; you never knew what you were drinking!
This is particularly important with a high-value investment where you need to eradicate the risk.
With standardised investment grade gold, such as well recognised bullion coins from renowned mints and Swiss manufactured gold bars, you enjoy the comfort of knowing your gold is liquid. This means it’s easy to sell whenever you need it. That’s mostly because these investment-grade gold coins (e.g. Sovereigns and Britannias) and bars are globally renowned and sought.
It also means that keeping tabs on the value of your investment is far simpler due to the standard weights and purities.
This helps both the speed at which you can realise your profit and also the price you can fetch. Compare this with the scenario of trying to sell non-investment grade gold, such as a gold nugget.
The uncertainty and ambiguity surrounding its purity, authenticity and weight will narrow buying opportunities dramatically.
Any gold classified as investment grade is VAT-exempt to purchase. Clearly, saving 20% in the UK and EU is a great incentive, especially when engaging in an investment. All the gold we sell is investment grade, as we believe in focusing on value investments with tax efficiency as a priority.
If you’d like to learn more about VAT and how it works with precious metals, read our revealing analysis here.
One common misconception is that a 1oz 22 karat coin has less gold than a 1oz 24 karat coin or bar, but this is not true!
All of these have 1oz of pure gold. The 22 karat coins simply have an additional 2 carats of an alloy (copper and silver) to improve their wear and tear.
We are one of the most reputed gold dealers in the business. Our company is a registered member of the British Numismatic Trade Association (BNTA).
Our team consists of precious metal investment experts who have many years of valuable industry experience.
We take pride in being able to leverage that expertise for your benefit. Our experts are best placed to discuss your investment goals and advise you on the best gold products to buy. Of course, we sell gold bars and bullion coins ourselves.
We also sell coin sets containing proof coins that have great collector value to numismatic collectors. All our products come with the assurance of a full buyback guarantee. We also offer our customers highly secure storage or delivery.
Diversification of investments is very important when it comes to gold investing, and those with a limited budget can take advantage of the monthly saver gold bundle Physical Gold.
With this plan, we source the best gold coins on your behalf and create a wonderful investment starter opportunity.
This is a great way to eventually build up a robust physical gold portfolio while taking advantage of the best prices in the market that we can source for you due to our long-standing market expertise. Receiving gold coins on a monthly basis reduces the volatility in market prices by conveniently levelling them out.
Read on to learn about the various types of gold available and what type of investments these make. Listed below, you will see questions with their answers.
There are four main methods of gold mining, varying according to the country of production and their method of extraction. Placer mining, hard rock mining, by-product mining and processing of gold ore. Gold which has accumulated as a placer deposit (naturally separated from rock through gravity), is extracted through placer mining which uses water as the loose material and is unsuitable for tunnelling. This type is recognised by many as typical gold prospecting, where manual panning can be used, although not commercially.
The most recognised gold mining is hard rock retrieval which uses tunnels underground and machinery in open pits to extract gold. The larger scale enables far greater quantities to be mined.
Mining for other minerals can sometimes provide the bonus of accumulating gold in small quantities. Typically, mining for copper and gravel can discover gold deposits as a by-product. Due to the scale of the operations, some mines subsequently find large quantities of gold this way.
Gold ore describes rock and earth with fine traces of gold, which are extracted through the addition of chemicals. The use of chemicals (namely cyanide) is expensive for the small yield of gold achieved, so this method is shrinking in popularity.
There are three types of the gold standard. The Gold Bullion standard refers to an agreement to exchange paper currency for a fixed amount of gold bullion (not coins). The gold specie standard converts paper notes into the value of circulating gold coins.
Finally, the gold exchange standard is where a government does not use the first two exchange methods but instead guarantees a rate between its own currency and that of another country that uses a gold standard. With the two currencies now tied, the first country is linked to the gold standard by default.
Use our automated portfolio builder and see just how far your investment can go.
There are eight varying gold contract types on offer between the two main exchanges. The Commodity Exchange (COMEX) offers the most common simple gold contracts (GC), representing 100 troy ounces of gold, deliverable on several set dates. The gold volatility index (GVF) is a pure play on volatility with a multiplier of $500 and cycles semi-annually. miNY Gold (QO)is aimed at the more modest trader, split into 50 troy ounce contract sizes. E-micro Gold (MGC) is the smallest of all, based on 10 troy ounces. The Multi-Commodity Exchange (MCX) is based in India. The most recognisable is Gold futures (GOLD) with a 1KG notional size and a daily price limit of 3%. Gold Mini offers smaller contract sizes or 100 grams, while Gold Guinea is aimed at the smaller contract again, at just 8 grams each. All three pose a single person limit of 2 metric tonnes. Gold Petal is the final gold contract type, representing just 1 gram of gold each.
There are a total of 24 carats that make up pure gold. Each is of equal value and 1/24th pure gold by weight. Investment-grade gold is either 22 carat (most common amongst Sovereigns and other popular bullion coins ) or 24 carats (now used for some 1oz bullion coins like the Britannia gold bars 100g and 1KG sizes)).
Even 24-carat gold is not completely pure but instead will be somewhere in the region of 99.9% gold. Jewellery can commonly be made of lower carat gold, such as 9 carats and 18 carats which are more resilient than higher purities, cheaper and more suited to clasping precious stones.
Gold coins fall into three categories – bullion, commemorative and numismatic. However, the market of gold coins is complex and needs a more detailed answer. Click here to read about all the different types of gold coins.
When you want to expand your investment portfolio with gold, you can invest in:
Read our article to dive deeper into each investment option.
Gold is located in many rock types, so prospectors are more successful in searching for these rocks rather than for gold itself. Gold deposits can be found in quartz which itself exists in river beds and large hillside seams. Heavy particles like gold can also collect within a harder intrusive rock which is formed when molten magma squeezes between existing softer rocks. Gold deposits can also be unearthed at the bottom of Alluvium deposits in river beds. This is an accumulation of sediment gathered into one area of the river, with heavier materials such as gold resting at the bottom.
The most common distinction between gold types is their carat or purity. This can be difficult to simply detect with the naked eye. 24-carat gold is virtually 100% pure, while 9-carat purity is as low as 37.5% purity. In its purest state, the gold will be relatively soft, while it tends to feel harder to the touch when mixed with more alloys. The colour can also vary, with pure gold displaying a distinct yellow-orange. When mixed more with silver, the white gold effect is present, while red gold contains a higher amount of copper. Assay marks on the gold will display purity, but not all gold will be hallmarked. Other than that, it is best to take it to a jeweller to safely perform a test and determine if it’s real in the first place!
With a conductivity score of 70%, gold is a popular choice for use in electronics. Most commonly, gold is used as an electroplated coating on contacts and connectors. It shines as the superior choice due to its high conductivity, corrosive resistance, and resilience (especially when mixed with nickel). Copper and silver are both cheaper and more conductive than gold, so they are used in a far wider array of electronic applications. Encasing electronics in gold is increasing in popularity to appeal to the luxury market, such as the Gold Apple watch.