There are many ways to invest in gold, from exchange-traded funds (ETFs) to gold stocks, but the simplest way is to just buy physical gold – or bullion – outright. But what’s the best way to invest in gold bullion? We look at the options below.
Should you buy coins or bars?
You can buy bullion in two main forms: coins or ingots (bars). The advantage of gold coins over gold bars is that they allow you to be more flexible. After all, it’s easier to sell 20% of your gold if you own ten gold coins rather than if your whole investment is in one gold bar. By the same token, given this flexibility, you’ll probably find that coins are that bit more liquid (easy to sell) than big bars. That said, if you want to buy a sizeable amount of gold, then bars might make more sense from a practical point of view.
Investing in gold coins
There are all sorts of gold coins from the Chinese Panda to the American Eagle. Some coins are more expensive than others because they are rare, beautiful or antiques – these are known as numismatic coins, and they have value as collectibles over and above their value as gold coins.
But if you are simply looking to track the gold price, then ignore these numismatic coins and focus on those that offer the cheapest ‘premium’ over the spot price (this is the current price, the one you’ll usually see quoted on financial websites).
First produced in 1967, the one-ounce South African Krugerrand is the most common gold coin on the planet and so normally trades at the cheapest premium over the spot price. Other good options are the sovereign and the Britannia. Both of these are still officially UK tender (the Britannia has a face value of £100, for example), which means that if you sell them at a profit there is no capital gains tax to pay.
Regardless of how you buy your bullion, there is no stamp duty or VAT to pay.
How to buy gold
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How to buy
One key thing to consider is costs. Gold dealers make their money like anyone else – by selling for more than the market price, and buying for less. The difference (or ‘spread’) can range widely depending on the quantity and type of bullion you buy, as well as who you buy it from, and the current state of supply and demand.
The worst deals will come from the gold vending machines and ‘gold bars’ now popping up in shopping centres. The latter serve a market for people keen to turn cash into gold fast, but most investors should go nowhere near them.
Hong Kong is widely acknowledged as the cheapest place to buy gold coins. Go to Queen’s Road in Hong Kong’s Central District, and you’ll find well-known banks, such as HSBC, shifting gold coins for as little as 0.2% above the premium.
But given that a flight to Hong Kong isn’t cheap, the best option for most UK investors is to buy from large, established British or European dealers. They will deliver it straight to your house, through trackable insured couriers. It’s better to go with a well-known, large firm with a good track record. There are a range of options, but providers include Baird, ATS Bullion, Chards, and GoldCore.
For free and impartial information on where and how to buy gold bullion coins and bars, see our comparison of leading gold brokers here.
When it comes to selling your gold, you’ll find yourself at the wrong end of the gold dealers’ spreads once again. Depending on the dealer, you could find yourself getting up to 5% less than the market price.
How do I store my gold?
The benefit of owning physical gold is that you have it to hand if you are genuinely concerned about complete financial or societal breakdown. We’ve always described gold as insurance, and if you think things could get to the point where all financial assets are essentially worthless, then having access to gold coins would be useful.
The key problem with taking physical delivery is that you have to look after it. You will need to store it securely. A safe is the most obvious option, or outside the home in a bank safe deposit box. If you do store the gold at home, and you want it to be covered by your home insurance, you will of course need to tell your insurer. Depending on how much gold you have, this could potentially bump up your premium.
Buy gold online and have it stored for you
An alternative way to buy physical bullion, and have it stored conveniently for you rather than taking delivery of it, is via a website which allows you to buy gold online. One of the best known is British firm BullionVault. It offers the option to buy gold which is held in vaults in Switzerland, London and New York. It conducts a daily independent audit of its holdings, and will also allow you to take physical delivery of your gold if you so wish. A similar service is offered by James Turk’s GoldMoney.