Why you should buy gold sovereigns

At MoneyWeek, we’re long-standing fans of investing in gold. We think it’s a great way to provide insurance against any future financial crisis. Or inflation.

If you want a truly diversified portfolio, invest some of your assets in gold.

Granted, the gold price will move up and down in the future, but one day it will probably pass the inflation-adjusted high of $2,400/oz set in 1980.

How should you invest in gold?

Trouble is, if you’ve decided to invest in gold, you have a further decision to make. You’ve got to decide how you’re going to invest in gold.

There are lots of different options. You could invest in a gold exchange-traded fund (ETF) – a fund that does nothing but hold gold. Or buy shares in gold-mining companies. Or buy gold bars or coins.

You could also choose to invest in semi-numismatic coins. These are coins that aren’t just valuable for their gold content. The coins also appeal to collectors who are interested in coins and banknotes.

Just as it’s a good idea to diversify your portfolio across a wide range of assets including equities and bonds, it may also be a good idea to diversify your gold holdings across two or three types of gold investment.

Having eggs in various gold baskets is probably the most sensible and prudent strategy.
As part of this mix, older gold coins should be looked at.

Classic European and world gold coinage is an often overlooked, but extremely important sector in today’s gold market. These coins are rare which means they have more potential to appreciate in price – yet, they can often be bought at bullion prices.

Crucially, you can also save tax by investing in gold. Gold bullion and some gold coins are exempt from VAT, whilst post-1837 British sovereigns and Britannia coins are exempt from Capital Gains Tax (CGT). That’s because these post-1837 sovereigns and Britannias are legal tender.

If you’re wondering which coins are exempt from VAT, the rules are a little complex. If a coin is bought as a investment in gold bullion, then it should normally be exempt from VAT. However, if a coin is sold for more than 180% of its gold-value content, it’s clearly attractive as a collector’s item and is then subject to VAT.

Often the price of gold coins is slightly higher than modern gold bullion, but these coins offer many advantages. They’re often scarce, and can have aesthetic value as well as historical significance.

When you look at semi-numismatic gold coins, the British sovereign (originally the one pound coin) is the most widely traded.

There is constant and excellent liquidity in most countries in the world. For the investor looking for slight leverage to the gold price with the potential for the premium (numismatic value) to rise, British sovereigns are a good way to invest in gold.


Sign up for a 4-week FREE trial of MoneyWeek magazine

MoneyWeek magazine signup

"The only financial publication I could not be without."
John Lang, Director, Tower Hill Associates Ltd.


History of the British gold sovereign

The first British gold sovereigns were minted more than 500 years ago. They were minted under Tudor king Henry VII in 1489.

The current design type with Saint George slaying a dragon on the reverse and the monarch on the front was introduced nearly 200 years ago in 1816 under George III. The sovereign was minted almost continuously from that date until 1932 when Britain went off the gold standard.

British sovereign ‘kings’ minted during the reigns of Edward VII and George V are probably the most widely owned and recognised pre-1933 gold coins.

In 1816, the British gold sovereign as we know it today was first introduced, and as the British Empire expanded under Queen Victoria during the 1800s, this coin came to be the world’s most widely distributed gold coin.

Minted originally in London, the sovereign came to be minted all over the world as Australia and South Africa came to be large gold producers. Mints in Pretoria, Bombay, Ottawa, Melbourne, Sydney and Perth minted thousands of sovereigns during the late 1800s and early 1900s.

The design of Saint George astride his brave steed, slaying the dragon, is common to the reverse of all variations of the coin.

Gold sovereigns: conclusion

It is estimated that only 1% of all gold sovereigns that have ever been minted are still in collectible condition. It is this relative rarity in relation to bullion coins and bars that leads to leverage whereby, in gold bull markets, the value of these coins increases by more that the actual price of gold.

Unlike paper investments or speculations, British gold sovereigns have a real and permanent tangible value. Therefore, they offer two ways to build wealth. They can offer the best of bullion and numismatics in one investment. They contain the intrinsic security of bullion or precious metal in a pure form and can also offer additional profit potential due to their aesthetic and historical appeal.

A small allocation of British gold sovereigns can be a useful component of a diversified gold portfolio.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

How to buy gold in 2014

At MoneyWeek, we've always believed in the power of gold. It's been exchanged for thousands of years & a proven store of value. We think you should put at least a proportion of your wealth in the metal.

So to help you make an informed decision, we've compiled a FREE report called 'The Gold Profit Plan'. It'll show you exactly why gold is such a powerful asset – and how you can go about buying it.

To claim your free report and start receiving MoneyWeek's free daily email Money Morning, simply enter your email address below.

Simon Popple
Metals and Miners


  • Goldilocks

    This article sweems to be quite sound although I am a little surprised the option of investing in a gold fuind within an ISA package has not been mentioned. A few months ago Tim Price recommended Balckrock Gold & General. I appreciate this includes other precious metals but any gains would be tax free.

  • Doris McMuffin

    what’s the spread on gold sovereign’s? I would imagine quite high.

  • https://www.bullionbypost.co.uk/ Rob at BullionByPost

    Doris, The premium on gold sovereigns varies considerably by supplier. Here at BullionByPost gold sovereigns are around 5%-7% above the spot price depending on quantity.

  • Malcolm Ketteridge

    Why do Money Week not mention Bullion Vault in this article?

    Bullion Vault lets me buy gold and silver bullion on line at the lowest possible price
    giving me as a private investor access to the professional bullion markets and benefiting from the lowest costs for buying, selling and storing gold and silver.
    I am able to withdraw all or part of my gold at any time if I need ready cash.

    Even with the recent volatile price of gold, my savings in gold bullion have gained an average of 10% per annum over the last 6 years.
    Quoting Money Week 21/05/2014: “Granted, the gold price will move up and down in the future, but one day it will probably pass the inflation-adjusted high of $2,400/oz set in 1980″, which is just short of double what it is today!

    Bullion Vault is part-owned by the World Gold Council and is the world’s largest on line investment gold service. They take care of $2 billion for more than 50,000 users like myself.

  • Malcolm Ketteridge

    Why do Money Week not mention Bullion Vault in this article?

    Bullion Vault lets me buy gold and silver bullion on line at the lowest possible price
    giving me as a private investor access to the professional bullion markets and benefiting from the lowest costs for buying, selling and storing gold and silver.
    I am able to withdraw all or part of my gold at any time if I need ready cash.

    Even with the recent volatile price of gold, my savings in gold bullion have gained an average of 10% per annum over the last 6 years.
    Quoting Money Week 21/05/2014: “Granted, the gold price will move up and down in the future, but one day it will probably pass the inflation-adjusted high of $2,400/oz set in 1980″, which is just short of double what it is today!

    Bullion Vault is part-owned by the World Gold Council and is the world’s largest on line investment gold service. They take care of $2 billion for more than 50,000 users like myself.

    • http://moneyweek.com/ MoneyWeek

      Hi Malcom,

      We like Bullion Vault. But this is an article about buying gold sovereigns, and that’s not what Bullion Vault does.

      • Malcolm Ketteridge

        I do not see the point of buying gold sovereigns as one has to store them somewhere safe – at home one runs the risk of theft. Gold Bullion stored in a secure vault, incurring a very small storage charge, seems to me the best choice for investing in gold, especially when any amount it can be turned into cash within a few hours. No worries about VAT either, unless one wants to withdraw more than 10 K in one year.

        • https://www.bullionbypost.co.uk/ Rob at BullionByPost

          Malcolm, The big advantage of sovereigns is the capital gains tax exemption. If you are buying a significant amount of gold, generally use your annual CGT allowance with other investments and expect prices to increase over the long term the tax saving could be much greater than the small additional initial premium.

  • carefix

    The half sovereign should also be considered. I just bought a few at 5.4% over spot. Sovereigns are not only VAT free but also CGT free when you sell them.

    The cheapest are typically Elizabeth II and Edward VII, the half sovereigns typically show some wear as they were used in trade. Far more so than the full sovereign.

    The sovereign is a very important coin as 1) It has no minted face value, 2) The word “sovereign” is not minted either. You recognised them by sight and by weight as the diameters for the sovereign is only 3.2mm greater than the half sovereign. They tell us of an age when the value of money was measured by weight and one which is increasingly looking as though it might well return.

    If you do not buy them for investment it is worth holding a few at home in preparation for any bank shut downs that might lie ahead. In the UK the sovereigns are widely recognised by grown ups unlike the silver britannia (or indeed the gold britannia) and can therefore easily be used to buy supplies in any emergency. If by any chance we get an alien invasion and they are able to save the world financial system and are not ethically prevented from doing so then at least you have a little investment gold. If of course the aliens don’t show up, then you have done some preparation!

MoneyWeek magazine

Latest issue:

Magazine cover
Party's over for Putin

The only portfolio safe from Russia's rout

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Hedge fund manager Hugh Hendry: 'It felt like the sun rose only to humiliate me'

In a series of three short videos, Merryn Somerset-Webb talks to Hugh Hendry, manager of the Eclectica hedge fund, about everything from China to the US, Europe, and Japan.


19 December 1932: BBC World Service begins

The first royal Christmas message by George V gave the fledgling World Service an early boost six days after it was founded in 1932.