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 you could profit from the gold market

If you want a better chance of profiting from the swings in the gold market, download our FREE report, How you could trade gold for profit, by PhD physicist and trading expert John Burford.

John doesn't see gold as a long-term investment – because he doesn't think it'll make you nearly as much money as swing trading…

To get this free report, and to start receiving our FREE email MoneyWeek Trader, enter your email address below

Simon Popple
Metals and Miners


Because these emails are completely free, we do have to fund them with advertising. Occasionally we will send you promotional emails, however we will never give, sell or rent your email address to any other companies.For more information, please see Privacy policy

2 Responses

  1. 28/05/2014, Goldilocks wrote

    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.

  2. 13/08/2014, Doris McMuffin wrote

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

Comment on this article

MoneyWeek magazine

Latest issue:

Magazine cover
Hard cash

What's next for gold and silver?

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues
Shale gas 'fracking' promises to transform Britain's energy market. Find out what it is, what it means, and how to invest.

More from MoneyWeek

FREE REPORT:
What you should really do with your money (2014 Edition)


How to buy and sell penny shares

A beginner's guide to investing in gold

How to invest in British fracking