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.

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.

• If you want to know where to buy gold coins see here: How and where to buy gold coins and bars

  • 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.

    • john10001

      All gold sales are tax free and not subject to VAT. It is Silver that you have to pay VAT on.

      • Guest

        i think you are mistaken.

        • quantumfield

          No he is not mistaken

    • quantumfield

      Gains on UK gold coins are tax free anyway.

    • shannon128

      Spelling not looking to good today

      • Roy

        Do you mean looking ” too” good?

  • Doris McMuffin

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

    • Craig Ross

      Indeed – easy to buy and harder to sell. What does owning them do to your home insurance, and do you really want to have a burglar magnet in the house? If you don’t put them in a safe they could walk, if you do put them in a safe you could find yourself opening it at three in the morning with a blade at your throat.

      • http://btinternet.com/ Tenderfoot

        Keep them in the gun cabinet.

        • MoreSilentMajority

          who needs guns? we all know they are against the law, and that the criminals the law is designed for always obey the law.

          vote labour, they’ll protect you. when things get tough, and seconds count, an unarmed policeman is only hours away. he will be there athis convenience to ensure the paperwork is filled out correctly and that your killer is given all the rights he is entitled to.

    • shannon128

      butter spreads very good in the gold wrapper

  • 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.

        • James Creighton

          Malcom – come the crash, do you think you will be able to retrieve your gold from Bullion Vault? Hmmmmm……. Fat chance mate – fat chance. In fact, even now, you can’t take delivery from BV – phone them and ask them – ask them if you can come in next week (next month even) to collect your gold and take it away – they will say, “not possible” – I know, I have tried. Their gold has been rehypothecated so many times – probably 100 claimants for each unit. Wise-up mate, take delivery. Or, even better, bitcoin.

          • Malcolm Ketteridge

            James – seems to me that you need to look at Bullion Vault’s web site regarding their daily audit process .The gold one has in Bullion Vault is stored in your name with very modest storage costs. They have a process for withdrawing your own physical gold but this can take up to two weeks as, quite naturally, a security protocol has to be followed – I spoke to the person responsible for this, who said that requests for physical gold are rare and present no problem. The gold you have in Bullion Vault has NOT been rehypothecated at all – rest assured that your gold is your gold..

      • http://www.outsidechance.org Ian Ross

        Yet you mention various ways of holding gold throughout the article? Some readers may imagine that their options are rather limited when nothing could be further from the truth.

    • http://www.outsidechance.org Ian Ross

      I would question that your bullion has gained 10% per annum over the past 6 years unless you are taking that figure as an average rather than a year on year gain. Like you, Malcolm I also hold gold in BullionVault. The amount that i currently hold is the profit I made after investing and seeing the price rise some 5-6 years ago. I then withdrew my original investment value and what is left is sheer profit. Encouraging that my holding appears to have gone up by 10% or so in the last few days. Rainy day money.

      • Malcolm Ketteridge

        Today that 10% has become 11.34%.
        Yes, I am taking the figure as an average.
        In October 2008 gold £478 per oz while today it is £804 per oz, an increase of 68%.

        • http://www.outsidechance.org Ian Ross

          Cheers! I thought that this had to be the case, Malcolm. I tend to check my BullionVault account after midnight to see if there has been any movement. Nothing for 3 years and now a steady rise throughout this week. I trade on Forex so I imagine that this has something to do with the GBPUSD situation which hit the markets on Monday of this week out of nowhere. When in doubt, head for gold!

        • Mr.Ender

          I have a question for you , if you store gold with bullion vault is it really 10£ a month for any amount and if you wanted to sell a SMALL or a HUGE investment in gold if they were storing it if you saw a sudden increase in price and you wanted to sell it right at that time what is the process like is it instant ? If i want to sell my this is just an example 10 million gold investment would i be able to sell it to them on the day and get the price i see on their website just curious thanks.

          • Malcolm Ketteridge

            Storage & insurance for as long as you hold your gold.
            0.12% per year on gold, billed monthly and subject to monthly minimum of $4.
            0.48% per year on silver, billed monthly and subject to monthly minimum of $8.
            See Bullion Vaults FAQ

  • 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!

  • DFW

    As one who buys mostly coins for their collector value, I have the advantage of being a US citizen. In most States, there is no local sales tax (a kind of VAT) on ANY coins at all, not even rare silver coins, which are subject to VAT in Switzerland. Investors from many nations maintain their holdings in the USA for just that reason. Whereas an 1841 sovereign costing a few thousand inside the EU would be subject to local VAT (somewhere between 18% and 23%), it would be subject to no tax at all in a state like Texas, and Dallas is the home of Heritage, by far the biggest coin dealer in the US. The EU does itself out of tens of millions in tax revenue on gains because it penalizes the owners of collector coins and chases them elsewhere.

  • hwron

    There are a few inaccuracies, I’m afraid:
    1. Quote: “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”
    Fact: The sovereign as we know it, rather than the 1489-1608 version) was first issued in 1817 not 1816.
    Fact: The version of 1817-1820 (George III) had the Garter with motto (HONI SOIT QUI MAL Y PENSE) surrounding the design that we are familiar with.
    2. Quote: “The design of Saint George astride his brave steed, slaying the dragon, is common to the reverse of all variations of the coin.”
    Fact: Sovereigns had only a shield reverse from 1825 to 1870, and both shield and george-and-dragon ones were issued 1871-1887.
    Fact: The half sovs had only a shield reverse from introduction in 1817 until 1893, the george-and-dragon design being used only from 1893.
    3. Quote: “It is estimated that only 1% of all gold sovereigns that have ever been minted are still in collectible condition.”
    Fact: It should be noted that many millions were melted and recoined on falling below the minimum acceptable weight (which represented a loss of 6.28%), often after just 15 years of circulation. And many others have been used as a source of 22-carat gold for jewellery purposes, or melted into ingots.
    (See https://en.wikipedia.org/wiki/Sovereign_(British_coin)#Reminting_worn_coins )
    So it is likely that only 10% of all gold sovereigns that have ever been minted are still in existence, i.e. only about 100 million.
    4. Quote: ” 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.”
    Fact: A gold coin is not subject to VAT if it was minted after 1800 AND is at least 90% pure AND is (or has been) legal tender in its country of origin AND is of a description of coin that is NORMALLY sold at a price that does not exceed 180% of the open market value of the gold contained in the coin (regardless of the condition, date, rarity or finish of the specific coin). It is also not subject to VAT if it is on the lists of VAT Notice 701/21A of coins recognised as investment gold coins (the EU list and a supplementary UK list) even if, for example, the coin was minted before 1800.
    For a full explanation of the VAT implications, see
    https://www.gov.uk/government/publications/vat-notice-70121a-investment-gold-coins/vat-notice-70121a-investment-gold-coins

  • Steven Heath

    When i was living in Thailand , i sold several UK Sovereign’s and didn’t get a very good price , but a Kuguran i sold at the same time achieved top money .

  • Bernard W Barker

    Well I for one would not invest in gold simply because if the chips are really down and you are forced to buy food, then all the gold in the world would be of no use, because you cannot eat it.

    • Gareth

      On that logic, you should invest in goats.

      • Bernard W Barker

        Gareth. If I were investing at all I would invest in Non Perishable Foods as I could open them when I needed food. In this situation of buying gold I would die of hunger as I could not eat my Gold investment. And in any case going back to Germany in the early 1930’s Jews owned all the Bakeries and they bartered Bread for Art Antiquities ie Paintings, Antique Furniture worth in good times £ thousands upon £ thousands and were forced to pay through the nose for a loaf of bread. Why, because these Jews owned all the bakery shops and so they thought they could take advantage of Hungary People who would part with anything to stay alive. Gareth do you get my drift now. Profit and the almighty Sheckle was a Jewish invention and so the Jew has become a predator depraved of all moral worth.

        I sold most of the gold I had two years ago when it was quoted at its peek at $1,900+ US Dollars an Ounce and it kept me going very nicely. When the chips are really down GOLD has a value of Zilch, because it is not edible, thats why Jews invested in Super Markets ie Cohen in Tesco and Lord Sainsbury in Sainsburies. Tesco Has blown its bubble just like Robert Maxwell did. Perhaps they have invested heavily in Gold, I really HOPE SO, so they loose their Arses, just like Tescos will. because know body will buy their shares anymore. Well I for one certainly won’t.

        Yours Sincerely Bernard W Barker

      • Craig Ross

        Should the Apocalypse happen don’t you think that one ounce silver might be the sort of thing you could actually exchange for what you might need to buy? Do you fancy producing a coin that you want (say) 500 tins of tuna for? A sovereign is too high in value for the kind of swaps that you might want to make in this imagined nuclear winter, unless you think it’ll be “one sovereign for a pound of flour” in which case you’d be better off dead, and will be soon after you’ve exhausted your gold supplies. Silver at “£18 now and five loafs after the crisis” is the better survivalist coin, if you’re that way inclined.

    • http://www.outsidechance.org Ian Ross

      Depending on where you were in the world, your currency might be of no use either in your desire to eat whereas gold is internationally tradable.

      • Bernard W Barker

        Please un subscribe _bbarker763@aol.com_ (mailto:bbarker763@aol.com) from your mail list .

        • http://www.outsidechance.org Ian Ross

          Done

          • Bernard W Barker

            IAN ROSS

            That’s my point. I haven’t signed up for any advice from you about Gold and what I said remains my opinion OK _bbarker763@aol.com_ (mailto:bbarker763@aol.com)

            • http://www.outsidechance.org Ian Ross

              I made a general comment – not advice – about gold which was never designed to attack your views. Simply to offer an alternative point of view around gold and its international transportability. You will receive no further contacts from me directly. However, unlike Facebook, sadly there appears to be no way to ‘block’ each others posts so, whilst you may ‘see’ me on this website, I trust that we will respectfully ignore any of each other’s views since they will not be directed at each other.

              • Bernard W Barker

                TO Ian Ross,

                What you stated is,

                That it is just fine by me. Bernard W Barker _bbarker763@aol.com_ (mailto:bbarker763@aol.com)

        • http://www.outsidechance.org Ian Ross

          Sorry, I imagined that Disqus had the same ‘block’ facilities as Facebook which, apparently, it does not. There appears to be no ‘unsubscribe’ or individual ‘block’ facility available. However, I have noted your name and shall not respond to any further postings from you, as requested. Confrontation is not in my nature. If you are able to block me from your side in some way, please do so. Thanks.

    • Dogsnob

      Will get you a handy Kalashnikov maybe? The food will follow.

  • Gondi

    How much does a Daytona rolex watch cost?

  • Phil Williams

    If you’re selling gold sovereigns, it’s always worth checking whether you have any rare or collectable coins. Many dealers only value based on the gold price & you could be selling yourself short!

    Check out http://goldsovereignexpert.com -> How rare is your sovereign?

  • bill moss

    I would be very careful with Bullionvault and the other gold custodians. READ the small print, they can only settle in legal tender if there are problems (that is FIAT money). I believe they are going to crash the paper price down to stupid levels via the futures market (They started this in April 2013 when gold broke support after they sold 400 tons of paper gold over two days at the worse time). When they finally crash the paper market Comex etc (Commodity Exchanges) will default and they (the powers that be) will take your metals from the custodians. You will then be paid out in legal tender at whatever price the metals were halted at. Currently they trade over 100 oz of paper gold for every real oz in existance!
    These custodians do not own the vaults, they rent space from the big boys. AGAIN read the small print. I think owning coins/soveriegns is a very good idea because the system is broken and it is just a matter of time before it collapses. A 100% chance just as night follows day and it is now just a matter timing as they are juggling 10 balls in the air. Does the fact that the Rothschilds invested in Bullionvault not tell you all you need to know!!

    To have insurance is good, just like the fire insurance on your house. Unfortunately we have the biggest firestorm coming in the financial market.

  • Goldman

    As an active investor and trader in Gold I can say this article is most inappropriate advice. Investors being told to buy something that is already overpriced. For any investor to make a return using gold coins they have to rise way above the normal price of gold. Collectors? Have you ever tried it?

    I take it the author does not put his money where his mouth is. Otherwise certainly guaranteed he would think twice about recommending Sovereign Coins to innocent buyers.

    The only people who make real money by buying Gold Coins is the company selling them. There are thousands of people with their money trapped in these coins and only managed to make a small return after years of holding onto them.

    If you are an investor who is looking to invest in Gold, Bullion Vault or an ETA is much more appropriate.

  • Tim M

    when buying / selling gold, do the bed & breakfast rules apply for capital gains? If they don’t, does anybody know where that’s stated in the tax rules?

  • wiley789

    The sovereign was never a ‘pound’ coin, a sovereign was valued at, and has always been, 21 shillings, so it was 1 pound and 1 shilling.

    • Chris Beney

      Surely that was the gold Guinea

    • A19Swine

      I do wish peeps would check their so called facts before suffering foot in mouth disease, as i have seen Mr Chris Beneys comment (quite correct sir!) if wiley had asked his Gt grandad or grandad (presuming his grandad is old enough) like me age 57 i grew up with old money & the conversion to metric & wileys comment aint worth half a crown (2/- & 6d) thats 12 1/2 pence to you wiley! i can still remember shops selling at the normal common price of 21/- 6d. most dealings were still being made in Guineas. why? dont know, its an old, old thing from when Guineas were legal tender way way back! my dad died last week aged 86 & he would be well proud of me to remember such useless info but at the same time important so as to be able to help drongo’s keep our history straight & right.

  • ricky sherman
  • Chris Beney

    No one has mentioned Canadian Mapleleafs, Unlike sovereigns which I think are 22ct gold, mapleleafs are 1oz of pure (24ct) gold. VAT free etc.

  • John Bruce

    Bullion Vault.com. Queens Award and quite right too. Proper, real, physical, open market at low dealing commissions and very easy to use. And the bullion is vaulted securely at small charge ands audited independently.

  • quantumfield

    The only gold worth having is the metal. Paper gold will one day be worthless because there isn’t the metal to back it up. Mines are always very risky. Coins and bars win every time.

  • Mustic T Jakobsen

    I got a coin it’s written on It that. (you get sovereign for nothing but you can get the best value for one ) anybody have idea about this coin I had for a long time but stil can’t figure out what email bahmbye1987@yahoo.co.uk pls

  • Dan Livingstone

    found the link on RT, seems that they have no problem with our gold then. (Just for snark, I like a bit of RT to break up my government sponsored media)

  • Scott Miller

    Gold and gold trading is not regulated by any government in the entire world.
    There is more gold in one bank in Hawai than the World Gold Council estimates is in the entire world!!

    There is no shortage of gold,anywhere in the world.
    Proof? Any amount of gold coins are widely available to buy from China,Australia,South Africa, Canada and USA.
    Every year thousands of tonnes of mined gold are added to the glut that has already been refined.
    No private investor has made money in gold in last 5 years.
    Proof? Check out a 10 year gold price chart.

  • Robert Cattle

    Buying yes but selling ??

  • Gofer.

    Who has money to buy gold/ only footballers or Bankers.

  • Edmund Cornu

    Please buy gold and keep Rothschilds rich.

  • Edmund Cornu

    Can’t wait for the return to the (real gold) gold standard when China and Russia declare it soon.

  • Dave

    Gold sovereigns are garbage.

    First, the gold in them is not pure, and you can get pure gold in bullion or coin form, also tax free. Furthermore, they depict an evil paedophile tyrant queen on them. Who wants that evil woman on their treasure? not me!

  • Chris

    Don’t bother with coins
    If you’re going to invest in gold buy bars – they are much cheaper ounce for ounce

  • John Bruce

    with respect all good but much better Queens Award to Industry and well respected internationally that for small commissions (much less than retail mark ups) allows you to buy and sell on the live current market in about half a dozen Countries. Your Gold, not paper (which can ‘disappear’) , and vaulted in any one of secure vaults in Zurich , Singapore, Here or elsewhere. Only rule is the money invested has to be returned to the same account to avoid fraud. Started by a man called Tustain 10 years ago so the man in the street could buy and sell what he found it took him 2 weeks to buy and lots of hassle (bullion). On BV many save monthly buying just a gram at c£25 at the moment. Since debt don’t cure debt Money Week is giving good advice.

  • John Bruce

    not <bullion vaulrt.com+''!!! Apologies for typo. And yes the gold you buy is what the central banks deal in "good delivery".

  • EMEK

    buying gold is folly…The price (dictated by Zionist America) is about to fall – as the American economy is about collapse….