Buy gold coins, get the history for free

Gold solidus © iStock
A gold solidus issued by Emperor Justinian I

Gold has been a popular store of value for millennia. As a result, coin collectors can bag a tiny piece of history for little more than the price of its bullion content, says Dominic Frisby.

If you like an investment you can touch, hold or even wear, then look no further than gold. “Gold gets dug out of the ground in Africa, or someplace,” US investor Warren Buffet, one of the world’s richest men, has famously complained. “Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

He has a point. But he also misses the fact that gold’s very utility is its lack of utility. It’s not there to be used. It’s there to be admired, hoarded and treasured. It’s there for its beauty.

Of course, it is safer to store your gold in a vault somewhere, but that way you don’t get any actual pleasure from the gold (unless its price is going up). You’re not admiring it. There’s a weirdly compelling, hypnotic quality to physical gold – perhaps that’s the reason it has so captivated so many millions of people throughout history and been so sought after. If you are going to invest in something, why not derive pleasure from it as well?

Supping from silver

Back in the silver bull market of the 2000s, I remember stumbling across one eccentric investor who would only buy silver in the form of antique tea and dinner sets, usually of the Georgian variety. There was no VAT to pay and, often, the bullion value of the silver was higher than the price he was paying for the tea set. He could in theory melt down the tea sets and make an immediate profit, but instead he chose to enjoy them. No doubt he would sip his morning cup of tea while contemplating the fact that silver was in a rampant bull market.

It’s possible to do something similar with coins. Gold lasts forever – it doesn’t tarnish, it’s immutable – so you can pick up old coins that are hundreds of years old, which look almost as good as new, for little more than their bullion content.

A few years ago I remember strolling through Shepherd Market, just off Piccadilly, after a boozy lunch and ending up in the coin shop there. There was a rather attractive little coin sitting in the window – a Justinian solidus (pictured). The Byzantine emperor Justinian I ruled in Constantinople in the mid-500s, so here I was, looking at a four-and-a-half-gramme coin that was roughly 1,500 years old. Yet the coin was trading at its bullion value (solidi have a purity of 96%-98%) – so I got all of that antiquity for free.

This solidus was the standard for eastern Mediterranean international commerce, so, rather like the British sovereign, there are plenty of them floating about. Unless some celebrity starts urging people to buy solidi, it’s unlikely they will ever attain much numismatic value. Even so, it easily beats owning four and a half grams of a boring old gold bar.

I bought the coin for £330 and I see the same coins now trading for £650 on eBay so I’m about 100% up on my investment. Gold has almost doubled over the same period, so I’ve beaten the market, if only by a fraction. But this has been a much more enjoyable investment. Showing it to people makes for a great talking point. So if you can pick up antique coins at the bullion value, even if they are common coins, that has to be a better investment than simply buying the metal itself in bullion form.

The best-value British gold coins

The most common antique coins in the UK are the Victorian, Edwardian and Georgian sovereigns. In most cases, they trade at a small premium to modern sovereigns. I’ve picked up loads of them over the years, but I have to admit that the sovereign is not the most attractive gold coin out there. They are only 22-carat – they are mixed with a tiny amount of copper to harden them and make them more durable for everyday use. There are better-looking bullion coins to be found, the solidus being one of them.

But again, when you buy a sovereign you get the antiquity almost for free. And importantly from an investment point of view, you don’t pay any capital gains tax (CGT) either if you sell at a profit. It’s one of those historical anomalies, but the sovereign is, technically, legal tender, so it is CGT exempt. In fact, holding a sovereign makes you all too aware how much the pound has declined. It now takes £300 to buy a sovereign even though the sovereign is the old pound coin.

Also CGT-exempt are 1oz Britannias. Britannias are beautiful coins, much more so than sovereigns. The reason is that they’re 24-carat, so don’t have that reddish tone sovereigns have. So they’re easily my pick of the 1oz coins.

Krugerrands are probably the most famous 1oz bullion coins, but you can also get Canadian Maple Leaves, Chinese Pandas, Austrian Philharmonics, US Eagles and Australian Nuggets, also known as Kangaroos. You’re not going to go wrong with any of them – each is an ounce of gold (they also variously come in other weights) – but I must confess a fondness for Philharmonics, Pandas and Nuggets.

When going for older coins, you should do a bit of research as well as taking the advice of a coin dealer (don’t just rely on the latter). And always use a reputable dealer, whether online or at a shop. My strategy is always to try and get as close a price as possible to the “spot” gold price for the bullion, and get the antiquity for free.

On the other hand, Anglo-Saxon coins, which I love, trade at a huge premium to their metal content (they tend mostly to be silver as well), because a lot of people feel the same way as me about that period in British Dark Age history. So, as a bullion investment, they might not be worth it. Of course, there are old and extremely rare gold coins as well – but be prepared to pay handsomely for them.