Rising demand for gold coins, sovereigns and bars has kept gold prices high along with hawkish signs from central bankers in the face of inflationary pressures.
Gold is one of the world’s oldest forms of investment and investors often turn to the yellow metal in times of uncertainty. Also, as the supply of gold is relatively limited, the price of gold is highly sensitive to changes in demand. Since 1972, returns on gold have averaged 7.78%, similar to equities, and outperformed bonds. The precious metal was only slightly behind the return of commodities, with 8.3% average annual returns.
There are several different ways to invest in gold, from buying the yellow metal directly, to gold funds and buying shares in gold-mining companies.
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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, i.e. they have value as collectables over and above their gold value.
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).
Collectable gold coins
Collecting coins can be lucrative. A $5 ‘Half Eagle’ gold piece coin from 1821 sold in an auction last year for $4.6m (£3.6m). The Knight Frank Luxury Investment Index shows that collectable coins have surged 59% in value in the past decade, 8% alone in the last year.
The materials they are made of are important. But so are their rarity and beauty – key elements in the “stories” behind the coins that collectors love. A coin may, for example, have been struck in error, such as the 20p coins from 2008, which emerged without the year on them.
Or it might point to a milestone in history, such as the “Flowing Hair” dollar – the first to be minted by the newly independent US in 1794, one of which sold for $10m in 2013. A $20 “Double Eagle” from 1933 became the world’s most expensive gold coin to be sold at auction – and the second-most overall after the “Flowing Hair” dollar – in 2002, when it fetched $7.6m (£5.7m).
Gold coins for investment
Coin collectors will choose gold coins with designs they find appealing or interesting but for the investor, it doesn’t really matter. Only the weight and the purity of the gold it contains does.
If you’re acquiring bullion gold coins as an investment rather than a collectable, you need to make sure your gold coins are at least 99.90% pure (that is 990 parts gold per 1,000), as that is the minimum to be classified as “investment gold” by HMRC, making it free of VAT. Be aware that the VAT-free threshold for gold bars is higher and requires a purity value of 99.95% or 995 parts per 1,000.
The popular Britannia bullion coins from the Royal Mint are 99.99% pure gold (999 parts per 1,000) and as pure as gold comes. In 2023, the Royal Mint revealed its first bullion coin to bear the portrait of King Charles, a piece struck in fine gold and enhanced with security features. The 999.9 fine gold bullion coin is currently for sale, with prices starting at £1,632.25.
"Bullion coins are an attractive option for many investors looking to diversify their investment portfolio,” Andrew Dickey, director of precious metals at the Royal Mint, said.
The one-ounce South African Krugerrand, first produced in 1967, 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 UK £1 gold sovereign, which weighs 0.2354 troy ounces* and is 22-carat gold, and the one-troy-ounce Britannia. Both of these are still officially legal tender in the UK (the Britannia has a face value of £100, for example), which means that if you sell them at a profit they are exempt from capital gains tax. That is one advantage these British gold coins have for UK-based gold investors.
Aside from the Britannia, other common one-troy-ounce gold bullion coins you will come across include the American Buffalo (USA), Maple Leaf (Canada), Gold Panda (China) and Gold Nugget (Australia). But only the Britannia is free of capital gains tax in the UK.
Your "investment gold coins" must also have been minted after 1800, or otherwise included on a list of acceptable foreign gold coins, the full list is available on the GOV.UK website.
*Gold and other precious metals are often weighed in troy ounces. At 31.1034768 grams, one troy ounce is about 10% heavier than a regular ounce.
The middle-ground: Gold sovereigns
Often the price of old gold coins and sovereigns 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.
The British gold sovereign (originally the one-pound coin) is the most widely traded semi-numismatic gold coin. There is constant and excellent liquidity in most countries in the world. For investors looking for slight leverage to the gold price with the potential for the premium (numismatic value) to rise British sovereigns are a good option.
Only 1% of all gold sovereigns ever minted are estimated to still be in collectable condition. Their relative rarity versus bullion coins and bars can lead to leverage where the value of these coins can increase by more than the gold price.
Unlike paper investments or speculations, British gold sovereigns have a real and permanent tangible value and 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.
How to buy your coins
Gold coins have been traded since at least the Bronze Age and collecting them is a hobby almost as old. The first-century Roman emperor Augustus was an “avid collector” of ancient Greek gold coins, says Amanda Foreman in The Wall Street Journal. His face was featured on the aureus, later to be replaced with the solidus as the gold coin of the later, Eastern Roman world.
Angels, ryals and guineas would pop up among others as variations of gold coins in England from the Middle Ages onwards, down to the 24-carat Britannias and 22-carat sovereigns that are still legal tender today (although no longer in circulation).
BullionByPost sells all of these. If you’re after a specific historic coin, the Royal Mint will track it down for you. BullionVault, as its name suggests, sells bullion coins. For more information read our guide on where and how to buy gold bullion
Investment or hobby?
One disadvantage of coins compared with bars is that you will pay a much higher premium over the “spot” gold price (the current market price for immediate delivery). This is to cover all of the associated costs that go into making and distributing them. For a one-troy-ounce coin like a Britannia, you will pay on average 4% above the spot price.
“Coins weighing less than one troy ounce have a higher premium because their manufacturing costs are higher relative to the value of the gold in the coin,” said Jan Nieuwenhuijs on Seeking Alpha.
While collectable and bullion gold coins both have their merits in terms of investments, which one you buy depends on your ultimate goals.
Are you looking for a safe, reliable store of value, the price of which may appreciate over time? If so, bullion should be the focus of your attention. But if you are fascinated by beautiful, rare and exceptional pieces, then collectable coins are a worthy asset, but consider them more of a hobby than an investment.
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