How to buy gold – Forbes Advisor UK


Buying gold can add stability and diversification to an investment portfolio, especially in today’s economic climate of high inflation and volatile stock markets.

Here’s what you need to know about buying gold in its physical form.

Remember that investing in a commodity like gold, or investing in a stock fund, is inherently risky and puts your capital at risk. You may not get some or even all of your money back.

How is gold valued?

Gold is valued by its purity and weight. This is then multiplied by the spot price of gold to calculate the value.

The London Bullion Market sets the price of gold twice a day to match buyers and sellers or, in other words, to balance supply and demand.

1. How is the purity of gold measured?

All that glitters isn’t necessarily gold, with manufacturers adding other metals and alloys to the mix.

Carats measure the ratio of gold to other metals. The karat number is often stamped on gold, ranging from zero to 24.

The higher the carat, the higher the proportion of gold compared to other metals, such as copper, silver or palladium. Pure, or effectively 100%, gold is 24 carats.

Here’s how clarity varies by carat:

2. How is the weight of gold measured?

To add an extra layer of complexity, gold is usually not weighed using traditional measurements, but using the “Troy” measurement. A Troy ounce weighs just over 31 grams, or about 1.1 British Imperial ounces.

The Royal Mint still sells gold coins measured in troy ounces, but its bullion is now priced by the gram.

How can you buy gold in physical form?

You can buy physical gold in the form of bars, coins, or jewelry from precious metals dealers and banks.

1. Investment bars

Gold bars – often depicted stacked in bank vaults – can weigh from one gram to over 10 kilograms. Bars are stamped with purity level and weight.

The Royal Mint is one of the main sources of gold bullion in the UK, but charges a premium above the “spot price” of gold to cover manufacturing and other costs.

If you are looking to buy 24 carat bars at the Royal Mint, the current price ranges from £80 for a one gram bar to over £49,000 for a one kilogram bar.

2. gold coins

Gold coins generally have a lower gold content than bullion. In the UK, the flagship gold coins produced by the Royal Mint are the Sovereign and the Britannia.

  • Sovereign: These 22 carat coins have a portrait of the Queen and are measured in troy ounces. Options include a quarter, a half and a double sovereign coin, the latter weighing 0.5 Troy ounces and currently being sold by The Royal Mint for £750.
  • Brittany : these 24 karat coins feature an image of Briannia and are available in Troy ounce measurements ranging from a tenth of an ounce to a half ounce. The current cost of a Royal Mint Troy ounce coin is £1,590.

Both coins are legal tender in the UK and as such are exempt from capital gains tax and VAT for UK residents.

The Royal Mint also makes commemorative coins, with the most expensive coin, the 24-carat one kilo coin The Who, currently selling for over £73,000.

Although commemorative coins enjoy the same tax advantages as Sovereign and Britannia coins, they are not classified as “in circulation”, which means that banks and businesses are not required to accept them as legal tender.

There is also an international market for historical coins as collectibles, which generally sell for more than their gold content. The 1933 “Double Eagle”, one of the last gold coins minted in the United States, sold at auction last year for $19 million ($16).

Other popular Troy ounce gold coins include the American Buffalo (USA), Maple Leaf (Canada), Krugerrand (South Africa), Gold Nugget (Australia) and Gold Panda ( China).

3. Gold jewelry

Jewelry, especially antique pieces, is another avenue to buy gold. However, as with gold coins, you will usually pay a markup over the gold content.

This markup is usually over 20%, and often much higher depending on the manufacturer, and covers the cost of design and manufacturing labor and the retail margin.

You should be able to calculate this markup if you know the weight and carat, as well as the current spot price of gold. That said, some retailers are hesitant to advertise the weight of jewelry for this reason.

For example, an 18k gold wedding band from a luxury designer brand sells for £1,570. The current value of the gold grade is £240 which means you are paying a 6+ markup for retailer craftsmanship and profit.

For comparison, you can buy an 18k gold wedding band from a high street retailer for £350, a two-thirds markup on the underlying gold value of £210.

If you are looking to invest in jewelry, keep all sales documents as this will make it easier to resell in the future.

Factors to Consider When Buying Gold

If you decide to buy physical gold, keep a few things in mind:

  • Storage: Physical gold requires secure storage, preferably not in your home. It must be stored away from humidity, corrosive products and metals such as silver, which can tarnish it. There is a cost to using third-party storage – for example, the Royal Mint charges an annual fee of 1% plus VAT for using its vault, calculated on the value of the gold (based on the price in cash).
  • Insurance: If you decide to store your gold at home, you need to make sure your home insurance policy covers it. Likewise, if you use a third-party storage facility, you should check that they carry adequate insurance.
  • Origin: Whatever type of gold you are looking to buy, it is important to use a reputable dealer. As stated earlier, one option is to purchase bullion or coins directly from the Royal Mint. If you are looking to buy from another source, members of the British Numismatic Trade Association must adhere to a code of ethics.
  • Purity: The gold content of the bar, coin or piece of jewelry determines its value. A high carat (21 carats or more) is preferred because it contains a higher proportion of gold and is less likely to tarnish. That said, higher karat gold is less durable and requires more care to prevent scratching or damage.

Other ways to buy gold

Buying gold in physical form can be difficult in terms of ensuring its authenticity, storing it safely and reselling it. Investing indirectly can provide investors with upside potential if gold prices rise, without having to hold gold directly.

Remember that investing in funds and directly in stocks puts your capital at risk and you may get back less than you invested or lose all your money.

So what are the options for investing in gold? Here’s a quick overview:

  • Buy gold and commodity funds: specialty commodities, mining, and exchange-traded funds (ETFs) can provide you with exposure to gold. These range from funds investing in gold mining companies to ETFs that directly track the price of gold and other precious metals.
  • Buy shares in gold mining companies: Gold mining companies have made windfall profits over the past year due to rising commodity prices. Mining companies include BHP Group, Rio Tinto and Glencore. They also offer potential income to shareholders via their traditionally high dividend distributions.

As with other assets, any profit or capital gain realized by investing in gold, directly or indirectly, will potentially be subject to capital gains tax (CGT). However, as mentioned above, CGT is not payable on Britannia and Sovereign coins as they are legal tender.

Everyone has a CGT allowance of £12,300 for the current 2022/23 tax year, which is the amount of profit you can make before tax is due. However, CGT is not charged on gold-based investments (such as funds) held in an individual savings account or Self-invested personal pension.

Is gold a good investment?

If you’re looking to get rich with a modern gold rush, you’ve probably come to the wrong place.

While the price of gold has risen 45% over the past decade, the FTSE 100 has risen 58% over the same period. So why all the hype?

The answer lies in holding gold during times of economic volatility. Some investors view gold as a safe haven during stock market declines, as well as a way to preserve wealth when inflation is high.

For example, during the bear market of 2007 to 2008, the FTSE 100 plunged 44%, while the price of gold rose more than 90%. However, a word of warning – although the price of gold tends to rise during stock market declines, this has not always been the case historically.

Gold prices can also be very volatile, meaning gold is not a safe investment. If you want some of that golden glow in your investment portfolio, aim for it to take up only a small percentage of your overall investments.

As with other investments, your investment in gold can go down as well as up, and you may not get your money back. If you are unsure of the best option for your personal situation, you should seek financial advice.

Should you invest in gold?

Gold can offer investors a safe haven and a way to preserve wealth in an environment of high inflation. As with stocks, the price of gold is volatile, but its value has increased over the past 30 years.

Depending on your preferences and risk appetite, you can choose to invest in physical gold, mining stocks, or gold-based funds and ETFs. However, it is important that any investment in gold is part of a diversified portfolio.


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