Of all metals, Gold is the most popular and most precious. Many investors buy it as a way of modifying risks. Some choose to do this through gold derivatives or buying gold funds. Others like the simplicity of buying physical gold coins or bars. It’s crucial to determine which of these investment methods best suits your objectives.
Over the past few years, gold investment has grown dramatically due to several factors. Demand for Gold investment has increased on the back of global currency devaluation, economic instability and mass borrowing and political instability, leading to terror attacks and coups. The range of gold buyers now spans a modest man on the street buying a few gold coins, to vast central banks choosing to transfer a proportion of their reserves from Dollars into gold.
Consider these three strands before you invest in physical gold.
Do you want to have the gold close to hand or would you prefer experts to keep it secure and insured? If you want the peace of mind, you have several choices to store your gold. The dealer who sells the gold to you, should be able to provide a complete service, including professional storage. Many banks also offer safe deposit boxes. However, be aware that these services aren’t free, and any cost will impact your overall returns.
If you’d prefer to keep the gold yourself, then ensure you have a secure place to keep it at home. Some argue that the best place is to keep it somewhere obscure like at the bottom of a Cornflakes packet, rather than in a home safe. After all, a burglar is unlikely to have time looking through all your food items to find treasure!
Physical Gold can be more tax efficient
One huge advantage of buying physical gold coins or bars is that they can be more tax efficient than gold funds or gold mining shares. There’s no VAT to pay on any investment grade physical gold. To qualify, it needs to be 22 carats or higher in purity and in the form of coins or bars.
The real bonus comes with UK gold coins. Certain coins are classed as legal tender in the UK. This means that any profit made is also free from Capital Gains Tax (CGT). So you get to keep all of your gains.
There are two factors when considering price. Firstly is judging your timing to buy gold and when to sell. As the price can be volatile, getting your timing right can have a huge impact on your returns. We recommend you view gold as a medium to long term investment so that exact timing and volatility is ironed out over time. Remember, most people don’t buy gold in the hope of becoming rich overnight. They aim to reduce their market risk by owning a safe haven asset, and a store of wealth to outperform inflation.
Secondly, the premiums you pay for gold will vary from dealer to dealer so shop around. Generally the more gold you buy the lower your price per unit. Older coins will command a higher price due to their added historical and scarcity value. Newer coins will trade lower/
In conclusion, physical gold investment can play a crucial role in your overall strategy. Just have a keen intellect on how you invest in it and do your research.