Is gold storage something you’re thinking about? Are you interested in purchasing physical Gold or silver, but concerned about where you’ll store it? Our infographic highlights the various options available; to help put your mind at rest.
The main advantage of owning physical gold is that it’s the real thing! There’s no counterparty risk, as there’s no electronic trading or paper involved. It’s as real and solid as can be and something that you have the pleasure of holding in your hand.
But how do you keep a precious metal safe and secure?
Insured delivery direct to your door
Delivered to you fully insured, our delivery is discreet, so the whole neighbourhood won’t know what you’re taking delivery of. It’s packaged in plain, padded envelopes, safely and securely. We also track every package that we post, which allows us to follow up on any queries and provide reassurance on when you should expect your delivery. If your gold or silver is in stock, and you place your order before 2pm, then we should be able to get it to you by the next working day. Before 1pm to be precise. Should your order be out of stock then we’ll aim to deliver it within 2 – 3 days – depending on the stock availability. From 2018 all gold orders benefit from free UK delivery.
Once you’ve received your package and signed for it, there are several options for you to consider regarding storage:
Many people choose to keep their gold stored safely at home and there are many options available for home storage. A steel safe is the most obvious choice for safety and security – preferable bolted down to the floor. But if bolting the safe isn’t an option, then try to keep them safe somewhere out of sight, like in a cupboard, hidden by other items.
You can also use everyday household cupboard items, like tins, packets of cereal, boxes of tea bags etc. to hide and conceal your gold, but it’s important that you remember where you’ve stored it so it doesn’t accidentally get thrown away. There are many different steel safes available for home use. These include fireproof and waterproof ones. There are even models that can be unlocked by using your fingerprints. They can also be installed inside the flooring, underneath the carpet.
There are a number of ingenious secret storage items that you can purchase from PhysicalGold.com, such as clocks or wall sockets, to help you conceal & store your precious metals.
Hiding things under the mattress is also more common than you might think, but whichever home storage option you choose, you must ensure your home insurance covers the total value of the gold. The advantage of keeping your gold at home is that you know exactly where it is, you can keep it close and touch it, as often as you wish.
Bank Deposit Box
Safety deposit boxes at banks are considered to be extremely safe and secure, so it’s worth visiting your bank to ask about the availability of one if this is of interest to you. Many banks have been withdrawing these facilities over the past few years though, so there may be a waiting list or a box may be quite difficult to acquire.
Safety Deposit Facility
A third-party safety deposit facility offers boxes for you to rent to keep your small, personal household items safe. These facilities are usually open 9 – 5pm for you to visit and generally cost between £100 – £1000 per year to rent.
Since tariffs are expensive, it could work well as a short-term arrangement. The benefits of using a safety deposit facility are that your valuable assets are stored away from your home.
Additionally, these boxes are available in various sizes and you can choose one according to your requirements. Of course, one of the disadvantages of this arrangement is that you cannot access the box at any time of your choice. You can only do so when the facility is open. Also, there could be a natural disaster like a flood that could damage your belongings stored inside the box. In many cases, the operator may refuse to re-compensate you for your damages when this happens, simply because their insurance may not cover it
Professional Vault Storage
The most common (and safest) gold storage option is to arrange for the secure storage of your gold with your chosen dealer, as they have access to secure vaults. These professional vaults offer 24hr safety and security, giving you reassurance and peace of mind. The vaults are highly secure and generally don’t allow public visits, but rest assured your gold will be personally allocated and stored separately in a fully segregated account, within your own little section in the vault.
At PhysicalGold.com, pension gold, silver coins and gold coins are stored at Loomis International, UK – one of the UK’s most secure gold storage facilities. Silver Bars are stored at Network Securities in the Channel Islands – a specialist vault facility that has dual controlled security systems and a direct connection to the local police station.
So if you choose to store your precious metals with us, we can reassure you that all of our stored gold and silver is fully insured, segregated and completely ring-fenced and you can request home delivery of your gold at any time. However, given the high levels of security involved, it’s often not possible for the public to request to view their gold, but we can assure you that it is there – safe and secure.
With the tax year end upon us, now’s the time that many take a hard look at their finances and make investment decisions for the following year. But if you’re one of the savvy investors already owning physical gold, then you’ll know buying gold and silver aren’t affected by the tax deadline.
Tax year-end brings a fresh start
If your money is currently in an ISA or savings account, then the tax year end might have you rethinking your investments and considering gold (or silver).
If you’re one of the thousands of investors wanting to move your money around, to reduce your tax exposure and maximise your gains, this article will provide insight into some important tax considerations, which every investor should know about.
Many investors just think of ISAs as tax-free investments, when in reality, they’re limited tax-free investments – meaning there’s an upper limit to how much you can save. The ISA limit for 2019/2020 remains at £20,000 maximum, but you can’t roll over any unused portion to the next year, so you have to use it or lose it.
Regular savings accounts are taxed
If your money is in an old fashioned, regular savings account, you’ll be charged a tax on any interest it generates. This makes a savings account quite unappealing for those who’ve already maxed out their ISAs. Especially with the highest available rates being around 1.5% and the majority of interest rates currently yielding sub-1% even before tax!
Capital Gains Taxes on assets you sell
If you’re looking into selling an asset or Buy-to-Let property that you own, you’ll likely end up paying Capital Gains Tax on the profits of that sale. This is especially true for those who’ve already reached their CGT allowance for the year. Many forms of Gold, on the other hand, are actually CGT free.
The lifetime allowance could affect your pension
The lifetime allowance, which was previously reduced from £1.25 million to £1 million, is a limit on the value of payments on your pension and could affect many people who’ve already reached this new allowance total. If you’ve saved into your pension throughout your working life, you could already be at this limit and you’ll be taxed heavier than in previous years. Check the Money Advice Service dedicated page for the latest allowance rates and related information.
UK Gold Coins have no Capital Gains Tax and no VAT
Physical gold has always been a worthy investment and gold investments make a great addition to any portfolio. Due to there being no upper limit on how much you can purchase in a year and certain forms of gold falling into the bracket for CGT and VAT free investments, it is looked on favourably by many investors. Currently, all bullion coins that are classed as legal tender in the UK which includes coins such as gold Sovereigns and gold Britannias, are CGT exempt. They are also VAT free providing the coins were minted after 1800 and classified as legal tender.
Coins to buy from Physical Gold
If you want to consider an investment that will appreciate tax-free, then take a look at our tax free-gold coins (including the Gold Sovereign and the Queen’s Beasts range) or our CGT free Silver. PhysicalGold.com even offers the opportunity to add gold to your Self Invested Personal Pension (SIPP) to achieve a balanced portfolio. Currently, the UK Government are willing to pay up to 45% towards the cost of your gold if you invest through a SIPP. This is applicable to all investment-grade gold bars or wafer that are professionally stored and have a purity of at least 99.5%.
Contact Physical Gold for 2019/2020 Financial Planning
Providing you’re looking for an investment that will help you diversify and protect your assets, whilst avoiding CGT and VAT (for gold), you can’t go wrong with Physical Gold. Call us without delay on 020 7060 9992 to speak to us or complete our contact form. We can provide guidance on how gold can comfortably fit into a wider investment portfolio for the financial year ahead.
The decision of where best to invest your money is an important one. Buying property has been a favoured choice for UK investors for years. Returns have been excellent and the physical nature of bricks and mortar has appealed in its simplicity.
But choosing the right property and managing it isn’t straight forward and now investing in real estate in the UK is less lucrative due to legislative and market evolutions.
Over the past decade, the very same investors who feel comfort in property’s simplicity, are starting to turn their attention increasingly towards another unfussy tangible asset – gold.
Physical Gold Investment and property are good places to start
As keen investors know, there are two key rules to adhere to when investing:
Only invest in things you understand
You have to be lucky with timing.
Certainly, I stick with the first rule religiously, which is why I’m a big fan of both physical gold investment and property. They’re both simple, tangible assets, with an intrinsic value.
And whilst I agree with the second rule – that there’s always an element of luck involved, I also believe intelligent, strategic thinking can vastly improve your chances of great timing. Trying to predict the market and repeated switch from one asset class to another requires extraordinary luck, which soon runs out.
6 crucial comparison points
1) Recent property v gold performance
Let’s start by comparing the performance of these two asset classes, in the UK over the past 3 years.
The UK House price index shows a 14.2% increase in average UK house prices in the period from June 2015 to June 2018. Just under 5% per annum capital growth in a low-interest-rate environment sounds pretty good. Add in rental income and it’s easy to understand why property is such a popular UK investment. However, when you drill into the figures, returns vary considerably from region to region which adds a layer of complication to the investment. Buying in the next ‘up and coming area’ can be down to as much fortune as expert insight.
How about the bigger picture?
Go back further to 2008 and average house prices have risen from £181,000 to today’s £224,000, an annual increase of 4.2%. This encompasses the period of super low-interest rates.
However, when we look at figures for the past 12 months, average UK house prices have risen a mere £3,000 or 1.3%. Even more significantly, key areas such as the usually thriving London market are now starting to see monthly falls in prices.
Speak to an estate agent and they’ll tell you that the current market seems to be softening month on month. Rather than houses selling above the asking price, vendors are being forced to offload properties at discounts due to flailing liquidity.
The below chart from www.home.co.uk demonstrates the fact that housing inventory is lingering on estate agents’ book for around 15% longer than a year ago.
For simplicity and better comparison, let’s just focus on the gold price in Sterling terms.
In the past 3 years, the UK gold price has risen 25.9% from around £770/oz to £970/oz. That marks an impressive 8.5% annual return. This outperforms UK property prices in the recent past.
How much is a gold bar worth? – Watch this video to find out!
Volatility plays a role
However, it’s important to note that while house prices tend to rise or fall steadily in one direction, the short term gold price is far more volatile. Returns over the past 3 years are very strong. But looking at the 6months from June 2015 to December 2015, the gold price fell around 7% in the UK. This makes the overall 25.9% increase even more incredible, but also clarifies that gold should be deemed a medium to long term buy and hold rather than short term speculation.
…and longer-term performance?
Taking a further step back and analysing gold’s returns over the past decade is even more remarkable. The spot gold price has risen from around £450/oz (June 2008) to the current £970/oz (June 2018). That’s an astonishing 115% increase or nearly 12% per annum.
If you’re a property fan, considering adding to your investment portfolio in the next year, you may instead wish to consider investing in Tax-Free Gold.
2. Market accessibility
Property entry point
Clearly, purchasing an investment property outright requires a large amount of capital. With average property prices above £224,000 in the UK, many people will find the market inaccessible.
Focussing on more modest properties such as studio flats, perhaps in less salubrious areas will certainly bring that figure down. But even small apartments in less desirable locations will require substantial investment figures.
Mortgages can bridge the funding gap
Most real estate investors will seek a mortgage to bridge the funding gap. However, obtaining mortgages is becoming increasingly difficult. Since the 2008 credit crunch, lending rules have tightened alarmingly with many buyers being with high credit ratings being turned down. The desire of lenders to seek new business is being crimped by their fear of defaults which has led to a far more strenuous lending process.
Even more significantly, the deposit required to obtain a buy-to-let mortgage has risen dramatically from a common area of 5% a decade ago to a more usual 25-30% nowadays, which instantly eliminates those with more modest means. Major estate agents Savills predict mortgaged property investments to fall a staggering 27% in the next 5 years.
Schemes to buy fractional ownership of property is available for those unable to afford a whole property, but this now enters a different realm, introducing a raft of other risks.
Gold starting amount
While the perception of gold investment is that it’s just for the rich and famous, gold is relevant to all of us regardless of wealth. Over the past decade, an increasing number of gold dealers have developed online platforms to purchase physical gold coins and gold bars (with small sizes such as 1oz and 100g available) with free insured delivery or convenient storage.
Increased competition, live pricing technology and transparency have made the gold investment market very accessible to everyone. While loans and leverage aren’t provided for physical gold investment, investors can pay by debit or credit card, as well as online transfer.
Low entry point
With many of the world’s major manufacturers such as The Royal Mint now producing favourite coins such as the Britannia and Sovereign in small fractional sizes, starting point for investors is around £100. With such low possible investment, gold investment is affordable to everyone.
Rewarded for quantity
A big difference between property and gold investment is that the latter offers discounts for larger quantity investments. So the price per gram when investing £100,000 is far lower than for £10,000, which in turn represents better value than buying £1,000. With that in mind, while the £100 starting point is possible, it doesn’t necessarily provide good value investment. Once investors buy a few thousand pounds worth of physical gold, decent discounts begin to kick in.
3. Type of returns
Property investment returns
One of the major appeals of investing in the housing market is the double whammy of possible capital appreciation and rental income. While capital appreciation is unpredictable, many property investors have made vast sums of profit simply from buying and selling at the right time. We all know that when the UK property market is on fire, prices can be like a steam train.
Rental income is more predictable, especially if you can agree to longer-term agreements with tenants. With high property prices excluding many UK residents from affording to own their own property, demand for rental property is high. The prospect of passive income is one of the main attractions of building a property portfolio, especially for those more mature in years, who still require an income.
Rental sector prospects for 2018 and beyond
Leading estate agent Knight Frank believes overall UK rental values will rise by 1.2% in 2018, but warn that London and the surrounding areas will see falls of 0.7% or more.
The risk of rental income is that tenants can default on payments, especially with wages stagnant or negative, but living costs rising. There’s also the prospect of having certain periods with the property unoccupied and receiving no rental income. This can represent a cash flow challenge as buy-to-let mortgages still need to be paid during such times.
Types of gold returns
Gold returns depend on which type of gold investment you own. Gold funds and mining shares can appreciate along with offering dividends.
However, for the sake of this comparison, we’ll just consider physical gold, as its tangibility makes it the most suitable alternative to property investment.
Unlike owning and renting a property, buying physical gold as an investment will not provide an income. For this reason, mature investors in need of an income, tend to focus on bonds and properties to provide this. They tend to supplement these investments with gold as a form of portfolio insurance.
Investors own gold coins and bars (typically up to 1kg) in the hope that both the gold price and type of physical gold appreciate. Appreciation is calculated according to the underlying gold price multiplied by the weight in gold that an investor possesses. Gold has more than kept pace with inflation over the years and has risen in value, especially during times of economic and political instability.
Additional rises in capital value possible
In a similar way that Victorian properties can be more valuable than brand new houses of similar square footage, Victorian gold coins can be worth more than brand new coins. But while premiums on period properties are generally fixed, older gold coins can continue to rise in value quicker than just the underlying market, providing a boost to profits.
The ease with which an investor can offload a property will depend on the type of property, the state of the market, and the location.
The first element is in your control. Sticking to more modestly priced properties will increase the number of possible buyers for the property, speeding up the selling time and improving the price achieved. One and two-bedroom apartments near major transport links tend to be the sweet spot, and most resilient to market conditions.
How does location impact liquidity?
On a macro level, trying to sell a property will be impacted by the particular region in which the property is located. We’ve already seen how London is currently underperforming other areas of the UK at the moment with housing stock proving stickier at current levels than cheaper areas. This can come down to timing and luck as hotspots can change regularly. London is renowned to be one of the most liquid areas usually due to the high demand to live in the capital. If your property’s location has become trendy, sales can be sped up considerably.
On a micro level, buying properties near to train stations, amenities and desirable green land, can all speed up the process when it comes to selling.
Dangers of a sticky market and the dreaded chain
If the property market is in a state of decline, selling a property can be very difficult. In these circumstances, sales can take many months or even years. With mortgages becoming increasingly difficult to obtain, being let down by another party in a long chain of buyers and sellers can be frustrating at best and a nightmare at worst.
Gold’s liquidity is one of its great appeals. Regardless of whether the gold price is busy or quiet, gold investors can achieve a sale within a day or two if needed. Rates that dealers pay for your gold will vary depending on the state of the market, but differences will be a percent or two at most.
Divisibility and type of gold play a part
Similarly to buying the right property, selecting whether to buy gold coins or gold bars, for example, can impact the ease in which it is to eventually sell.
It may sound obvious, but buying a 1 kilo gold bar (which costs around £35k) means that you cannot sell £15,000 worth of gold if you need to raise funds. Obviously the same goes with property – you can’t sell half if you need. But buying £35,000 of 1oz gold coins would enable the gold investor to sell in any increment they want.
Does the type of gold coins matter?
Buying the right type of gold coin also enhances its liquidity. Coin collectors will likely need far more time to sell their unique gold coins as they have a narrower buyer base. These numismatic coins are likely worth many times their simple gold content, so more time is needed to achieve the price.
Sticking to well-known bullion coins will enable a super-quick sale to a gold dealer at a good price.
Tax treatment of property investment
General residential buy-to-let properties are becoming less tax efficient. Unfortunately, there are tax burdens when you buy, while holding the asset and when you sell.
Tax when you buy
Stamp duty is a tax when you purchase a property, based on the purchase price of the house or flat. Each higher bracket of stamp duty only applies to the value amount within that higher bracket. Properties below £125,000 in value are rated zero percent, with 2% charged up to £250,000, 5% up to £925,000, 10% on homes up to £1.5m and a colossal 12% above that. Once you consider the conveyancing fees as well, it costs a huge sum in tax just to get started.
Even worse, in April 2016, an additional 3% stamp duty is applied to all these brackets for buy-to-let properties. (see details below in the ‘4 Major Threats to Property’ section).
Tax when you hold
If you’re renting out a property, then income tax applies to the rental income. The ability to offset this with your mortgage costs is also disappearing (detailed in ‘4 Major Threats to Property’ below).
Tax when you sell
With the double incentive of an income and possible capital appreciation, comes the double punishment of income and Capital Gains Tax (CGT). Selling your main UK residence at a profit is thankfully not liable for CGT. So mercifully, you can ‘invest’ in your own property without the fear of fiscal punishment.
However, CGT applies to gains made on second homes. All you need to know about CGT is that each individual has an annual tax free threshold (around £11,000 each), with any gains above that being taxable. With the scale of property values, this threshold has little chance of protecting you from up to 28% CGT, especially as you can’t sell half a house before the tax year-end a half afterwards!
How about buying within a pension
While commercial properties can be more tax-efficient as they qualify for a Self-Invested Personal Pension (SIPP), residential properties are not a permissible asset.
Gold’s tax efficiency
With buy-to-let investors to be hit hard with the fiscal stick, it could see many of them moving some money away from property and into physical gold investment – which has no such tax penalties.
As long as you buy ‘investment grade’ gold, your investment is VAT exempt. To qualify as investment grade, the gold needs to be in the form of a bar or coin and at least 22 carats in purity. So that discounts gold jewellery or low purity coins.
As we’ve already mentioned, holding physical gold produces no income so there’s no income tax to pay.
No tax on disposal
The real bonus with gold investment is that if you buy the right type of gold, there’s also no CGT to pay on any profits. For UK residents, this means buying British coins with a face value. This face value qualifies the coin as legal tender, for which tax is not applicable. Predominantly, UK gold investors focus their purchases on gold Sovereign or gold Britannia coins, which are both classed as legal tender.
Even if you wish to invest in gold bars or non-UK coins, CGT can be avoided due to the smaller divisibility of the asset compared with property. Krugerrands, for instance, are a popular coin which in theory are taxable if you sell at a profit. But due to their modest size, some can be sold before tax year-end and others afterwards to spread out any profits, thus keeping within tax-free thresholds.
6. Ongoing costs
With investment properties being occupied by tenants, wear and tear are inevitable. As a landlord, you’re obligated to provide upkeep and maintenance of the property for your tenants. Clearly, you have a vested interest to uphold your property’s condition too. The level of these ongoing costs will depend on how well your tenants look after the property, the age of the property and the value.
For larger property portfolios, it’s not uncommon for many properties needing work at once, leading to high running costs. Paying a management fee for a company to help this process is common. Ongoing fees to manage tenants and rent are also applied if you’re unable to manage the process yourself. Finally, landlord insurance is required by law, further saddling the property investor with continuing costs.
Physical gold coins or bars costs
The main ongoing fee for gold is insurance and storage. For modest amounts of gold, it’s possible to take delivery yourself, reducing ongoing fees to buying a home safe and adding the gold to your contents insurance. But for larger investments, the peace of mind of professional vault storage is comforting. However, insured storage can cost up to 1% per year of the value of the gold, which will rise as the value of gold increases.
7 major threats to property which are catalysts for gold
Any factor which is detrimental to the economy or specifically the housing market can act as a huge boost to gold investment. As the world’s safe haven asset, economic and political instability which can impact property investment negatively, will likely provide a magnet for investors to gold, as a way of seeking protection. We’ve seen this switch into precious metals throughout the history of gold investment.
Bad news for UK property can also put Sterling under pressure as a currency. This indirectly boosts gold prices in the UK, as pricing originates in Dollars and is then converted into Sterling. So a weak Pound increases the price of gold for UK investors.
1. China woes and Russian politics
The biggest overseas buyer of UK property in recent times has been the Chinese. They’ve not only been the catalyst for UK property price increases but almost single-handedly provided momentum to the global economy. It’s not uncommon to hear that an entire block of new flats has been sold within weeks, mainly to the Chinese market.
But cracks have started to appear in the world’s second-biggest economy, forcing the Chinese central bank to devalue its currency on some occasions this year. Stock markets have already reflected the growing concern and accepted that the Chinese bull-run is possibly coming to an end.
China’s size is significant
If, as expected, Chinese demand for UK properties wanes, then we’re likely to see the heat from the market dissipate. China’s size (it contributes more than 13% of global GDP), means a shrinking economy will also impact every other region around the world – further curbing demand for UK buy-to-lets.
Equally the wealthy Russian buyers have also held an obsession with buying UK properties over the past decade. With political tensions increasing with Russia, many are pulling out of the UK market, especially with visas harder to obtain.
With their focus on the high-end London market, it’s no surprise that this is now the region and sector which is most missing their enthusiasm and Rubles.
2. New legislation around greenbelt land
Supply and demand play a key role in both property and gold. With property investment, it’s reassuring that, here in the UK, we have the equation of an increasing population and very limited space to build new houses. Similarly, gold’s demand continues to increase, whilst supply is extremely limited, due to no major discoveries in the past 15 years.
However, the squeezed housing supply, currently pushing up UK prices, could be about to explode. Many affordable housing projects are already underway. But it’s the biggest shake-up of protected green belt land in 30 years that will provide the catalyst to a surge in UK housing stock.
If the proposal to build thousands of new starter homes is approved, it could play a huge role in alleviating the current supply shortage.
3. Stamp duty rise on buy-to-lets
Whilst property supply may increase, the Government is also determined to hamper demand in a desperate attempt to prevent another financial crisis. In the last few years, the budget specifically targeted UK property investors – adding a huge 3% extra stamp duty for buy-to-let investors starting in April 2016. This applies across the valuation board and will need to be paid in addition to the current stamp duty rates. This equates to an additional £15,000 stamp duty on a purchase of a £500k property. This additional upfront tax burden may put off those looking to enter the market or those wishing to add to their current property portfolio.
Difficult to raise money
Post the 2008 financial crisis, banks are now increasingly tight-fisted when it comes to giving out generous mortgages on buy to let properties. Not only is it difficult to get a buy to let mortgage, but recent budgets have also witnessed reduced tax breaks for buy to let investors, making the asset class less attractive for investors.
4. Reduced tax breaks
If that wasn’t enough, new legislation already passed,
will impact the income received for all UK buy-to-let investors. Previously investors were able to offset much of their rental income against their mortgage, meaning little or no income tax on the investment. However, this benefit is now being phased out, so anyone owning investment properties will face significant rises to their tax bill. This will not only deter new investment into the market but may also see existing owners sell to avoid the tax hike.
5. Interest-only mortgages coming to an end
The days of easy money before 2008, witnessed an epidemic of UK house buyers taking out interest-only mortgages. The idea was that the borrower could invest money in the stock market for the duration of the mortgage term and witness growth which out-paced the amount needed to pay off the loan’s notional amount. This would leave them with a bonus nest egg to do with what they liked.
But when stock markets failed to make the expected gains, many households fell short of the amount they required. The consequence was that the Financial Conduct Authority (FCA) has applied pressure to lenders to stop giving these mortgages out anymore. Nowadays, interest-only mortgages are only really available on buy-to-let properties rather than main homes.
Interest-only time bomb
However, with one in five mortgage customers having one of these deals, the next few years could see many homeowners facing eviction. A huge proportion of loans handed out in the 1990s are maturing over the next few years. And a lethal cocktail has brewed which could hit the housing market and the economy hard.
After a decade of ultra-low interest rates, many homeowners have continually re-borrowed as their homes have risen in value. This extra money has helped fuel the economy to this point, but it leaves many with very high loan-to-value (LTV) on their homes. With these loans deals about to finish, these homeowners will fail to obtain new interest-only deals. Combine this with interest rates already on the rise, and monthly mortgage commitments could increase ten-fold.
Such an impact would undoubtedly witness house prices falling with further rental demand.
6. Increased uncertainty over Brexit
The continuing uncertainty over Brexit is a cause for great concern when it comes to property market investments. As the gates close for new immigrants, property market demand is likely to be affected causing volatility in the real estate market.
It’s unclear what sort of trade deal will be achieved for the UK after its £39 billion divorce bill is paid. Either way, the uncertain journey, regardless of the quality of the final destination, is bad for property markets and supportive of a market hedge such as gold.
What’s happening in Italy?
As was suspected, Brexit isn’t an isolated incident. Not only does the UK’s withdrawal from the EU impact many other countries, but it also sets a precedent. Italy has followed suit in electing a coalition Government borne out of the desire for change.
With the far-right coalition suggesting the appointment of a eurosceptic finance minister, President Sergio Mattarella has stepped in to deny the selection. This unheard-of move has caused Italian bond yields to plunge more than at any point since the Euro’s inception in 1999.
This leaves Italy in a state of limbo with the new Government wishing to spend its way out of trouble at rates that would break EU guidelines. This demonstrates their desire to be the next to leave the single currency and return to controlling its own political destiny.
7. Equity market correction
We’re all enjoying our stocks going up in value in our pensions and ISAs. But all good things must come to an end. Analysing stock valuations over the past 150 years depicts bull runs lasting up to 6 years, immediately followed by a market correction. The Dow Jones and FTSE indices are now enjoying their 9th year of rising prices, so the law of averages tells us that the downturn is overdue.
Maybe it will keep rising indefinitely?
An analogy would be the city of San Francisco. History and science tell us that being located on the San Andreas fault guarantees future earthquakes. With many of the current residents having enjoyed years without a major quake, it’s naïve to suggest it will never happen. It will happen, we just don’t know when. What we do know is the longer it goes without a quake, the bigger the damage when it does occur. The same can be said of stocks.
Each day we read about more major brands either shutting stores, making redundancies or even going into administration. This isn’t just small independent shops in the high street, but major mega brands such as House of Fraser, BT, Sainsburys & Asda, Toys R Us and Maplin. On an evolutionary note, commerce is changing at the fastest pace for a century with online giants like Amazon squeezing profit from physical stores and automation replacing human jobs. This will only continue with technology.
Many market experts predict a major stock market correction with the Fed Reserve starting to raise interest rates in the US. Closer to home, wages are stagnant and credit bubbles are almost at bursting point with car leasing and zero percent credit card deals.
What would be the impact on gold and property?
When stock markets tumble, every investor feels the pinch, jobs are lost and day to day income is impacted. This takes any heat from the stock market as fewer borrowers can raise the funds to move house or pay high rent.
This is also the very time, that institutional and savvy retail investors switch their attention to gold. As a safe haven, it tends to receive a significant injection of investment demand during such market downturns.
Which investment should I choose?
The great thing is that you don’t need to choose between property and physical gold investment. If you’re already a keen property investor, then it may be worth taking your first steps to gold investment to hedge your portfolio. As we’ve seen, possible threats to one asset class can be a benefit to the other. That way the two investment rules are met: property & gold is simple, tangible assets and timing become less of an issue if you own both.
However, we all know that strong economic markets don’t last forever. That’s where owning some gold comes into play. Relying solely on property investment means the good years are great, but the bad years are catastrophic. Combining property and gold investment hedges the issue, so regardless of underlying conditions, you should still receive both income and portfolio growth
Do you need to be lucky with timing?
Timing and cycles can make a huge difference in your investment returns. While gold prices could rise or fall in the coming months, the odds are convincingly in favour of now being a great opportunity for physical gold investment. Rather than try to time the stock market or property sector downturn, invest in gold now while prices are relatively low. It’s better to have your portfolio insurance in place 6 months, or a year before the downturn, than one day after.
Is gold investment for you?
If you have decided gold investment is for you then look no further than Physical Gold. Why not call our experts on 020 7060 9992 today?
Here at Physical Gold, we have been looking at where the biggest gold mines are in the world which in turn led us to create or latest infographic ‘Where in the World is the Gold?’.
We looked at how much gold is produced in mines across the world and ranked the 10 largest producing mines worldwide. With anything, you like to know where your product was originally sourced, therefore we thought we would do the same for physical gold investors much a like yourself.
The craze for gold mining has been around for thousands of years. Archaeologists have found gold artefacts in Eastern Europe dating back to somewhere around 4700 BC. This would indicate that the practice of gold mining has been around for almost 7,000 years. Infact, gold was mined across the world. Gold mining sites have been found across Europe, North Africa, and even India. In India, gold was mined as early as the 2nd century AD and gold artefacts found in the ancient Harappa and Mohenjo-Daro civilizations, now part of modern-day Pakistan, have been traced back to the minefields in Kolar, in Southern India. The size of these operations grew during the reign of the Chola kings a few centuries later.
Roman miners used two different methods to mine gold. One was called hushing, which meant that a flood of water was released to expose the gold hidden below the silt and the soil. The other was called ground sluicing, which was essentially an open pit method. In the 19th century, there were a series of gold rushes all over the world, which led to the discovery of gold mining sites across the world.
How much gold is there anyway?
So far, the amount of gold that has been mined is approximately 171,300 tonnes. While that may seem large a large amount, it is important to know that gold is one of the rarest elements. In comparison to the entire volume of the Earth’s crust, the precious metal is only 0.003 parts per million of the entire crust. In fact, the scarcity of gold is one of the factors that makes it so precious.
Gold supply running out?
It is widely believed that global gold production peaked in 2015 and since 2013, the output from almost all mines has slowed considerably. Some analysts have predicted that we have another 20 years or so of gold mining left. Of course, needless to say, once that happened it would dramatically spike the spot prices of gold.
However, new explorations continue to take place, as several countries continue to fund searches for new gold. China, the world’s largest consumer of gold is one such country. China recently discovered new precious metals deposits, valued at nearly $60bn near the shared border with its neighbour, India. However, China’s mining operations in the region could create border tensions between the two countries. On the other hand, mining company Polyus, from Russia claims that their 2018 output is likely to be at the topmost range.
Call our experts to know more about gold production
In this infographic, we have covered some of the significant gold mining projects across the world. China and Australia are the largest producers in the world, followed by the US, Russia, and Canada. Our team of experts can guide you on gold investing, how to generate good returns by investing in gold and when to buy and sell. For expert advice on gold investing, call 020 7060 9992 and speak to a member of our team, or drop us an email through the ‘contact’ section of our website.
Investing in silver is new to many. Even established gold investors may not have bought silver before. But that’s now changing, as we’re seeing just as many enquiries in silver as gold. So why are more and more people investing in silver?
Gold isn’t the only precious metal – Why you should invest in silver too
If you currently invest in a precious metal then it’s likely to be gold and with good reason. As the most popular of the precious metals, gold is recognised as a valuable commodity and is available in a range of formats and weights, which are easily tradable. Gold has historically been a reliable way to both protect and grow your wealth.
Silver’s the new kid on the block
But gold is not the only precious metal investment. Experienced investors know that, as with all types of investment, having all your eggs in one basket isn’t a good idea. It’s unlikely that all the shares in your portfolio are in one company, so why not consider diversifying your holdings in precious metals too? In fact, it’s not only us who are excited about the potential of silver. 5 years ago, 95% of our enquiries were for gold. Roll on to today, and our sales are now split 50/50 between the two precious metals. Metal diversification is a sound strategy for many reasons:
Silver’s historical position
Silver, like gold, has been considered a precious metal for hundreds of years and has been utilised as money throughout history. Its value is intrinsic, meaning that like gold, there’s never a shortage of buyers. As such, silver is a great vehicle for securing your wealth against threats such as volatility and for growing your portfolio.
Much of silver’s use can be roughly split three ways; between ‘silverware and jewellery’, ‘photographic’ and other ‘industrial’ uses. These are the key drivers of the worth of silver and why it has become such an attractive investment.
The use of silver, particularly in the photographic and technology fields, has been key to its rising value over time. In photographic materials, the silver can only be used once, meaning the volume of the available silver present on the planet is reducing every day. The technological uses for silver are naturally increasing, as more and more advances in technology are made every day – relying on silver for component parts.
Silver’s pivotal role in solar panels
In the manufacture of solar panels, silver plays a pivotal role. 90% of the structure of crystalline photovoltaic cells, which are widely used in the solar panels industry is made of a silver paste. When sunlight is received by the cells, a stream of electrons are generated. Silver is a metal with one of the highest conductivity ratios of both electrical and thermal energy. Therefore, silver is used to conduct the power out of the panels.
The solar industry alone uses 52.4mn ounces of silver, with each solar panel using around two-thirds of an ounce of silver, which is approximately 20gms. As the industry grows, with more and more townships across the world becoming more energy efficient and turning to green energy, the demand for silver will increase, as will its price. However, a reverse effect would also take place, as the rising price of silver is dissuading solar panel manufacturers from using too much of it in their operations.
Electronics is where silver really comes into its own
The use of silver, and its value, has changed over time but one thing is certain – the demand is growing and the stock of available silver on the planet is steadily decreasing. An increase in demand and a slowly diminishing supply, usually means one thing for prices..!
Silver, unlike gold, isn’t merely desired but essential for industry and commerce and its necessity has put considerable strain on silver’s supply thereby increasing demand for silver investments. Historically gold and silver used to trade at a ratio of 12:1 which meant it took 12 ounces of silver to buy 1 ounce of gold. Today – the ratio has widened and it takes 60 ounces of silver to buy 1 ounce of gold. Most commentators and analysts believe that as a result, silver bullion is massively undervalued with many predicting it could reach $100 an ounce in the next five years.
As silver’s use in industry increases many financial analysts, investing experts, and even geologists believe that a silver shortage is upon us. Infact the Silver Institute predicts that silver demand for industrial purposes will increase by 36% by 2016.
The demand for industrial silver went up a lot more, rising to 599mn ounces in 2017. A large portion of this increased demand came from the solar industry, as there was a 24% increase in global solar panel installations in 2017. Solar photovoltaic cells use a silver paste, thanks to the incredible electrical and thermal conductive properties of silver. Silver is also an essential ingredient for the manufacture of electronics, including electronics used in the automotive industry. The industrial demand for silver from the electronics industry alone consumed around 249.9mn ounces.
Here’s the best bit….
Silver-zinc batteries are increasingly being used by the electric car industry, which is also growing in leaps and bounds. Experts believe that by 2030, 25% of the global automobile industry will be electric. So, on the one side, we have increased industrial demand that seems to be increasing steadily over the years, clearly outpacing the production volumes. The leading countries across the world for silver production are Mexico, China, Peru, and Russia. Sadly, production volumes have been plummeting globally. Recently, the Peruvian government released a statement that declared a significant fall in silver production from mines in the country. In fact, the fall in production volumes is as much as 12%. So, you can see where this is headed. A scarcity of a much in demand resource, with the demand curve rising steadily over the years would eventually lead to the spot prices of silver skyrocketing. Current spot prices are at $16.58 levels for a troy ounce. However, many investors believe that prices are likely to reach $20 an ounce in 2018. Still, others believe that in time, silver could be as dear as $130 an ounce. Obviously, as we move into the future, investors who believe in the rise of silver, need to get in early in order to stay invested long term and maximise their gains from the difference in buying and selling price.
Silver is undervalued
The historical ratio between gold and silver is currently out of sync. Throughout history, silver has, on average, been around 10-15 times cheaper than gold. Right now this gap has widened so that 1 ounce of gold, for example, will buy an astounding 75 ounces of silver. Many experts have identified this significant undervaluing as a huge opportunity to purchase silver.
Why invest in silver coins or bars?
In addition, silver has many other strengths, making it a very worthwhile choice to strengthen your portfolio. People that ask themselves, “Why consider investing in gold?” end up considering silver investment. Consider the following benefits of investing in silver:
Low entry point– because of silver’s relatively low price (when compared to gold), it’s an attractive precious metal when either first investing in metals or when adding to an existing portfolio. As silver is much cheaper than gold it only takes a small price change to effect a large percentage increase in growth. It’s fair to say that consequentially – silver is more speculative than gold but together they provide a good balance within your precious metals portfolio.
Good ‘hedge’ against other investments– Silver is typically not linked to falls in the stock market or interest rates, so when stock markets fall or interest rates are low for example, your silver investment still has the potential to rise.
Likely to yield higher returns than cash deposits– with interest rates low, your returns may well be better than cash investments such as ISAs or bank savings. Like a bank though, your investment can be securely held by us, so there’s no need to hide your silver bars under your mattress!
Contacting Physical Gold to discuss silver investments
If you are investing in bullion coins or numismatic coins, we also have some great coin accessories that would help store your collection safely, without damage, in the event you decide to take delivery of your investment at your preferred location. In terms of delivery and storage, we have some excellent options, where you can choose not to take delivery of your purchases and opt to have them stored at our LBMA approved secure storage vaults, and simply receive the paperwork that entitles you to access them at any time you want.
We here at Physical Gold have recently been focusing our efforts on informing the masses about our great silver investment opportunities. In doing so we have created a new infographic called The Wonderful Uses Of Silver which details all sorts of intriguing facts and stats. For instance, did you know that early x-ray films all had a hint of silver in them? And that silver helps to protect spacecraft against the likes of space radiation? This useful material is more important than most people know, and there is much to be learned about its uses. Why not have a read to see what you can discover…
Silver basics one should know
With an atomic number of 47, the precious metal is instantly recognisable by its atomic symbol – Ag, which was historically adapted from the word ‘Argentums’, which is its Latin name. Silver has amazing conductive properties and has a moderate melting point. Infact, believe it or not, silver has a melting point of 961.8, placing the element right between Germanium and Berkelium. The metal has an atomic weight of 107.86. The discovery of silver was an important step for mankind and it was one of the early metals to be discovered, probably around 5000 B.C. Interestingly, the metal can be found in nature in its elemental form, as nuggets or sometimes as crystals. Electrum, a natural alloy found in the world, is actually an alloy of gold and silver.
Interestingly, the quantity of silver on Earth, when compared to gold is 17 times more and the precious metal is also a rare bird in the English language, as it appears that there are no words in the dictionary that rhyme with the word, silver.
Solar panels are constructed using crystalline silicon photovoltaic cells. Silver paste contacts are used by manufacturers, which are printed on these cells. Over 100 million ounces of silver are used each year by the solar energy industry. The semi-conducting layers of these cells use the energy from the sun to produce power. The industry uses another way to produce power, by using the reflective property of silver to reflect the solar energy. Collectors capture this energy and use salts for power generation.
Use of silver in electrical components
Silver is a metal with a very high rate of conductivity,
and this property is used by the industry to manufacture every kind of electrical component. From electrical switches to modern gadgets in the kitchen, almost all electronic devices are made using silver in one way or another.
Even mirrors are made of silver
The reflective properties of silver make it perfect for use in manufacturing mirrors. Many years ago, mercury was used to create a reflective backing on glass. However, due to the toxic properties of this element, it has long been replaced with silver by the industry.
The use of silver in photography
Traditional photography used silver halide crystals to create images. When these crystals were exposed to light, their patterns would register a change, which could then be used to develop a photograph. Of course, with the advent of digital cameras, this practice is now prevalent only in special situations where traditional photography is still in use.
Uses in the automotive industry
The super conductive properties of silver were put to use by automotive manufacturers in keeping our cars heated to a comfortable temperature. Silver is introduced inside the glass used for the windows in cars, which in turn ensures that heat remains inside the vehicle, keeping us warm during winters. Due to its high melting point, silver is also used to lubricate bearings inside the car engine.
Other interesting uses
The reflective property of silver is also used to shield spacecraft against harmful solar radiation. Silver is also combined with aluminium to form a very strong alloy that is used extensively by the air force.
Is the time right for gold and silver investing? It’s true that, at first glance, when looking at the historical price charts for gold and silver, they can look like a bit of a rollercoaster. This might lead you to believe that gold will never reach the dizzying heights it once did.
The price of gold reached its highest point in 2012 when it soared to a record high of £1,200 per ounce. The picture for silver investing is similar to current prices much lower than at its peak. This means the current levels of both metals offers great value. No-one should want to buy at or even close to the all-time high. Current prices for gold are around 20% better value than at its height, with silver an astonishing 60% cheaper.
You can view graphs illustrating past performance over various timescales, by clicking here. They make fascinating reading, though we would always stress that they should be considered in context and not in isolation.
2016 saw both the gold and silver prices record around 30% gains by year-end. And although it might not yet have reached the heights of 2012, gold enjoyed a continuous upwards trend, hitting a top point of £1,050 per ounce in July of that year. In Q1, The World Gold Council reported gold demand was up 21% to 1289.8 tonnes – the second strongest quarter on record. First-half gold demand was up 18% – the second strongest on record – with gold investment accounting for almost half of that demand.
Silver also went from strength to strength, reaching its highest price since January 2015. The US Federal Reserve’s decision not to change interest rates, together with no indication as to when they might raise them, encouraged people towards investing in gold and silver.
More subdued gains in 2017
Precious metals enthusiasts saw more modest gains the following year. Starting the year at £935/oz gold finished the year around 2.5% up at £960. During those two points, it spends 3 periods north of the £1,000 mark, peaking in September at £1,030. This coincided with a strong performance in the stock markets with the FTSE 100 rising 7.5% and the Dow Jones an incredible 24%. Generally, when stock markets perform so well, gold has the least interest and its price suffers the most. So it’s encouraging in the grand scheme of a balanced portfolio that gold still returned around the inflation rate during such a period.
What can we learn from that?
This demonstrates that while gold can act as portfolio insurance during economic downturns (usually appreciating by double digits), it still can act as a store of wealth in other years too. With cash deposits still paying well below the inflation rate in 2018, this simple achievement for gold shouldn’t be sniffed at. Essentially owning gold should be a long term strategy, as returns (and potential losses) can vary greatly from year to year. Trying to second guess the market and predict the performance is futile and relying on extreme luck at best. It’s always tempting to sell everything and only buy the investment that is performing the best at that time, in a hope to ride the gravy train. However, this strategy leaves you vulnerable to being hopelessly exposed to market corrections and change. Owning some gold along with stocks, bonds, cash and property, enables balance and more predictability.
….and silver? Has Bitcoin taken its mantle?
Silver experienced a poor year in 2017 with losses of around 3.5%. Some feel the price is being manipulated downwards by the huge banks which are looking to load up on the metal. If so, the price will inevitably bounce back with a vengeance when the banks want their holdings to increase in value. An alternative is that with stocks performing well under the new Trump administration and cryptocurrencies making millionaires seemingly overnight, silver simply hasn’t had a look in. Many have switched their attention from bullion to bitcoin. With the silver price so low and its huge potential for quick gains, it’s certainly been viewed as the exciting and go-to investment for those seeking significant price rises. With the likes of Bitcoin achieving this on a steroid level, the short term greed has switched all the attention away from silver.
Will silver regain its shine instead of Cryptocurrencies?
However, as we now know in 2018, cryptocurrencies are incredibly volatile, on the downside as well as the upside. For the novice investor whose head has been turned by tales of instant wealth, there are now almost as many stories of overnight bankruptcy caused by incredible price drops for bitcoin. This period (after their initial glamorous price growth) will likely sort the wheat from the chaff. Naive investors will perhaps start to reconsider the value of cryptos, deciding either that they’ve now missed the boat, or that the risk of complete loss is too great. For the more travelled investor, they already know that investing in cryptocurrencies is similar to betting red or black in the casino. There is simply nothing tangible behind their value, and while the blockchain technology has its merits and will no doubt perform a critical role in our futures, getting rich overnight from Bitcoin could be over.
For savvy investors seeking large gains, they’ll know that while silver and cryptos can be grouped as higher risk, higher gain asset classes, they are almost opposites. While the likes of Bitcoin may have no tangible or intrinsic value, silver is a physical precious metal. Its value can never fall to zero like Bitcoin and its value is backed by something tangible that not only can be used as currency but also has vast industrial uses especially in the technology sector. For this reason, the investors left standing after the inevitable Bitcoin massacre will no doubt seek out silver once again as the go-to sexy investment.
Current silver and gold value represent a great opportunity and potential
2018 has started in a rather dull fashion for precious metals. Prices are still around 20% below their historical peak, so it’s still a very good time to invest in both gold and silver. It just goes to underline that it’s a lucrative opportunity, with room for growth and the possibility of sharp spikes. As of March, returns for the year have been virtually flat for gold and 7% down for silver. Combined with last year’s silver price squeeze, it’s now looking like incredible value. It’s the ratio to gold, which averages 47:1 over the past century, now stands at a staggering 80:1. Surely silver investing offers vast upside potential.
Crucially, the influential factors which tend to increase the demand for precious metals, are still very much in place. Global markets continue to be unstable, rumours of another banking crisis persist and a housing market slowdown has already started. Combine this with heightened terror threats and rising demand from Central Banks for gold, and it’s easy to understand why the precious metals market still has plenty of wind in its sails.
The calm before the stock market storm
Stock markets have now enjoyed nearly a decade of
uninterrupted growth since the 2008 credit crisis. Recently the Dow Jones has received further boosts from the Trump administration. It’s tempting to leave as much money in stocks while they’re doing well as possible. Especially while precious metals are taking a breather. However, every market analyst will agree that a simple glance at historical performance will tell us that equity market bull runs cannot and do not continue forever. More pertinently, the most severe market crashes come after the longest a strongest bull runs, which inevitably fuel an inflating bubble. This is similar to the fact that San Francisco sits plumb on the San Andreas fault line. A glance at historical earthquakes will tell us that with the constant movement of the earth’s crust, further events are not only likely but guaranteed. It’s a case of when not if there will be another huge earthquake. Not only that, but when San Francisco is overdue a quake, just like the stock markets are now overdue a correction, then the expected magnitude of that impact is far greater.
Maybe I can simply leave all my cash in stocks and switch to gold when that happens?
The best policy is not to try and predict the future, as that’s just witchcraft! Instead, we should learn from the past and understand that just like the earth, the markets are constantly moving and predicting the moment of a big eruption is impossible. We’d suggest leaving money in stocks (even after they do fall dramatically as you won’t want to miss out on the recovery, however long that takes). However, we’d also insist on owning some physical gold and silver too. The most prudent strategy with timing when to buy precious metals is simply to buy now and wait. As long as you allocate a healthy percentage of your assets into the likes of gold, then you’ll be protected when the markets do crash. My little saying is that I’d rather own gold 6 months, or even 2 years before the market crash, than a day after. Because then it would be too late.
What else could push gold and silver up this year and next?
It’s not only the stock market which is vulnerable. There’s plenty of other elements in the mix which are either brushed under the carpet by authorities or simply under-estimated.
Interest rates and housing market
After an extended period of record low-interest rates
in most of the globe’s major economies, we’re now starting to emerge into a new phase. Base rates have already risen in the UK and are predicted to continue rising in 2018 from May onwards. Rates in the US have also been rising, at a slightly faster rate. Rhetoric from central banks is that increases will be modest. However, the huge danger is the impact even small increases could have on the average man in the street. In a period of incredibly low or even negative wage growth, one of the few areas that have papered over the cracks has been property. With house prices seemingly on an unstoppable journey to the stars, the property-obsessed UK public felt comfort knowing their prize asset was at least rising in value. With interest rates near to zero, borrowing has been super cheap. So most of us have re-mortgaged, unlocking vast fortunes to fuel either extravagant lifestyles, or at least pay for the bills during lean periods. This increased leverage now leaves us vulnerable to the very interest rate rises we’re seeing now. When the starting point is as low as its been (0.25%), it only takes modest base rate increases to have a huge impact on our monthly mortgage cost, especially when cushy fixed intro rate mortgages periods come to an end. Check out our investigation into the relationship between interest rates and the price of gold and silver.
…and the housing market has softened
Not only are our monthly mortgage costs increasing, but the value of our property has stopped rising, and started to fall. This is a consequence not only of the international market struggling, with wealthy Chinese and Russians previously fuelling UK price growth, but also over the swingeing tax increases brought in by the current Government which has increased stamp duty so dramatically. We expect that firstly, more house owners will fail to pay their mortgages as interest rates rise, leading to more downward pressure on house values. For those who do manage to survive as costs increase, they will have less disposable income (with wage predictions stagnant), which will impact the high street and service sector, further crimping stock markets. Higher interest rates also mean higher new borrowing costs, which deters investment in corporate growth. All this will put even more pressure on the already unaffordable rental market. It’s common to compare gold investment versus property, but both should play crucial roles in a balanced portfolio.
UK consumer credit bubble
With the pressures of interest rate and mortgage rises, the public’s other debts will also come under pressure. Two particular concerns are the car market and credit card sectors. Both industries are enjoying record high borrowing. However, as lenders feel the squeeze from higher rates and more defaults, we’re likely to see stricter borrowing requirements and higher rate deals. A record number of UK borrowers are currently on zero per cent credit card deals which are likely to begin to reduce in availability. People will then struggle to refinance their debt at anywhere near the levels they’ve been used to. In the automotive industry, a growing trend has been for leasing cars. Whether on outright monthly lease deals or borrowing with a balloon payment at the end, many drivers will struggle to continue financing their car. Certainly, the hunger for new cars every 2 to 3 years will likely diminish.
The technological age is slowing crushing the high street
Early 2018 has brought with it fresh casualties of the ever-growing high street demise. Toys R Us and Maplin have both gone into administration, while seemingly popular food chains, Prezzo and Jamie’s Diners are closing a large number of restaurants. Perhaps this doesn’t come as a surprise. You could argue that Maplin has always been incongruous and never really had mass appeal. While kids love the experience of Toys R Us, adults who buy the games are now far more likely to order from Amazon and benefit from lower prices and next day delivery. Either way, this trend of weeding out the weak, however large the company, is likely to continue as the public turn their back on the high street and embrace online shopping. The frightening consequence is the sheer loss of long term jobs. Automation is filling the role of so many which will have a long term negative impact on an already growing population. Read our blog on the future of gold in a cashless society.
Brexit, Trump and Russia
There isn’t enough time to cover every simmering possible global issue which could push gold and silver prices skywards. But certainly, a handful of other significant issues would be the ongoing threat to the UK from Brexit. Whether this has a direct impact on our economy, a slower longer-term influence or is simply negative to Sterling, this is one which will stay on the radar for a while to come.
Donald Trump hasn’t blown up the world yet, but who knows about tomorrow! None of us would be shocked if he develops his trade war with China, instigates a war with the likes of North Korea, or simply makes some terrible domestic decisions in the world’s biggest economy. Either way, in today’s ultra globalised economy, foreign issues have more impact on the UK than ever.
The recent tensions between Russia and the UK after the poisoning accusations could be a storm in a teacup. However, the Government’s strong condemnation of Russia suggests there could be a hidden agenda. With Putin now flexing his muscles, I’d rather own gold right now to provide diversification, just in case this escalates (especially as Russia have been stockpiling gold aggressively themselves over the past few years).
Long term view for gold and silver investing
The value of gold and silver may be volatile, but owning them as part of a portfolio reduces your overall personal volatility. They tend to act as a balance to the traditional paper assets (like stocks and shares), so when those markets fall, physical gold and silver have historically risen. The motivation for many gold & silver investors aren’t necessarily to time the market perfectly; instead, it’s to take a long term view to provide balance and protection to their overall wealth. This way, exact timing isn’t important, as the long-term hold should outperform any short-term price drops and still deliver portfolio insurance.
If you’re still unsure and concerned about timing, then our ‘Monthly Saver’ enables you to purchase regularly. You can set up to automatically buy a small quantity of gold or silver every month. This means that if the price does decrease from one month to the next, it benefits you, as your next purchase would be at a lower rate.
Over time, you buy each month at the various underlying prices, therefore averaging out the cost of your precious metals. It’s a great way to get started in gold and silver investing.
The main message is that it’s necessary to take the long-term view. As with any investment, prices will go up and down, but as these graphs illustrate, the rewards can be well worth it. If you’d like to find out more about this type of investment, why not Download our free guide to investing in gold and silver. We maintain gold and silver are still very good value and worth their weight in, well… gold and silver!
First of all, we’ll briefly explain what VAT is and when it applies. We then quickly move onto how this applies to purchases of precious metals, and then finally reveal some powerful methods of buying gold in the UK without paying any VAT at all!
What is VAT?
Value Added Tax (VAT) is added on to most consumer goods and services in the UK. The current general rate of VAT is 20% with some items being at a reduced or zero rate. This is added at the point of sale and the consumer will bear the charge.
Many food and drinks are zero-rated except alcohol, confectionery and hot food. Most cultural and leisure activities are exempt as are some health, education and charity goods and services.
VAT rules on silver purchases
If you buy any form of silver in the UK, your purchase is
subject to 20% VAT, regardless of purity and whether it’s a coin or bar. Despite this cost, physical silver investment in the UK has continued to grow in popularity, as analysts believe the silver price is severely undervalued.
Brexit caused the end of VAT-free silver in the UK
Prior to Brexit (31/12/2020), Physical Gold Limited were able to provide silver coins and bars without VAT. Sadly, the UK’s departure from the EU meant that the treaty which brought VAT-free silver ended.
Whilst we can’t provide silver VAT-free anymore we are still able to sell popular silver coins and bars at similar all-inclusive prices. We have made a number of changes to our silver business, which benefit the final price to our customers, these are:
Silver delivery – we now provide silver with no delivery charge. This is because silver is now delivered from the UK. Postal savings have been passed directly to customer’s
Reduced product range – we decided to reduce the number of silver products we sell. This means we buy fewer products, but more of them. In negotiations, we can bulk-buy these products, which means we pay less and pass this benefit on to the customer
Overall, these savings negate a lot of the increased price for VAT, so much so that the overall increase price caused by having to pay VAT is negligible. Additionally, we can say we are competitive with other UK dealers and our silver still represents great value for money.
Another benefit is that we can now accept mixed orders for gold and silver. You can now pay for your silver purchases by credit card up to £10,000 and mix gold and silver in the same order – offering you more flexibility.
Buying silver coins
We offer a range of bullion coins from 1oz Britannias and 2oz Queen’s Beasts coins to the most popular foreign silver coins. If you’re buying a large number of silver coins (such as silver Britannias) or looking to build a substantial holding over time, then don’t forget that any UK silver coins are also Capital Gains Tax-free to UK residents.
Buying silver bars
We are at able to deliver pure silver bars to UK addresses. You can benefit from the lower premiums of the larger silver bars, and buy silver bars delivered directly to your door.
3. VAT-Free Silver Bars (For Storage)
For some, while silver investment is a great idea, they don’t want to store the metal themselves. In this case, we provide an alternative solution for those wishing to buy VAT-Free silver bars for storage. Our silver bars are stored, on your behalf, in the Channel Islands. Keeping them offshore means your purchase is exempt from VAT as they fall outside of UK tax. With large bars available, you’re able to obtain tighter margins on your silver, while still being tax efficient
VAT on gold
This depends on what type of gold you buy. Since the 1st January 2000, the VAT Act 1994 exempts Investment Grade Gold from Value Added Tax. So as long as your purchased gold qualifies as Investment Grade, then no VAT will be charged.
There are a few requirements for gold to qualify for an exemption:
Firstly, it has to be in the form of a coin or a bar. For this reason, VAT is still added to gold jewellery. You should also avoid gold dust, gold ore and gold watches if you want to be tax efficient.
If you opt for a gold bar (such as 100g, 1oz or 1 kilo), the purity needs to be at least 995 thousandths. The good news is that a majority of gold bars on the market exceed this, at 999 thousandths gold, with the rest generally meeting the minimum requirement.
..and how about coins?
For gold coins, the purity target is lowered to 900 thousandths, meaning that any coin of 22 carats or higher will qualify. There are a few extra guidelines for coins – they must be minted after 1800, have been legal tender in their country of origin and not usually sell at more than 180% of the market value of its gold content. Essentially these additional rules exclude very old, obscure numismatic coins.
6 Hacks to buying the best value gold sovereign coins – Watch our video now!!!
If all this sounds complicated, don’t worry. We only sell gold coins and bars that meet these requirements and qualify as Investment Grade, so you’ll never pay Value Added Tax when buying gold through Physical Gold.
How can you take this a step further?
If you want your gold investment to be completely tax-efficient, then buying UK gold coins also benefits from being Capital Gains Tax-free. They already meet the VAT exempt criteria but are also tax-free upon sale due to their legal tender status. With each Sovereign, Britannia, special edition UK coins and variants of these, each coin possesses an actual face value. The Government can’t tax you on the movement of legal currency, so buying and selling UK gold coins is completely tax-free!
Here at Physical Gold we’ve introduced an incredibly simple product, specifically designed to help you, by taking the stress out of choosing the right coins.
If you’ve ever thought about investing in physical gold or buying gold online, you might have some questions, or you might be apprehensive because you don’t quite know what to buy. If so, you’re not alone.
Enhanced performance UK Tax-free coins
Called The Directors Pick, we scour the market to source Royal Mint issued, pre-owned, UK tax-free coins, and carefully hand pick a mixed portfolio of these Enhanced Performance coins especially for you. With our extensive network and buying power we can secure coins from sellers, auctions and the intermediary market. So you benefit from our years of specialist experience and expertise, at absolutely no extra cost.
These pre-owned Enhanced Performance coins have an additional intrinsic value, over and above that of their gold content; reflecting their added desirability and scarcity. This added value enhances the coins market value when the gold market rises and offers added protection when the market falls – providing the best overall value and reassurance if you’re just starting out or if you’re looking to own a collection of tax-efficient gold coins.
Why is our Directors Pick so popular with physical gold investors?
This is a popular product because we specialise and focus on UK gold coins that are
VAT-exempt and Capital Gains Tax free. This is due to their legal tender status, which means there’s no tax due on any gains made. We select high performing gold coins that offer diversity as well as security on your other assets.
Hand picked, guaranteed by our experts and tailored to your needs, the Directors Pick is designed to help you get started with your gold coin collection. Were also happy to explain the gold buying process, the economics behind the price of gold and even help you open a Monthly Saver account, if you’re interested in regular monthly savings.
So, whether you want your gold delivered right to your door, or stored in one of our secure storage vaults, our Directors Pick gold product provides you with high quality gold coins and specialist expertise, all focused on helping you build your gold coin portfolio quickly, easily and stress free.
With prices starting as low as £2,000 for the Directors Pick, we can create a package to suit your needs and budget.
Visit us at https://www.physicalgold.com/buy-gold-coins/gold-sovereign-coins/directors-pick to see how easy buying gold online can be!
What are the best investments of the past decade? We wanted to compare annual returns of the major asset classes over the past 10 years and then declare the top performing asset over the entire decade. What better way to illustrate this than the asset class decathlon! Each decathlon event represents returns over each of the previous 10 years.
Best Investments overall
Over the 10 year period, UK gold prices rose more than any of the other major assets classes. Its total cumulative was a whopping 132.91% significantly higher than the runner up – Bonds (62.27%) and third-placed shares with a reasonable 56.14% rise. This doesn’t necessarily mean that every decade will produce the same results, and macro factors will always have an influence on results. As a safe haven investment, gold is generally bought in times of unrest. It’s no surprise then that it was the best investment during the period which witnessed the invasions of Iraq and Afghanistan and the downgrading of the US Dollar after the Global credit crunch.
Gold’s overall victory is also reflected in its consistency. Our infographic illustrates the fact that gold was the best performing asset class in four of the ten years, equalled by Shares. The remaining 2 years were won by Bonds’ performance. Gold only experienced a loss during one of the ten years, again the best of all the investment classes.
As expected, cash remained in the middle of the pack throughout the decade when interest rates remained very low. This also reflects that cash represents a low risk/low reward store of wealth. In other words, you may not get huge returns but you won’t suffer losses either.
How can this help us invest
The research demonstrates that over the length of a decade, the various asset classes each have their moment. By sticking to just one or two assets, you risk missing out on some potential significant gains. As any decent IFA will tell you, diversification is the key to protecting your portfolio from large losses, maximizing returns over the long term and providing a more predictable return.
Unless you have a crystal ball, you have to be incredibly lucky to pick each asset class at exactly the right time to buy low and sell high. This risky strategy tends to mix some good years with catastrophic losses. Not the best ingredients for a balanced portfolio.
What does it tell us about gold investment
The infographic and results supports our view of gold investment. Firstly, it plays an essential and unique role in anyone’s overall investment strategy. After all, if you’d invested in a mix of shares, bonds, property and cash, not only would you have missed out on gold’s huge gains, but some years may well have wiped you out.
Of course, analysis of other decades may show a different overall winner of investment returns, with gold performing far less favourably. But, this only goes to demonstrate the need for a balanced investment strategy. Gold plays a unique role because it tends to perform particularly well during times of political and economic turmoil. Crucially, the other asset classes all seem to do their best during stable times. But if an event causes disruption, whether it’s an economic downturn, an act of terrorism, banking crisis, currency devaluation or war, then all these assets fall in value together. Leaving the investor with a major headache. By owning some gold as part of an overall strategy, your wealth is protected from this volatility. Rather than taking risks, owning gold actually reduced the overall risk and volatility of your portfolio.
If you have a large appetite for risk, it’s possible
you’ll be attracted to ‘get rich quick’ offers. Timing has to be perfect with these and you have to get lucky. Generally, you can lose all your money, but in the same respect, you can also double or triple your money in a very short period of time.
Gold should always be viewed as a medium to long term investment. The infographic supports this. While it performed impressively, it did fall significantly in 2013 after offering almost no return in 2012. It may not make you rich overnight, but investing in gold is a prudent investment, which can offer some balance with riskier short term opportunities.
Another important takeaway from this research is that gold beat the rate of inflation on eight of the ten years analysed. The best of any of the major asset classes. This supports the notion of gold investment as a store of wealth. It maintains your purchasing power over time and protects from the erosive qualities of inflation.
The final bonus which makes gold the best investment of the past decade is its possible tax efficiency.
Not only did it rise in value more than any other major investment, but it also did it tax efficiently. Tax free gold coins for example are VAT-exempt and Capital Gains Tax free. Outside of an ISA or Pension, the other investments struggle to be as tax efficient. And who wants to share their gains with the Treasury!?
Did you know that not all gold and silver performs the same? Your choice of dealer can directly impact the returns on your investment. So, what should you look for in a gold or silver dealer? In this short video, we explain why we’re one of the UK’s leading precious metal dealers and how we’re uniquely suited to help with your requirements, whether you’re an experienced investor, or just starting out.
Gold & Silver Dealer
Choosing the right gold or silver dealer can make all the difference, both when it comes to credibility & reassurance and also when assessing vital elements that can affect your investment return, such as coin selection & tax.
As industry leading, BNTA accredited gold-investment professionals, we specialise in helping both experienced investors – looking for gold and silver diversification, as well as those looking for the very first time, to own some gold of their own
We offer access to unique gold investment solutions, some of which are not available anywhere else, such as:
With a dedicated consultant to discuss your aims and objectives for your wealth and future, we’ll suggest the most appropriate options for you, bearing in mind the all important considerations around tax-efficiency.
Because of our industry reputation & size, we have significant buying power, which enables us to negotiate the best prices for you as an individual, before organising the purchase on your behalf.
We can then either securely store and insure the gold for you or simply send the gold, safely insured, directly to your door.
When the time comes to sell your gold, we even guarantee that we will buy it back from you, meaning you never have to worry about how liquid your investment is.
As an accredited business, with unique investment solutions, offering dedicated consultants and a buy back guarantee, investing in gold & silver has never been easier, more secure or more suited to you than with Physical Gold.
When making an investment, it’s just important to know how easy that asset is to sell, as it is to buy. We promise to repurchase any metals sold by us, regardless of how much time has lapsed since purchase.
Whether you’ve bought gold or silver, coins or bars from us, we’re able to offer all our clients a Buyback Guarantee. This provides you with the knowledge and comfort that if you need to quickly sell any, or all, of your holdings, then we’ll facilitate that for you.
Obtaining the best price
In fact, we go a step further, as we believe our role in buying back is as important as our guidance when selling. We give you a sell it now market rate for all your gold or silver if you need to sell immediately. Alternatively, if you’re able to wait, we make a note of your intention to sell and try, as brokers, to match with buyers over the coming weeks. If there’s a solution that works, then you’ll obtain an enhanced price, as we’re essentially cutting out the wholesale element.
you own something real, with a tangible value. But often, selling that physical asset can be more challenging than offloading its paper or electronic counterpart. Fine wine, art and property are such examples. They may be appealing investments, but you only realise your profit if and when you’re able to sell that asset.
For this reason, it’s important to have an exit strategy in place even before you buy the asset. How many times have you heard of someone holding out for a price on their property, only to be told it’s only worth what someone will pay.
The best starting point is to ensure the asset you buy is as liquid as possible. For example, if you buy an investment property, ensure you don’t narrow your possible future buyers, by purchasing an obscure property like a converted lighthouse. The reason 2 bed flats are such popular investments, is because they’re easy to sell, thus achieving the best possible price.
Gold investment and propertyare comparable in this way. It’s crucial to buy gold or silver which is world renowned and desirable. At Physical Gold, we only sell very liquid, investment related gold and silver products, providing the backbone of our buyback guarantee. We don’t offer obscure collector’s pieces, as we believe liquidity plays a key role in maximising returns.
What selling options do I have?
If you purchased well-known, liquid coins, then you have various selling options. Certainly, if they’re pre-owned coins they may possess an additional value over and above their gold content reflecting their additional history, relative rarity and desirability. If you’re able to sell these coins off piece meal, to private individuals, you’ll obtain the best possible price, as you may be able to find investors and collectors willing to pay higher premiums for certain coins.
At the opposite end of the spectrum, there’s the convenience of a local jeweller. The compromise is that the jeweller is likely to melt the metal down for jewellery and pay you way below market rate.
Selling back to a leading dealer like Physical Gold, is a perfect choice for convenience and value. You’re able to sell all your metals immediately and have cash in your bank within a day or so. We re-sell your gold and silver as pre-owned stock, so our prices reflect that.
If you wish to discuss selling your gold or silver, call us on 020 7060 9992 of email firstname.lastname@example.org.
It’s a not so well kept secret that certain gold and silver coins are not taxable for Capital Gains Tax. That detail can have a huge impact on your profits.
So we thought we’d provide a run down of what you need to know.
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax levied on individuals and corporations when they sell/dispose of an asset and make a profit (a capital gain). For you and I, that means a tax on any profit you make from selling a chargeable asset such as shares or a second home. The tax only applies once the particular asset is sold and a profit has been made, rather than when the asset is still held.
The tax is calculated annually on an individual’s net gains. So for instance, if you sell 2 different shares during the year and one makes a loss while the other profits, your annual capital gain will be the net profit of the two.
The current rate of Capital Gains paid, varies between 18% and 28%, depending on whether you’re a lower or higher rate taxpayer. But don’t be surprised if the UK Government decides to increase the tax as high as 40-45% in the near future, in an attempt to raise taxes stealthily.
While most investments will be taxable, the good news is that there are a few exceptions to the rule. Any gains made on an ISA or pension are protected from CGT. Additionally, selling premium bonds, UK gilts, your primary residence, or a private car are all tax-free. Oh, and betting, the lottery and pools also escape incurring CGT.
Is there CGT on gold and silver
Just like any other capital asset, selling gold or silver at a profit can incur CGT. However, we just hate the idea of our customers having to share any profits from gold or silver, if they don’t have to.
Two of the most popular ways of avoiding CGT are by buying UK tax-free coins and Pension Gold.
Coins produced by the Royal Mint, which qualify as legal tender, are not subject to CGT as the Treasury cannot tax the movement of legal currency. This covers Gold Sovereigns, Gold Britannias, Silver Britannias and some other limited issue Royal Mint coins. There is no upper limit either, which is why so many customers focus on these coins as a tax-free store of wealth.
Our Pension Gold product has also proved to be a popular way of benefiting from rising gold prices without paying tax. Any profits from gold bullion, held within your Self Invested Personal Pension (SIPP), are sheltered from CGT.
If all this sounds complicated, don’t worry, we specialise in guiding you to the most tax-efficient gold and silver. Just call us on 020 7060 9992 and a member of our team can suggest coins which qualify as CGT-free.
Can I sell other gold or silver without paying CGT?
Everyone in the UK is allowed to make a profit on sales of £12,300 each tax year without paying CGT. This means if you buy modest amounts of taxable gold or silver, say £5,000; even if the price has doubled when you come to sell, you’ll still fall within your tax-free annual limit.
However, if you also need to sell other taxable assets, such as shares, in the same tax year, you’ll probably wish you owned more tax-free gold or silver.
With this in mind, you could sell small values of your taxable gold or silver so that you fall within your allowance. The annual calculations run from 6 April to the following 5 April, so you could sell some coins before year-end and some just afterwards.
With Covid-related national debt at record levels, we wouldn’t be surprised to see the tax-free allowance reduced or even cancelled altogether.
The good news is that we focus on selling gold and silver coins which will never be liable for Capital Gains Tax. So if you’re wondering if silver or gold is the tax-free investment you’re looking for, you should look no further than the UK legal tender coins. Both gold and silver versions are very popular, partly due to their tax-free nature, but also because they’re very liquid. So investing in them means they’re easy to sell at optimum prices, without sharing your profits with the Treasury.
With the invasion of Ukraine by Vladimir Putin and the crackdown on tech companies in China, there are 87 fewer billionaires in this year’s Forbe’s billionaire list, with 2,688 billionaires making the 36th-annual ranking in total.
Delving into the billionaire list, our research shows not many reports focus on the achievements of millennial billionaires in particular. According to Beresford Research, millennials in 2022 are aged 26-41, where 122 millennial billionaires made the Forbes billionaire list this year.
To understand how millennials have made their fortunes despite being so young in age, we have analysed the latest data from Forbes to assess which industry has the most millennial billionaires.
The industry with the most millennial billionaires
Our research shows technology is the industry with the most millennial billionaires, with 43 in total. The combined net worth of millennial technology billionaires reaches $239.1 billion.
No. of Millennial Billionaires
Collective Net Worth of Millennial Billionaires (USD$ billion)
Finance and Investments
Media and Entertainment
Fashion and Retail
Food and Beverage
Metals and Mining
Construction and Engineering
The finance and investments industry has the second highest number of millennial billionaires, with 21 in total. This is followed by media and entertainment where the billionaires have a collective net worth of $85.1 billion.
Construction and engineering, and energy each have just one millennial billionaire. Interestingly, these are the two industries with the eldest millionaire billionaires.
The industries with the youngest millennial billionaires
The healthcare, and metals and mining industries have the youngest average age of millennial billionaires, at 34 years old. The millennials in these industries combined have a net worth $14.7 billion.
No. of Millennial Billionaires
Collective Net Worth of Millennial Billionaires (USD$ billion)
Metals and Mining
Finance and Investments
Fashion and Retail
Food and Beverage
Media and Entertainment
Construction and Engineering
There are two 26 year old millennial billionaires in the Forbes 2022 billionaire list. One is Henrique Dubugras, a billionaire from Brazil who operates in the finance and investment sector, and the second is Katharina Andresen who is located in Norway.
The 10 richest millennial billionaires in the world
The richest millennial billionaire in the world is Mark Zuckerberg, with a net worth of $67.3 billion. Second to Mark is Zhang Yiming who operates in the media and entertainment industry.
“Our research shows there has been a drop in billionaires making the Forbes billionaire list this year, but an increase in the number of millennial billionaires.”
New entrants to the list include Rihanna, who is credited as a ‘self-made’ billionaire, at 34 years old. Rihanna has a net worth of $1.7 billion. Her success is attributed to her cosmetics line Fenty Beauty, her lingerie company Savage x Fenty, and her career as a chart-topping musician and actress.
Mr Fisher continues; “Rihanna is an example of the importance of diversifying your portfolio. This is particularly key against a volatile market since it can reduce losses incurred. For example, investing in commodities which are in high demand during periods of economic turmoil can help investors weather the storm.
“We have seen external factors impact billionaires this year, where the number of Russian billionaires has dropped due to the war. There have also been drops in the number of billionaires from China where there has been a crackdown on technology companies. Despite this, technology remains the industry with the highest number of millionaire billionaires, with 43 making the list this year.”
Methodology for research
The millennial billionaire research was undertaken by Physical Gold through an analysis of the Forbes World’s Billionaire list, to see how many billionaires there were aged 26-41.
The results were tallied for each included industry and were thus ranked by the industries that currently have the most to least number of millennial billionaires.
For millennial billionaires who accumulated their fortune from more than one sector, they were excluded from the research so it could be a fair and definitive assessment for each included industry in the research.
We’re only half way through 2022 yet, already a record amount of physical gold, gold exchange-traded funds and other exchange-traded products have been purchased by investors this year. This caused the gold price to rise to near all-time highs of over £1500 an ounce this March, a level not seen since August 2020, during the height of the COVID-19 pandemic. There is no doubt why. Looking back to the start of the pandemic, gold was a strong performer throughout 2020 and it had the highest return of any major asset class, returning close to a 25% yield.
However, 2022 will be a different year. Despite gold’s strong recovery from its 13% dip in 2021, unprecedented global factors still pose significant risks to the economy. The sluggish recovery from COVID-19, Brexit ramifications and now the European energy crisis from the conflict in Ukraine mean that uncertainty is rife. Now, mid 2022 as the UK government collapses, investors are still facing down inflation as one of the biggest risks to their savings. Is gold once again the safe harbour to ride out the financial storm?
How has gold performed historically during times of high inflation?
Gold’s performance over the past 50 years tends to support the theory that gold is a hedge when inflation is significantly higher than any target set by Westminster.
According to a study by the World Gold Council, over the last half a century, gold has returned 15% per annum on average when inflation is higher than 3%, compared to just over 6% per annum when inflation is lower than 3%.
How does inflation impact the economy?
Enter May 2022. Consumer inflation reached its highest level in more than four decades due to rising fuel prices and food costs. Pressures resulting from inflation have a wide range of economic ramifications. Increasing the cost of retail goods and services, inflation first reduces purchasing power.
Due to increased risk, borrowing costs may also increase as interest rates rise. Furthermore, inflationary pressures can fuel further inflation, resulting in a feedback loop.
As people spend faster in order to reduce the amount of time they spend holding depreciating currency, the supply of money exceeds the demand, causing the currency’s purchasing power to fall even further.
In a nutshell, money buys fewer goods and services, decreasing the incentives to save cash and encouraging diversification into other assets or instant spending.
Assets, however, can retain their value more easily. Cars (which have seen 28% increase in prices this year according to Autotrader), houses at 12%, and gold with 20% increases from June 2021 to 2022. In the chart below the last few crises are apparent, 2008 subprime mortgage disaster and more recently 2019-2022 with the triple whammy of Brexit, Covid and Ukraine.
Gold Price per Oz (£) vs UK Inflation (%) 2002-2022
Why does inflation increase gold prices?
Inflation increases the price of consumer goods, resulting in the pound losing value. As inflation rises, the price of gold denominated in pounds increases.
Because investors convert their cash holdings into gold to protect their assets against inflation, gold is a good hedge against inflation. It is possible that an increase in investor interest will lead to a bull market in gold until the inflation effect subsides.
Our previous articles have discussed the advantages of gold as an investment and its importance as a means of protection from inflation. Creating more fiat currency lowers the value of each pound in circulation when inflation occurs.
Gold prices during the 2007 financial crisis
Taking a step back just a few years more, we can see how gold reacts to another financial crisis. In our chart we see a steep increase in the price of gold during the financial crisis that was arguably started with the failure of a variety of investment banking firms from March 2008. Over the course of this period, gold prices first rose, then fell by about 25% during the first few months. Prices then went on to regain all losses within a short period of time and rally to historic highs. Short term the market was very volatile, longer term for anyone holding gold from that time it was a great investment that outperformed other assets.
What makes gold a safe hedge vs inflation?
There is a good reason for the reputation of gold as a hedge against inflation. Since fiat money (paper money) decreases in value during times of inflation, people turn to the assets that have been used as money throughout history – gold and silver. Among the former metals, gold has the reputation of being the ultimate inflation-hedge (silver is regarded as a primarily industrial metal today).
Therefore, inflation and the gold price exhibit a strong positive relationship. As seen throughout the last 25 years in the gold and inflation chart above, gold rallies when inflation rises. An increase in the money supply leads to an increase in the price of goods and gold is a liquid asset.
While some people are seasoned gold investors, gold investment in the UK can be a whole new world for many. In the past decade, gold investment has evolved to become far more mainstream, but most investors remain novices. As such, we regularly help our customers answer questions they have about the market, buying process and how to sell.
One thing’s for sure, you shouldn’t be embarrassed or shy to ask these questions. You need to feel comfortable and understand any asset if you’re considering investing your hard-earned cash. As leading gold investment UK specialists we’ve heard all possible questions many times.
But what are the most common questions we receive?
Type of gold
Clearly, there’s a choice when you come to buy your gold. Questions range from whether you should buy bars or gold coins, 22 or 24-carat gold, or whether various year coins are worth investing in over others. It’s certainly worth doing your research independently as well as seeking advice from experts. Together you should be able to make the right choice. Gold should always be seen as a medium to long-term investment, so there’s no rush to buy. Make sure you’re happy with the type of bar or coin you wish to buy before taking the plunge. While we at Physical Gold focus on selecting the best type of gold for investment purposes, other gold merchants are simply shops and might try to persuade you to buy a type of gold which they have in stock and can’t shift.
The simple answer to these questions is that the best type of gold will vary from individual to individual, which is why our consultation process starts from the beginning and looks at your specific motivations and needs.
Is timing important with gold investment UK?
The golden question (if you’ll pardon the pun!), is what the prospects are for gold in 2022, and whether now is a good time to buy. Be wary of any gold dealer who guarantees returns. No-one has a crystal ball. As mentioned previously, the exact level at which you enter the market isn’t crucial, as gold generally gains in value above the rate of inflation in the long term. However, a good dealer will certainly help you buy in a trough to pick up that extra bit of value and also help you select gold which offers value at that time of purchase. For example, it may be a bad time to buy Maple Leaf coins as there may be a shortage leading to inflated premiums, whereas other coins may provide a buying opportunity as they’re currently trading cheaper.
One shrewd method of eradicating the timing issue is to drip-feed money into gold or split your investment into 2 or 3 tranches. Therefore you iron out some of the volatility and secure various prices, hedging your bets.
Are there tax-efficient ways of buying gold?
If an investment is the main purpose for buying gold, then it’s not only your buy and sell price which contributes to overall returns. Tax plays a crucial role also. Everyone wants to know the best ways to invest in gold. Seeking guidance from a reputable gold dealer will help select tax-efficient gold as gold investment in the UK has several tax advantages. Anyone who’s watched James Bond films may dream of owning huge gold bars. But selling them may incur 28% Capital Gains Tax. Others may not realise that 18-carat gold attracts VAT, whereas 22-carat and 24-carat coins and bars are exempt. UK Tax-free gold coins are usually a safe bet for cash investors, and Pension Gold is a great method of adding bullion to your retirement plan while avoiding VAT, CGT and receiving tax relief on your purchase.
How do I store gold?
Questions range simply from where to store gold, to the exact requirements and costs of each specific option. Certainly, if you’re seeking security and protection from your physical gold, then allocated and segregated storage is the only sure way to be safe. Ensure you receive the correct paperwork to prove your ownership. We’ve heard of horror stories of where gold bought and supposedly stored, wasn’t available when clients wished to taken delivery of that gold. Other rumours suggest that unallocated gold accounts will crumble if too many investors wish to sell at the same time.
How do I buy Gold?
Start off be contemplating what you’re trying to achieve from your investment. Is your primary motivation to maximise returns, or is it to buy small pieces of gold to pass onto grand children one day.
Your investment time-frame and appetite for risk may also help determine whether to go for older numismatic coins or simple bullion coins or bars.
We provide guidance as to which choices will best suit your needs. And for those who feel they want a mixed and balanced tax free portfolio, we offer a service to create a portfolio for you.
Research by Digital Ethos and Physical Gold – the UK’s leading provider of gold and silver coins and bars – has found that online searches for the investment in gold have surged since 24th February 2022, the day Russia launched a large-scale invasion on Ukraine.
We have witnessed a 400% increase in search interest compared to the last three months – with peak interest on the day of invasion. Search interest peaked at 100 on the day of the invasion, a huge increase on the 20-25 average of the past three months.
There has also been an 80% increase in gold price searches in the UK and across Europe over the past week.
Here, we have analysed how gold searches increased throughout Europe in the days leading up to the invasion and shortly after.
Daily search demand for gold over the last three months
The UK saw a 40% increase in search interest around investing in gold and where to buy gold over the last five days, as well as a huge increase in searches for mining company shares.
Daily search demand vs gold price
Last week, Daniel Fisher, CEO, Physical Gold said that demand had “gone crazy” since the Ukraine crisis escalated. As more investors pile into gold investing, the market broke past £1,404 an ounce last week and has now surged to around £1,450/oz, with Mr Fisher explaining people didn’t want to be left out now the price was moving quickly.
With the invasion of Ukraine, the biggest assault on a European state since World War Two, spot gold prices jumped around 2% to $1928 at Monday’s opening in Asian trade.
The UK is Europe’s fifth most gold-hungry nation
During the last week leading up to the invasion the UK had the fifth highest search interest in “buy gold” phrases. Italy led the way with the most interest, followed by Austria, Germany and France.
Portugal, Finland and Norway were the least concerned with “buy gold” phrases in the lead up to the invasion of Ukraine.
Physical Gold has seen a particular rise in investors new to gold looking for a safe investment option. Markets are facing a turbulent time from the economic fallout with investors scrambling for safe havens such as gold and this can be reflected in the huge increase in search volume.
“This time of year we see more and more people looking to the precious metals market not only as a safe haven investment but also for savvy Christmas gifts.” Daniel Fisher, CEO, Physical Gold.
Buying gold for Christmas
The precious metals market is braced for sales to rise dramatically over the next few weeks, as an increasing number of new investors look to give the gift of gold this Christmas.
Last Christmas, Physical Gold – the UK’s leading provider of gold and silver coins and bars – saw a 53% increase in customers buying Sovereign coins and 5g gold bars, which are designed as gifts to help people save for their future.
In 2020, The Royal Mint saw a 510% surge in gold sales in November and December, compared with the year before. Daniel Fisher, CEO, Physical Gold, said: “This time of year we really do see more people looking at the precious metals market, not only as a safe haven investment but also for savvy Christmas gifts.
Gold preferred to gift cards
“Once a high street gift card might have done the trick, but today there may not be a more savvier Christmas present to buy than physical gold; to invest in your future, a family member’s future or to boost your own investment portfolio.”
Recently there has been a huge uptick in the sale of precious metals, noticeably among young adults, and that has been evident in Physical Gold’s recent sales. According to the Royal Mint, the number of customers purchasing gold aged between 22 and 37 increased by 32% in 2020, as the coronavirus pandemic put precious metals under the spotlight.
Daniel Fisher continued: “At Physical Gold we are hearing from plenty of millennials stuck for Christmas presents, coming to us with a genuine interest in purchasing precious metals; be that for friends, family or partners.
“Lately, too, there has been an increase in older generations purchasing physical gold. A number of our customers have hinted at these investments being put aside for their children’s and grandchildren’s future.”
Gold price spikes with demand
Customers are being warned not to leave their Christmas gold shopping until the last minute as gold prices are expected to rise in December. In 2020, the gold price dropped significantly in November, losing almost 10% of its value. Prices then rose around 3% again leading up to Christmas day and the New Year period. The pattern was similar in 2019, with 3% depreciation in November, followed by 2.5% recovery in December.
Daniel Fisher, says: “Our historic prices would seem to suggest that the best time to buy Christmas gold is around the end of November and early December.
“Whether you are an experienced gold investor, or looking for a unique Christmas gift, Physical Gold offers its customers a simple, transparent and cost-effective route to holding top-grade investment gold in your hand.”
As a present, gold or silver has the advantage of being a tangible gift that someone can open at Christmas. One of the big advantages of precious metals is that there are numerous products you can invest in, depending on what you feel comfortable with. The most obvious is simply to buy physical gold, either in the form of gold bars or coins.
Physical Gold has an extensive portfolio of gold and silver bars and coins in a variety of forms and denominations in the UK. Whatever your reasons for buying precious metals, Physical Gold Limited offers a safe and secure way to buy gold and silver online.
Holding gold in your portfolio might be one way to invest and protect your purchasing power, but there is now an alternative asset that has soared in popularity within recent years: cryptocurrency.
Daniel Fisher, Managing Director, Physical Gold, believes we may now be living in a world where investment in both gold and cryptocurrencies can form a stable and speculative portfolio for investors.
Crypto & Gold’s relationship
Quite often I am asked the question: ‘Should I invest in an emerging asset like Bitcoin or a traditional safe haven like gold?’ As the UK’s leading provider of gold and silver coins and bars, it should be in my best interests to say ‘gold, of course!’ but, driven by changing markets and unsettled Covid-19 economies, I’m becoming increasingly aware of the pull for investors in cryptocurrency – which in turn, is being invested into the precious metal market.
For hundreds of years, gold has dominated the safe-haven asset arena. Some investors like to think of gold as insurance for their money. If there is a concern about a nation’s currency, or if there’s an economic collapse, people usually turn to gold because it benefits in times of crisis. During recessions and times of global turbulence, gold can commonly return more than 30% in a year.
But for those seeking the possibility of mega gains, crypto is tempting many new investors.
While Bitcoin was launched just over a decade ago, cryptocurrencies are beginning to achieve widespread recognition. Historically, those who did not want to ride stock market swings to their full extent invested in gold. However, the exponential growth and increasing popularity of cryptocurrencies over the past year has sparked the interest of many investors.
John Carter, founder of Simpler Trading, says “gold has over 5,000 years of history on its side and isn’t going anywhere, which means it is super safe.” He’s right; gold is valuable as a material for consumer goods and it is scarce. Regardless of demand, gold supply remains low. It cannot be manufactured like a company issues new shares, or a federal bank prints money. Measured against highly volatile cryptocurrencies, gold certainly offers more stability.
Cryptocurrencies fluctuate violently – the rarity and lack of a central authority contribute to this as well as popular culture. Both political and social trends influence cryptocurrency to a higher degree than gold, making precious metals a far safer option. And, while gold prices have experienced volatility similar to stocks in the short term, over time, the precious metal’s value remains stable.
The reports of gold’s demise have been greatly exaggerated. Cryptocurrencies are certainly a legitimate asset and have the potential to be a true “store of value” – joining a select group of assets, commodities and currencies that can be saved, retrieved and exchanged without deteriorating in value. However, gold has at least a 5,000 year head start as a widely-accepted, global medium of exchange and value, and the gold market enjoys great depth and liquidity. The total amount of physical gold held by investors and central banks is an estimated $3.7 trillion.
A match made in heaven
Although some cryptocurrencies have experienced meteoric rises fueled by speculators, having exposure to both gold and cryptos makes sense as our idea of money moves into the 21st century.
Undeniably, there has been clear evidence of a shift in the market. As this new crypto-sector evolves, Physical Gold has seen incredible growth in the “pair trade” between gold and cryptos – investors who swap their digital coins for physical gold and silver, and sometimes back again.
We knowthat diversifying a portfolio can help mitigate risk and potential loss. Today, most investors embed this tactic into their investment strategy, with many arguing that cryptocurrencies and gold are actually the perfect match for your portfolio.
Although Bitcoin doesn’t have age on its side, its soaring popularity reflects genuine investor interest. The crypto revolution has led to an explosion in both the number and value of other digital currencies. Cryptocurrency promises potentially high returns and diversification, but at the cost of security and investors still view precious metals as the stable value store during turbulent times.
If you’re looking for a safe-haven asset that is negatively correlated to other assets, gold has an important role in the stability of your portfolio as a “buy and hold” investment. It also acts as a diversifier, inflation hedge and capital preserver. All of these benefits can result in positive returns over time.
The case for Bitcoin is speculative given that it doesn’t have much utility yet. It is, perhaps, a gambler’s playing field – which for many investors is an intriguing and exciting prospect, but, by also investing in gold they can sleep easy knowing they have their gold in their pockets, while also taking a venture in the cryptocurrencies market. While many crypto projects will fall to zero, physical gold bars and coins will always have an intrinsic value.
The best way to minimise that risk is to use a trusted dealer. Physical Gold offers a convenient and efficient way to buy silver and gold, online with confidence that your purchase is protected by a 3D secure authentication payment system.
In the coming years, we can expect cryptocurrencies to remain subject to more booms and busts, but gold will always be on hand to offer a way of protecting your wealth in a post-Covid-19 world.
Personally, it makes sense to buy both. An investor’s appetite for risk will determine how their money is split between the two asset classes. Diversification is key no matter which route you take. Adding cryptocurrencies to physical bullion can offer security and speculation to your portfolio. So maybe, as we move into our new-normal, now is the time to stock up on both and join the many investors who are privy to this dual investment.
If you’re looking to make the switch from crypto to precious metals, Physical Gold has a variety of gold bullion bars and coins that you can invest in, ensuring your portfolio is safe and stable amidst an ever-changing and volatile market.
The phrase we hear more often than any is; “Is now a good time to buy gold?”. I’ll address that in this update.
One good phrase for timing the gold market is; “Its not the timing of the market, but time in the market”. Trying to buy at the bottom and sell at the top may sound like a wise strategy, but in reality it’s impossible and can lead to reducing your returns and security. The fact is that holding gold over the long term has proven over the years to provide a secure storage of wealth and outperform inflation.
But I don’t want to just beat inflation, I want big returns…..
It’s human nature to want to beat inflation by a large margin and gain more substantial returns. So timing in and out of the market plays a role in achieving this.
While it’s impossible to predict the future, despite many so-called market experts making gold price predictions, timing is about stacking the odds in your favour. This means you look at market fundamentals and choose to invest in assets which look most likely to perform well.
While allocating your money into different asset classes is always recommended, it’s fair to say that now seems like a good time to buy gold.
Because gold has such a long history, we’re able to see how gold has performed before to help predict how it might perform over the next few years.
The gold price has almost always risen in times of severe economic downturns.
Are we heading into an economic downturn?
Even before the pandemic, markets were overheated and global debt at record highs. Since Covid took hold, Governments around the world have opted to print more fiat money to support their suffering communities in the form of furlough support. Now, nearly 2 years on from the start, there seems to be a lethal cocktail mixing which could lead to the mother of all recessions.
The following ingredients are now in play;
Inflation is rising quickly around the world. This is expected when Quantitative Easing programs around the world have been operating at full tilt. Increase the supply of a currency, and it’s value will fall. But we’re also witnessing inflation from broken supply chains. Petrol, building materials, electronic components for cars, food, carbon dioxide, the list goes on. They are all contributing to prices rising at alarming rates. Consequence; Money in the bank is losing value every day. The cost of living is rising. Interest rates will rise soon, increasing mortgage payments for many.
Tax hikes are being put in place to try to reduce (or more realistically stem) the spiralling debt. This can be in the form of increasing National Insurance, reduced tax free thresholds for taxes like Capital Gains, and reduced welfare. Consequence: Less disposable income for the average person means economic growth will be strangled
Continued restrictions are dampening trade. Travel limitations and business restrictions are preventing businesses getting back to anywhere near full capacity. High streets are quiet and shops are closing. Furloughing has ended so the safety net is now gone. Consequences: We’re likely to see a spike in companies going under and individuals losing their jobs
Equity and property markets will likely fall in response to negative growth, poor company performance and less ability to afford to move home.
Continued uncertainty will dampen consumer and corporate confidence. With further spikes in Covid cases, potential further lockdowns and possible ‘long-Covid’ consequences, companies will limit investment and consumers spend less.
How is gold supply and demand at the moment?
During the height of the pandemic, we saw enquiries increase around 700% year on year. That initial rush has calmed, but demand from new investors now seeking the security and protection gold offers as a safe haven, continues to grow. Overall demand remains above pre-pandemic levels and we expect this to rise as recession kicks in.
Institutional money will also increase gold holdings as many competing asset classes suffer. They will look to move allocations out of stocks, bonds and cash, and into gold.
And gold supply….?
Supply of new coins and bars is managing to keep pace with demand. However, due to very few gold holders wishing to sell, we still see huge shortages in the secondary market. It has now been 2 years since we saw decent amounts of sellers in the markets. With the looming economic difficulties ahead, I can’t envisage this changing anytime soon. Premiums on many gold coins are increasing.
Where is the gold price?
As of the time of writing (November 2021), the gold price is moving upwards. It remains more than 10% below it’s all time high in 2020, but has gained around 8% in the past month, as momentum builds.
This was expected as we moved out of the furlough support and inflation began to take hold. While we can’t predict with certainty where the gold price will move in the short term, it seems that now represents good value.
With all these elements working together and interest rates likely to rise for the first time in a decade, it seems like now is a good time to be buying gold.
During the last decade the Bank of England has increased its Government debt from £200bn to over £800bn as a result of its Quantitive Easing Program . The aim of the program, to stimulate demand for goods and keep inflation low during and post the covid pandemic has been hindered by rising energy prices in addition to supply shortages and bottleneck issues due to Brexit.
With inflation still rising (from 2%-3.1%) and the bank expecting it to reach 5% early next year, this is not good news for the consumer. High inflation erodes purchasing power, so it will cost more to buy the same things. We’re already seeing prices for fuel, building materials and food rising, demonstrating how the scourge of inflation affects everyone, regardless of background or buying habits
Protect your wealth with gold during these uncertain economic times.
More money printing on the cards
There has been much talk recently of the Bank of England printing more money in an attempt to stoke the flames of recovery. The British Chambers of Commerce have put out a plea for the Bank to inject a further £50b into their Quantitative Easing (QE) program.
This program already stands at £200b, and many speculate that this size will grow considerably over the coming year as the Bank seeks ways to fend off a double dip. With the UK debt being the number one priority we will all see our tax bills rise and Government handouts dwindle as George Osborne attempts to rein in spending.
So what does this mean to the average man in the street? Surely any cash injections will be beneficial and help keep the economy bubbling while we tackle the huge debt mountain.
In the short term, the QE program may well be disguising the depth of the problems we face. I see it as a sticky plaster over the gaping wound which our excessive borrowing has inflicted. The main problem in the medium term of simply printing more currency is high inflation.
By injecting more money into the economy, we are helping devalue our own currency. The last country to use QE in a major way was Zimbabwe and they now have inflation well over 1 million percent! This means its people struggle to carry enough currency to even pay for a loaf of bread.
The danger in the UK is the combination of the QE with the record low interest rates and already simmering inflation levels. With inflation already over 3% during the worst economic downturn of our generation, just imagine where it will be once they QE kicks in and we start to emerge from depression. The difficulty is the lack of control we have over cost push inflation. With populations and consumption increasing, natural resources come under further pressure. Commodity prices are helping push up prices of goods and stoke the flames of inflation.
With savings rates at banks usually below 1%, the value of your money is diminishing day by day. If inflation hits double figures, the pace at which your savings depreciate will increase considerably. Many people will see their hard earned money and kid’s inheritance being able to buy less and less.
Protect your wealth with gold
Many of these savers are now moving some of their Sterling based savings sideways into gold. This commodity has always historically been seen as a great hedge against inflation, and unlike Sterling you cannot simply print more of it! As a precious metal it needs to be discovered and mined and World Gold Council stats show that new discoveries and supply are low, helping to push its value higher.
Only time will tell if we see further Quantitative Easing and high inflation in double digits, but it makes sense to prepare for the possibility considering all the factors point in that direction.
More than a decade on from observing a gradual move towards gold as a savings vehicle, we’re seeing the theme become more mainstream.
Interest rates have remained at record lows, meaning bank savings for UK savers yields near to zero.
With supply chains deeply impacted by Covid and Brexit, supply-push inflation is increasing rapidly. Combined with the catalyst of global Quantitative Easing, inflation is mounting a charge upwards.
In reality, this means that leaving money in the bank in 2021 and 2022, returns far less in interest than the current inflation rate.
Add in the very real fear of a global banking crash, and many more people are looking to diversify their savings into precious metals, in order to protect the buying power of their money. We expect to see this theme continue as the world suffers the economic consequences of the pandemic.
Bank savers switching to gold
London, October 14 – Physical Gold Limited, a gold bullion dealer based in the City of London, today reported a massive rise in the number of investors switching out of bank deposits and into solid gold.
With UK interest rates at an all time low, returns on deposit accounts and cash savings are significantly below the rates achieved in the past. In fact many bank savers report interest rates below 1%, even before savings tax is applied.
Traditionally a safe haven to park cash during economic or political turmoil, deposit accounts are now deemed to offer less preservation and protection to savers’ money. The credit crunch has seen banks widening the gap between where they are willing to lend money and pay bank savers. For the latter group, this has meant record low returns.
These poor returns are further threatened by the looming possibility of high inflation. With the framework of record low interest rates, relentless public spending, and the unprecedented move by the Bank of England to print £175bn of new money with Quantitative Easing, the eventual emergence from recession could see the onset of inflation. This would further erode the value of savings, whereby people could see their money able to buy less and less as time goes on.
In an interview today, Dan Fisher, CEO of Physical Gold Limited said:
“There is a growing concern about a currency crash, both in Dollars and Sterling. Gold has protected against the scourge of inflation throughout history and has proved to be the ultimate safe haven asset.”
A new, but very real risk associated with bank savings is that of Counterparty Risk. With many of the High Street banks everyone has grown up with now being bailed out by the UK Government, and examples of overstretching such as Northern Rock, it now means savers have to worry if their money is safe at all. With only £50,000 protected in the UK, any money above this is exposed to the underlying bank’s Counterparty Risk.
Switching money into physical gold coins and bars eradicates any such exposure altogether. The precious metal is independent of any corporate or Government policy, and by its very nature as a physical asset, its value cannot fall to zero. In fact the underlying $ gold price has soared over 200% in the past 5 years alone.
Unlike with bank savings, investment into certain gold coins is totally free from tax, so any gains made on the investment can be kept rather than shared with The Treasury.
Physical Gold Limited has seen many everyday people switching some of their savings into gold and reaping the benefits of the comfort and returns it can provide. Many savers are even contributing regularly as a savings scheme, to gradually build up a golden nest egg.
One of the most common questions I hear is from keen investors wanting to know the best gold coins to buy as an investment.
The most important thing people seem to overlook is the ease in which you’ll be able to sell the coins. It sounds obvious, but so many buyers focus purely on trying to get as much gold for their money when they invest that they forget to consider the liquidity of the gold.
Liquidity makes the best gold coins
Remember that your profit is only realised on physical gold when you actually sell the coins at a profit. So when buying coins your primary focus must be on choosing well-known coins in desirable condition. So please don’t be tempted by an obscure coin just because its £10 cheaper than its globally renowned alternative. With this in mind, any of the well-known bullion coins are a safe bet. These could be Sovereigns, Britannias, Krugerrands, Eagles, etc. You can find a comprehensive list with thorough descriptions at Bullion coins.
A novice should never try to be too smart by delving into the world of numismatic or historical coins. These generally present high potential profit, but also large losses for those without market experience. Proof coins should generally be avoided by the gold investor as you won’t necessarily get the full premium back that they command.
For very modest investors it can be fun to select a variety of bullion coins for your portfolio, perhaps choosing some Sovereign coins with an interesting background or coins with beautiful designs.
This is a series of 11 one ounce 24 carat gold coins (also produced in silver and fractional versions), which are limited in issuance. In contrast to the Britannia or Sovereign bullion coins which are unlimited and mass produced, the Queen’s Beasts coins have been released coin by coin, every 6 months. Once a particular version is all sold, they’re not produced any more.
This relative scarcity, combined with a degree of collectability, has pushed up premiums on these coins far quicker than standard bullion coins.
While the first 8 coins in the series already command high prices, the most recent 2-3 coins are still being produced, albeit not for long. Therefore, premiums on the most recent releases are still only slightly higher than the standard Britannia. While there’s no guarantee that their prices will mirror the earlier coins in the series, there’s a good chance.
However, for those UK investors considering a more sizeable investment you must consider factors such as tax. Capital Gains tax was recently increased for higher rate tax payers in the UK to 28%. That means that if you sell your gold coins at a profit exceeding your annual limit (currently around £12k) then you’ll pay away almost a third of that excess to the taxman. Any other assets you sell in that year will use up that £12k limit too. So if you sell shares or an investment property and make a profit, you’ll no doubt be paying CGT on all your gold profit!
The great news is that with some careful planning and help from a reputable gold dealer, you can source tax free gold coins. Britannia, Sovereign and Queen’s Beasts coins are all free from Capital gains Tax for UK residents due to their status as legal tender. Quite simply the taxman cannot tax the movement of legal currency. For this reason, together with the fact that these two coins are amongst the world’s best known, most UK investors are best off investing into these tax free gold coins.
The most important rule with gold coin investing is that everyone’s situation, needs and motivations for buying differ, and so the best gold coins to buy may also vary. This is where the real value of a knowledgeable gold dealer pays dividends!
Inflation is now rising rapidly as a consequence of;
Massive global Quantitative Easing as a reaction to the Covid pandemic, devaluing fiat currencies around the world
Supply squeeze inflation, caused by a combination of Brexit and Covid-related supply chain issues. With panic buying rearing it’s head, the UK has experienced shortages of petrol, food and toilet rolls.
In 2021 and beyond, gold is becoming a mainstream way of moving money out of the banks to achieve protection from the erosive power of inflation.
With Bank of England policy maker Adam Posen stating the case to print more money, it reinforces the case for owning physical gold.
The Bank of England have already printed £200b of Quantitative Easing (QE) in a desperate attempt to support the UK’s floundering economy. There is now talk within the central bank to extend this by another £50b and potentially open the doors for a further £200b of ‘funny money’.
But what does all this mean to you and me? Well, the last country to use QE in this way was Zimbabwe and they now have over 1million % inflation rates. That means its people literally cannot carry enough money to buy a loaf of bread! Now I’m not suggesting for a moment that we will see similar levels here in the UK. However, this untested act of desperation combined with the record low interest rates can provide the perfect cocktail for an inflationary environment. I can definitely see inflation hitting double digits in the UK in the next few years as the economy eventually heats up.
For the average person that means that their hard earned cash will lose its buying power. If wages don’t increase by 10% or more, then we will all be worse off. Our savings in the bank which receive 1% or less interest now will be losing value day after day.
That’s why I feel it is the proactive and prudent saver who looks to shift a proportion of their savings sideways into physcial gold. Why expose yourself entirely to Sterling, its probable weakness and inflation? Surely its wise to spread your eggs into various baskets and the gold basket is the safe haven asset which protects against both inflation and deflation.
It is policies such as QE which reminds us all that its always worth having a little gold in your portfolio as we never know what the world will look like tomorrow. Certainly we can never safely predict where the central banks will decide to stop.
While ETFs have provided an accessible way for investors to gain exposure to the gold market there are many fears circulating about their security and integrity. For starters, the fact it is a structured paper asset that not everyone fully understands tends to defeat the object of owning a simple tangible asset like gold. So many investors have been stung over the past 5 years investing into asset-backed securities that were rated AAA by the credit rating agencies, only to see them downgraded to junk status overnight when everyone realised that the subprime mortgages they were linked to would not payout. It transpired that many very sophisticated investors never really knew which assets the bond was linked to or understood their lack of protection against such defaults. So are you more comfortable understanding the risks of holding gold coins or gold funds or ETFs?
Press reports are speculating that only 10% of the traded ETF value is backed by actual gold. With a distinct lack of auditing, its difficult to know for sure what the exact figure is.
Jefferey Christian of the CPM Group confirmed that gold is leveraged around 100:1 at a Commodities Futures Trade Commission (CFTC) Hearing on March 26, 2010. This means that there are around 100 claims for each ounce of gold in existence and so not enough gold to be delivered to everyone who has been promised paper gold.
So the question remains would you be able to access the value of your ETF if half or more of the investors decided to withdraw at the same time?
The term counterparty risk has become far more used and relevant over the past few
years. This term didn’t seem relevant to bank deposits a decade ago it went without saying that leaving savings in a high street bank was safe. But things have changed dramatically. Now we’ve seen our major high street banks on the brink of collapse. Who would have believed me 15 years ago if I’d have predicted that RBS, Nat West and Lloyds would be mostly Government owned?
The 2008 credit crunch saw bankruptcies to seriously major corporations from General Motors to Lehman Brothers. I saw many friends who had built up shares in Lehmans over many years of work and anticipated those stocks providing their retirement. No-one could have predicted that they would lose value so quickly and Lehman would go under.
We then saw the next phase of counterparty risk with Sovereign debt. Investors who thought they were taking on very little risk by investing in Government bonds faced the very real prospect of not being paid out in full. Countries such as Ireland, Greece, Portugal and Spain need help from the EU and IMF to repay their debts. There is every chance that bondholders will not receive all the capital back.
And now, in the new Covid world, Government debt is at record highs and corporations are struggling to adapt and survive under the new world parameters.
With physical gold, there is NO counterparty risk. It doesn’t matter if a Government fails to repay bonds, a corporation goes bankrupt or even if the gold dealer you bought the gold from ceases trading. You will always have the physical asset to do with as you like.
By investing in gold mining stock, ETF or Gold funds each poses some sort of counterparty exposure and a threat to the value of your asset. Remember paper gold is a promise to pay, not the real thing!
3. Risk Profile
If you’re considering a choice between mining stocks and physical gold, its crucial to realise that these are different asset classes with entirely different risk profiles. Firstly, investing in mining stocks means your investment is linked to the performance of one company. As a paper asset, if that company underperforms, or even worse goes bankrupt, there is a chance that your investment becomes worthless. The value of gold coins and bars can never fall to zero or anywhere near because of the intrinsic gold content. During times of global economic turmoil mining stocks and bullion perform quite differently. Terror threats, currency depreciations, huge unemployment, record deficits and banking crises don’t provide conducive conditions for equity markets, which is why we’ve seen more and more people fleeing to the safety of gold bars and coins. Generally, while mining stocks have the potential for impressive returns they tend not to outperform physical gold during times of crisis such as the recent credit crunch. During sharp market declines such as the 1987 stock market crash, mining stocks become correlated to the broad equity markets rather than the price of bullion.
4. Comprehensive Insurance
If the reason you want to invest in gold is for portfolio insurance then make sure you have a Comprehensive policy! Everyone knows that gold provides security against economic and political unrest, making it the perfect safe haven asset in the current world in which we live. In that case, you want this wealth protection to be thorough. By investing in paper gold its like buying an insurance policy with get-out clauses. In other words, it doesn’t provide full coverage. There are still risks attached such as counterparty risk. By investing into physical gold, its like having the most comprehensive insurance available, putting your mind at rest that no matter what the next financial headline is, your physical gold holding will provide the necessary balance.
5. Tax Efficiency
In the UK, there is the opportunity to own physical gold coins which are completely tax-free. All investment grade gold is VAT exempt. You pay no income tax while holding the gold and UK coins such as the Britannia and Sovereign are Capital Gains Tax-free due to their status as legal tender. Compare this to paper gold such as a mining stock or gold funds where you’ll have to pay income tax on any dividends and capital gains tax if you sell the shares at a profit. With CGT now up to 28% for higher rate taxpayers, that’s nearly a third of your profits!
Accessibility in times of crisis is crucial. After all, gold should act as your crisis hedge. Over the past month, we’ve read about the attempted ink-cartridge bombers and MI5 revealing renewed threats to the UK, France and Germany. The Eiffel Tower has been evacuated twice in recent months. If one of these attempts gets through and the financial system collapses for a week or so how easy is it to access funds through your gold ETF, mining shares or Gold funds? By holding the physical metal itself, especially in the form of globally recognised coins, you hold the ultimate liquidity.
With central banks around the world still printing QE money going into 2022 to support their Covid-affected economies, the value of fiat currency is diminishing. Signs of inflation, possible interest rate increases and tax hikes, suggest to many experts that a global recession, the size of which we’ve never known, is upon us.
It’s no surprise then, that investors are increasingly turning to gold to provide some diversification and protection from the coming economic storm. But if most people are asked which gold coins to buy, they will be stumped.
The Krugerrand coin is one of those coins which most people, even my grandmother, have heard of and this is for good reason. For many, it represents one of the best choices of gold in which to invest your hard-earned money.
A South African coin first minted in 1967, the intention was to lure global investment into
buying gold coins from South Africa’s rich gold reserves. Up until recently the Republic was the number one producer of gold and has only just been overtaken by the Chinese powerhouse.
To appeal to the investment market it was the first coin to contain exactly 1oz of pure gold, ensuring a straightforward marketing proposition compared to the likes of a Sovereign which contains 0.2354oz. Interestingly this fixed gold weight rather than a fixed face value (like most other bullion coins) meant that the Krugerrand coin represented a convenient store of wealth regardless of inflationary levels.
Krugerrand coin most common globally
Despite no face value, the coin is legal tender in its home country and is therefore minted in a durable alloy mix. Its overall gold content is 22carat or 91.67% pure as the gold is alloyed with copper to provide resilience and maintain its integrity. This is one of its major selling points now. With approximately 50 million in circulation, it represents one of the most active secondary markets in gold coins and a vast majority of the Krugerrands we see of 30 or 40 years old are still in fantastic condition.
Indeed due to the huge number in circulation and its global recognition, the depth of the Krugerrand’s liquidity is only matched by that of the British Sovereign, a coin that has built up its liquidity over many more years. There are more Krugerrands in circulation than all the other gold bullion coins combined. As an investment into a physical asset, this is very important. Just like when buying and selling a house, it is not only the price you manage to purchase the property at but also the sale price which will determine your profit. If you buy a house for a great price but it’s on the main road and appeals to a very niche market, then it is more difficult to sell and the eventual sale price will inevitably be affected. The same goes for gold. Buy a Krugerrand and you’ll be able to sell the coin easily at any time, maximising your chances of securing a good price.
Incredibly by 1980, the Krugerrand coin accounted for 90% of the gold coin market. It’s a telling recognition of its success that it has spawned so many other copycats worldwide including the Canadian Mapleleaf in 1979, the Australian Nugget in 1981, the American Eagle in 1986 and the UK Britannia in 1987.
So the Krugerrand is a very liquid coin, easy to buy and sell and it maintains its condition well. But how does it’s price compare to other 1oz bullion coins? From what we see at Physical Gold Ltd, the Krugerrand offers amongst the best value of ANY 1oz gold coin. Due to its resilience to scratches, I’d recommend buying second-hand coins rather than the most recently minted. Like a new car’s premium, it’s almost always better value to buy a ‘nearly new’ version. Brand new Krugerrands can be 3-5% more expensive. I’d also try to steer clear of the smaller half, quarter and 1/10th ounce versions as premiums rise with each smaller coin. I’d also avoid Proof versions of the coin. Although pretty, I’m not convinced you’ll receive the same premium that you paid for the coin when you come to sell. Your best bet is to stick with the better value bullion version.
The only potential drawback I see for UK investors as that of Capital Gains Tax. Like a majority of other assets, any profits on Krugerrands have to be declared and are liable for tax of up to 28% if you breach the modest thresholds. Now, this may not be an issue if you only buy a handful of Krugerrands, have no other assets to breach your tax-free threshold or, the sin of all sins, decide not to declare the sale to HMRC.
However, for those playing by the book who invest £10k or more into gold coins, the last thing you’ll want to do is give almost a third of your profits back in tax. For this reason, we always prefer mixing Krugerrands with a portfolio of coins such as the UK tax free coins – The Sovereign and Britannia. This way a shrewd investor can dispose of these assets strategically so they never pay any tax at all!