Industry News

World Gold Council: Gold Investment Digest and updated Investment Statistics

World Gold Council

Key findings from the latest Gold Investment Digest show that:

  • The gold price rose by 29% in 2010. By comparison the S&P Goldman Sachs Commodities Index (S&P GSCI) rose by 20%, the S&P 500 rose by 13%, the MSCI World ex US Index increased by 6% in US dollar terms, and the Barclays US Treasuries Aggregate Index rose only by 6% over the year.
  • Gold price volatility at 16% on an annualised basis in 2010 remained consistent with its long-term trend. By comparison, volatility on the S&P Goldman Sachs Commodity Index was 21% during the year, based on daily returns.
  • Gold benefited from the continued contagion from European sovereign debt problems as investors’ hedge their currency risk.  This was evidenced by strong gold buying in ETFs, bars, coins and other investment vehicles in Europe and other parts of the world.
  • Investors bought 361 tonnes of gold in the ETFs the WGC monitors in 2010, bringing total holdings to a new high of 2,167 tonnes, worth US$98 billion. This represents the second largest yearly inflow on record, after the 617 tonnes of net inflows experienced in 2009.

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  • During the first nine months of 2010, global jewellery demand totalled 1,468 tonnes, increasing 18% from the same period during 2009. Gold demand for technological and industrial applications continued to recover during the first nine months of 2010, registering a 19% increase over the same period in 2009. Complete full-year data for gold demand will be available in February when the World Gold Council publishes its Gold Demand Trends report.
  • Central banks became slight net buyers of gold for the full-year, after two decades as a steady source of supply to the market. The IMF successfully completed its gold sales programme of 403.3 tonnes without disruption to the market. The Fund sold 200 tonnes to the Reserve Bank of India, 10 tonnes to Sri Lanka, 10 tonnes to Bangladesh and 2 tonnes to Mauritius, all in off-market transactions executed at market prices. The remaining sales were conducted through on-market sales within the ceiling set by the third Central Bank Gold Agreement (CBGA3).

A glut of gloomy news reinforces the case for gold

Case for gold

In the past few days economic figures have reminded us of the rocky economic road ahead and the continued need for some wealth insurance. This has strengthened the case for gold as the best way of achieving this portfolio protection.

Firstly UK inflation rose sharply in December to 3.7%, way above expectations. This has mostly come from the huge increases in energy prices. This now puts UK inflation higher than that of hyperinflation prone Zimbabwe’s CPI at 3.2%, thus making a mockery of long standing commentary in the press that it was ridiculous to compare Britain’s inflation problems with that of Zimbabwe.  This month saw the well publicised VAT increase begin which will further fuel UK inflation. Here at Physical Gold, we’ve long been concerned about the possibility of high inflation in the UK due to the dangerous combination of record low interest rates and Quantitative Easing.

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After these inflation figures were releases the markets reacted by starting to

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price in interest rate rises as early as the Spring. However, Ernst & Young has warned that any such increase would be premature and put the UK’s economic recovery at risk.

Next up was some unemployment figures. The total has now hit 2.5m after a 49,000 rise. Perhaps most alarmingly for the future is that youth unemployment (16-24 year old’s) increased to the highest levels since records began.

National Debt passes £1 trillion

Finally, somewhat slipping under most people’s radars due to the inflation and unemployment figures, was the news that UK national debt has now surpassed the £1 trillion mark. Just as scary is the pace at which this debt continues to rise – £7,000 every second!

So if you’re honest with yourself and take a hint from the above figures, you’ll come to the conclusion that we’re in this squeeze for a while to come. So with gold providing the balance your portfolio needs in these circumstances there’s no better time to invest in some physical tax free gold coins.

The fact that the gold price has done so well over the past few years means it’s predictable in its nature. With inflation and unemployment struggling, this is the perfect case for gold to continue outperforming every other asset class.


Tesco gold buying is a great indication for us all

Multi-tasking Tesco

Tesco have recently announced that they are entering the lucrative and sometimes unscrupulous scrap gold market. You will now be able to take your unwanted gold jewellery into selected stores and be able to sell that gold for cash.

Of course the practise of pawn brokers and more recently the multitude of cash for gold companies is nothing new. However, Tesco are the first big name retail brand and certainly supermarket to become involved.

But what can we derive from this unusual foray into the gold market? Well, undoubtedly Tesco are one of the most respected and powerful companies in the UK. They have diversified into clothes, electricals, financial products and many other areas. It’s right to assume that anything Tesco turns its hand to is an area of huge potential profits.

So the very fact that Tesco is very keen to buy your gold should indicate that unless you have to sell, you too should be buying gold. Most market analysts see the price of gold continuing its march upwards over the medium term.


If you have scrap gold to sell then Tesco may be a good option. They’ve promised to beat their main rivals with the price they’ll pay for your old earrings. But that’s not saying much as I’ve heard reports of the ‘Cash for Gold’ type companies offering 10-30% of the true value of your gold.

Your best bet is to shop around and even take your gold into a local jewellers for their price. If its gold coins or bars you’re looking to sell then avoid these companies altogether. You will receive far better value from gold dealers such as ourselves where you’ll achieve nearer the actual gold value for your gold rather than a third or quarter of the value offered by scrap merchants.

Overall though, unless you have to sell, keep hold of that gold as the price is set to soar this year and beyond.


Worried about today’s VAT increase? No need – investment gold is exempt

VAT increase

With the UK rate of Value Added Tax (VAT) increased today to 20%, most purchases will instantly become more expensive. In the investment world, the level of VAT charged on an asset can seriously affect returns. For example, the full VAT level applies to the purchase of silver coins and bars meaning the metal has to rise by 20% in value before you make any money (not to mention the huge bid/offer spreads of up to 50% which apply to silver).

Investment gold

However investment gold is still the only precious metal with an official HMRC VAT exemption. The term ‘investment grade’ gold means gold of at least 22 carats in purity in the form of a bar or coin. As long as you stick to these parameters, you’ll pay no VAT whatsoever. Here at Physical Gold Ltd we ONLY deal in investment-grade gold as we always focus on getting our customers the best returns possible. Steer clear of gold nuggets and gold dust as both of these fall outside the HMRC guidelines.

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Generally all the main 1oz bullion coins, Sovereign coins and assayed gold bars will be of investment grade.

The current VAT exemption could be lifted at any time but once you’ve bought the gold tax cannot be applied in a backdated nature.

So while everyone worries how the VAT hike will make life that bit tougher, why not capitalise on the exemption for gold and spread some of your risks. And don’t forget if you buy UK coins such as Britannias or Sovereigns, they are Capital Gains Tax-free too, so you’ll pay no tax when you buy them and no tax on any profits you make!

Insider's Guide to gold and silver