Value of gold bars
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When most people think of gold, they imagine the classic gold bars from films. But how much is a gold bar actually worth?
In this video, you’ll discover the 5 proven factors to calculate the value of a gold bar. By the end, you’ll learn how to buy and sell gold bars at the optimum price.
1. Gold spot price
The starting point with calculating the value of a gold bar is the current spot price. This is a moving gold price, displayed in ounces and grams and in various currencies. This isn’t the price where you can buy and sell gold but instead acts as a benchmark to calculate prices. You can see live prices at the top of websites like our own and historical price fixes on the LBMA website.
It may come as no surprise that gold bars are minted in a large array of sizes and weights. The classic brick-like gold bars we see depicted in the media are known as Good-Delivery bars and weigh a whopping 400 ounces! These bars are worth several hundred thousand pounds each and is primarily traded between central banks.
Retail sizes are also commonly available from 1g to 1oz, 100g, up to 1kg. The next step to calculating the value of a gold bar is to multiply the spot price with the weight. So if the spot price of gold is £30/g and the gold bar weighs 100g, we simply multiply £30 x 100g = £3,000.
3. Buying or selling premium
As I mentioned at the beginning, £3,000 isn’t the price you can necessarily buy and sell the gold bar at. In fact, you’ll pay slightly more when buying the bar and receive slightly less when selling it. This is known as the bid/offer spread. An easy comparison would be when obtaining travel currency. The Sterling Dollar rate may be quoted at 1.33, but you can buy Dollars at 1.30 and sell at 1.35.
Because gold bars have no historical value, the premiums you’ll pay above the spot price are modest. Coins, on the other hand, can be worth more per gram due to a historical and scarcity value. We study the merits of gold coins versus gold bar investment, focussing on five key factors.
Higher quantity and size reduces the premium
The general rule of thumb is that the larger the gold bar, the lower the premium you’ll have to pay. Similarly, buying a large number of bars will also reduce your price per gram.
The bar brand can also impact the value when buying. Certain top-end Swiss brands will be more expensive than a near-identical bar of the same weight, manufactured by a lesser-known brand.
Focus on value, not brand
My advice is to buy the best value bar as long as its gold content is 99.99% pure.
When selling a gold bar, you’ll likely receive a slight discount to the spot price value, usually around 2%.
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4. Tax impact
One overlooked aspect of a gold bar’s value is Tax. Gold bars are VAT-exempt so tax doesn’t play a role in its value when buying. However, when selling gold bars, it’s possible any price you receive will be taxed for Capital Gains. This will only apply if you’ve made more than £12,000 profit on the sale when compared to the price you paid. Even then, tax is only applicable to the profit above this threshold. It’s also possible to sell some gold bars before the tax year-end and some afterwards to spread your profit and avoid incurring tax.
If you are considering purchasing a larger quantity of gold and want to remain tax-efficient, then UK coins could be a better option than gold bars due to their CGT-free status.
Clearly, the value of your gold bar will vary with time. While the gold spot price moves, so will the value of your gold bar.
But to really maximize the price at which you sell your bar, or minimise the price at which you buy, you should consider market sentiment. If you can buy when the market is very quiet, there’s every chance that gold dealers will reduce premiums or offer sales to move stock.
In the same way, if you can sell your gold bars when market demand is high, then dealers may improve the prices they’ll pay, as they know they can re-sell them quickly.
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