Methods for investing in gold UK

Published On: January 13, 2020Categories: Alternative Investments4.6 min read

Gold is a widely-recognised safe haven for investors which provides hedge against turbulent economic times. Apart from this, the yellow metal has high traditional value in terms of investment option and savvy investors are aware of the importance of gold as an investment. Gold forms part of any well-balanced portfolio as it provides wealth diversification. That is why investing in gold UK is so much common among investors, especially among those who look for increased stability for their investments.

Ways for investing in gold UK[optin-monster slug=”z0dpnwjsixpzcdk8vqmh-2″]

Storing gold in physical form: One of the most popular ways to invest in gold is by buying gold bars, gold sovereigns, dublooms, pieces of eight or even sequins. Buying physical gold allows buyers to take hold of gold in its physical form. However, investing in gold UK in this way may involve safety issues as investors need to keep the purchase securely, either at home or at the storage facilities, which may carry a charge in return for storing the metal securely in vaults.

Physical gold can be bought either through a traditional dealer or through online dealers. The popularity of online dealers has increased over the recent times, but investors should take into consideration a number factors before choosing an online dealer for buying the precious metal.

In the UK, sovereign and Britannia are among the most common ways to buy physical gold, partly due to the fact that coins are not subject to capital gains tax. It should be noted that all gold coins are equal, so the price also depend on the demand for the specific date, design and weight of the coin. Alternatively, investors can buy ingots, but they are required to pay capital gains tax on any gains. It’s difficult to assess the precise cost of investing this way, but dealers make their money on selling gold to investors for a premium and buying it back at a discount, so investors may lose 3-5% of the value this way.

Investors should also figure in the cost of storage when calculating their investment. The minimum storage cost is usually £10 per month.

There are a variety of different gold coins minted, popular options include Sovereigns and Kruggerands and Maple Leafs. A QE2 mixed years Gold Sovereign would cost an investor £305.54 on 3 July 2019, says The Gold Bullion Co, while a one ounce Kruggerand would cost £1,158 according to Bullion By Post.

Gold exchange-traded funds

Another way of buying gold is through exchange-traded funds or ETFs. These are listed on the stock market which track the price of gold. ETFs are the cheapest way for investing in gold UK. These are bought and sold in a similar way to shares, can be held in ISA, and many are even backed by actual gold. However, a broker fee is involved when trading shares, including those related to gold. But there is an upside to it as the fee involved is only a few pounds and it is a fixed amount, irrespective of the transaction volume. By buying the precious metal through ETFs, investors need not worry about finding a reputed dealer, storage costs or the large transaction costs. However, investors cannot take the physical possession of the gold when investing through ETFs.

Russ Mould, investment director at AJ Bell, says: ‘ETFs spare investors the costs and inconvenience associated with issues such as storage and insurance when it comes to holding physical gold coins or bars and offers exposure to the gold price.

‘The trackers will move pretty much lockstep with the underlying metal price, although this does mean that they can follow it down as well as up.’

Investors have the choice to choose between trackers which own the physical gold to provide performance and those which use futures contracts and derivatives instead. ETFS Physical Gold or iShares Physical Gold, for example, own the metal while ETFS Gold ETC uses derivatives. Another popular gold ETF is ETFS Gold Bullion Securities (GBSS).

Online bullion dealers for investing in gold UK

Investing in gold UK through online bullion dealers is an attractive option for investors if they are not concerned about actually holding the physical gold with them. This is a much cheaper way of investing in gold UK and involves less hassles compared with holding actual gold in hands. Gold bought via this method is safe as it is held in secure vaults and investors do not have to worry about the security of their possession. Much like investing in gold UK through ETFs, investors need not worry about the security of their investment which involves paying for the storage costs.

By investing in gold UK through this method, investors can buy and sell the precious metal easily in any quantity they like and the rates are far closer to the current price. Another advantage of investing in gold UK by accessing the services provided by online bullion dealers is that the transaction is completed much faster compared with that when investors hold the physical gold. While buying and selling gold stored and managed by investors on their own may involve a lot of hassles and take a longer time to complete the purchase or sale, completing transactions via the online dealers is fast. Investors can buy and sell their possessions almost instantly by signing up at dealer websites. Moreover, payment cards such as MasterCard provide the facility to its users wherein gold can even be used to make payments just the way payments are made through any other payment card.

This is achieved by linking the bullion to the payment card which allows for using gold for actually making payments in any amounts anywhere that takes MasterCard. However, it has its own downsides. First major dealers charge storage – including insurance. The cost is typically low – about 0.01% a month or 1% a year – but over the years that builds up. There’s also a minimum charge with some companies that could hurt smaller holdings. There is capital gains tax involved as well, but the CGT applies if profits are much more than £11,000.

About the Author: Jonathan Adams

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