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Investing in Gold: Fund or Physical?

Friday, September 7, 2012

With trading volumes for gold sustaining unprecedented highs, and prices for both gold and silver receiving a welcome boost from the US central bank stimulus, the only current concern for gold investors is whether to plump for a fund or physical gold. We explain the options, from funds, to physical gold bars and smaller value coins.

Most investors see funds as the most straight forward investment route. This allows an investor to buy into a fund that in turn invests in physical 400 ounce gold bullion bars. Such funds are normally operated by independent managers within the exchange-traded fund sector. According to, there is more than £81.06 billion invested in these trackers annually.

The benefits of a fund are that it allows the investor relative freedom; they are not responsible for storage insurance and are able to trade quickly and often online. But such freedom comes at a cost. Funds are not the cheapest option, with the average total expense ratio estimated between 0.25 and 0.40 percent of the value of the fund’s assets.

For those wishing to get their hands on real gold, without the responsibility of security, allocated storage providers are proving increasingly popular. As newcomers to the gold market, these companies offer “allocated” and secure storage at, usually, less than 0.20 percent of the value per year. Investors are also required to pay dealing costs, which start at around 0.80 percent of the gold’s value, and drop significantly as value increases. Security of the investment is assured as the company inspects the physical gold storage on a daily basis and investors are able to arrange next day delivery of their gold bars, if required.

Another choice for investors wishing to break into the precious metal market, or simply invest smaller amounts, is to buy coins. The Gold Bullion Company sells gold, silver, platinum and palladium bullion, as well as coins, such as sovereigns and krugerrands. Coins can be bought online and are delivered next day via a fully insured courier service. Investors are usually able to store their coins safely at home and increase their investment quantities as desired.

The Gold Bullion Company can advise customers on the best gold coins for investment based on scarcity and numismatic value. For example, The Gold Bullion Company advises anyone wishing to invest in British sovereigns to look to the Edward VII Gold Sovereign, weighing 7.98 grams of 22 carat gold and issued from 1902-1910, or the Victoria Young Head Shield Sovereign. The US $20 Liberty ‘Double Eagle’, was designed by James B. Longacre and features Liberty’s head encircled by thirteen stars on its face. The back depicts a wreath encircling the date and value of the coin and the inscription ‘United States of America.’ The coin carries a purity of 90%, being made up of .900 gold and .100 copper and is currently trading at around twenty times its face value. To buy gold coins from The Gold Bullion Company, visit