Valued for its scarcity and beauty since the early days of man, gold has been considered a safe store of value for over a thousand years. Generally regarded as a hedge against economic and political uncertainly, gold is the default destination for investors when the traditional markets and financial institutions are on the ropes!
I’m thinking about investing in gold but what are the options?
Physical Gold Bullion
When we think of gold as an investment, most people immediately conjure images of gold bars and coins stacked high on the shelves of a dusty bank vault, like a scene from a James Bond Movie, and a facility only open to the super rich! But over the past few years, access to affordable, smaller domination gold bullion supplies have become available to even the most casual private investor, bringing a whole new world of safe, secure and more tangible investment opportunities to everyone.
In the UK, demand for physical gold bars and coins has increased at dramatic pace over the past five years. Consumers are actively seeking opportunities to take some, if not all of their savings and investments out of the hands of the increasingly unstable banking and financial sectors. Amid bank bailouts and soaring national debt, people are worried for their financial future… and rightly so.
What type of physical gold should I buy?
Gold Bullion is available in both bar and coin format, generally bars will carry a lower mark-up over coins but coins may hold increased value when it comes time to sell.
Gold Bullion Bars should always be stamped ‘four-nines’ 999,9 (99.99%) pure fine gold bullion and should be from a recognised global LBMA (London Bullion Market Association) refinery such as Umicore and Metalor.
Gold bars range from small single gram bars right through to brick sized 12 kilogram ‘good delivery’ bars. When evaluating your gold bar investment options, it is important to note that smaller bars will carry a higher purchase margin over the gold price when compared per gram to larger bars, but divisibility of your investment must also be considered… A single kilogram bar is a one-time purchase then sale option, whereas an investment consisting of four 250 gram gold bars can be split into four separate sale opportunities over a period of time, taking advantage of favourable marketing price or cash requirements.
Gold Bullion Coins are becoming an ever increasingly popular choice among private investors, they offer the perfect balance between value, divisibility and portability. The standard gold bullion coin will carry a full troy ounce (31.1034768 grams) of pure fine gold contained within either a 22 carat (91.67%) or 24 carat (99.99%) coin format. Popular investment gold coins include the original bullion coin, the South African 1oz Krugerrand (22 carat), Canadian Gold Maple (24 carat) and the Royal Mint, Capital Gains Tax Free 1oz Gold Britannia, which, since 2013 features a full troy ounce of 24 carat gold.
Exchange Traded Funds (ETF’s)
Gold Exchange Traded Products are a more involved investment option, traded on the world’s major stock exchanges, ETF’s are investments that track the moving gold price index and deliver returns (or loses) accordingly. Some funds are backed by physical gold although others have no physical backings, often referred to as ‘synthetic’ funds. Such funds generally do not allocate bullion in the name of the investor and therefore are not immune from the financial standing of the containing company.
Fees on electronically traded funds are generally very low, often from as little as 0.2% commission per trade but do require a far greater understanding of market trading and will generally require the assistance of an advisor to setup and manage your investment.
Another slightly more obscure gold investment opportunity can be found in the gold mine investment market. Considered the most risky of gold investment options yet popular in the US, investors purchase shares in the actual companies prospecting for gold in hopes of large returns on performance – This type of investment carries none of the securities traditionally offered by other types of gold investment and is possibly not for the faint of heart!
We can’t provide you with specific financial advice but we can give you the facts, if you would like to learn more about physical gold bullion investment, please contact our sales team on 0121 523 1047.