GOLD AS AN INVESTMENT
A HOW TO GUIDE
INTRODUCTION
Gold has long been regarded as one of the most dependable and timeless investment opportunities. For centuries, gold has held its value, weathered financial storms, and stood as a symbol of wealth and stability. At MoneyMagpie, we firmly believe that gold deserves a spot in your portfolio, whether you’re just starting out in the world of investing or you’re a bit of a pro!
That’s why we’ve decided to write a book about it!
In this book, you will find everything you need to know about gold as an investment. By the end, you will be able to make confident investment decisions and maybe even add a bit of gold to your portfolio.
WHY GOLD?
Goldisaphysicalassetinlimited supply.Thismeansthatthereisonly somuchgoldthatexistsonthis planetandforthatreason,this preciousmetaltendstoincreasein valueovertime.
Unliketraditionalcurrencies, governmentscan’tsimplyprintmore goldtocombatalowsupply.This meansthatwhenthedemandforgold goesup,sodoesitsvalue.
Sincearound2001,theoutputofgold mininghasbeenonadowntrendmeaninglessnewgoldisreleasedinto circulationeachyear.Asaresult, muchofthegoldthatisavailableto buytodayisrecycled.
Formany,preciousmetalsareagood wayofdiversifyingor counterbalancingtherisksthatcome withotherinvestments.
Gold,inparticular,isoftenreferred toasa‘safehaven’whencomparedto traditionalinvestmentssuchasstocks andsharesbecauseittendsto performwellwhenmarketsarein decline.
2024hasbeenaprettygreatyearfor gold,solidifyingthepreciousmetal’s standingasapopularinvestment duringturbulenteconomictimes.
InOctober,theWorldGoldCouncil releasedtheirQ3GoldTrendsreport whichrevealedasignificantincrease ingolddemandandpricesinQ3 2024,drivenbyvariousfactorsacross sectors.Totalgolddemand,including OTCinvestments,reached1,313 tonnes,a5%year-on-yearincrease, markingthehighestdemandforany thirdquarter.Value-baseddemand surpassed$100billionforthefirst time,a35%risefromtheprevious year.
GoldETFssawaresurgence,with95 tonnesofinflows,reversinglastyear’s outflowsandmarkingthefirst positivequartersinceQ12022. Furthermore,OTCgoldinvestments nearlydoubledto137tonnes, sustainingpositivedemandforseven consecutivequarters.
2024alsosawasignificantdemand forgoldintechnology-supported largelybyAIadvancements.Demand rose7%year-on-yearto83tonnes.
Findings from the report show that the demand for gold isn’t going anywhere. Total gold supply rose 5% year-on-year to 1,313 tonnes, with mine production reaching record levels (up 6%), and recycled gold supply increasing by 11%.
As stated on the Bullion Club’s official website, “With inflation constantly chipping away at your money’s purchasing power, protecting your wealth is more crucial than ever. Diversifying with gold isn’t just smart; it’s a powerful move towards stability and security.”
2. WHY IS GOLD SUCH A POPULAR INVESTMENT?
Gold traditionally offers a strong return over time. The Bullion Club website states that gold has increased in value by 576% since the year 2000. For this reason, The World Gold Council suggests putting 2-10% of your portfolio into a safe haven such as gold.
There are a number of reasons that gold stands as one of the most popular long-term investments.
Given the dual nature of gold- as both an investment and a commodity- it has the potential to perform well during times of both boom and bust. Gold has historically increased in value during times of uncertainty, including the Covid-19 pandemic. In January 2020, gold was trading as low as £1,151.10 per troy ounce, but by early August the price was over £1,570 – a 37% increase in a matter of months [comparing 02/01/2020 LBMA AM gold price of £1,151.36 with 07/08/2020 LBMA AM gold price of £1,574.37].
However,uncertaintyisn’ttheonly thingthatdrivesthegoldprice. Traditionally,monetarypolicyhashad asignificantimpactongolddemand; forexample,risinginflationcanlead sometohedgeagainstlocal currenciesingoldandloweringof interestratesoftenactsasadriverfor gold. Conversely,goldcanalsoperform wellwhenthegoingisgood. IncreasingGDPs(particularlyinIndia andChina)canboostdemandfor gold,andespeciallygoldjewelleryas peoplehavemoremoneytospendon elaborategifts.
CONT... WHY IS GOLD SUCH A POPULAR INVESTMENT?
Anotherimportantdriverforgold demandiscentralbankpurchasing, whichcanhaveasignificantimpact onthegoldprice.Inthefirstquarter of2024,centralbanksboughtanet 290tonnesofgold-thelargestQ1 increasesince2000.Inresponseto thetrend,thepriceofgoldshot above2000USDperounceandhas beengraduallyclimbingeversince.
2024hasbeenastrongyearforgold whichhasincreasedtheasset's popularityamongstinvestors.With demandgoingstrong,theprecious metalcouldexperienceanequally strongyearin2025.
3. SHOULD I INVEST IN SILVER INSTEAD?
Thesecondmostpopularprecious metaltoinvestinissilver.Witha muchlowerpricepointandstrong usecasesinmanufacturing,should youputyourmoneyinsilverinstead?
Since2007,thevalueofsilverhas roughlydoubled,similartotherate ofincreasegoldhasenjoyed. Thereforemanypeopleseesilveras anequallyappealinginvestment opportunityasgold,despitegold’s standingasthemorepreciousofthe metals.Theinvestmentopportunities withsilverareoftencomparableto thoseofgold,anditcancertainlybe aprofitablemarket.
Goldpricesdotendtomovemore slowlythansilver:thelatterisseenas beingmorevolatile,partlybecauseof itswiderusewithinindustry.Thebest optionforyourowncircumstancesis likelytodependuponyourattitudeto riskandwhetheryouareseekinga longer-terminvestment-forwhich goldisapopularoption-oryouenjoy theshorter-termvolatilityofsilver.
Itshouldalsobenotedthatallsilver bullionproductsattractVAT. However,ifyouareinterestedina VATfreeoption,goldcoinsfromThe BullionClubareVAT-freefornonVATregisteredprivateindividuals.
Therarityofgoldmakesitmore expensivetopurchasethansilver,so itmayappearthatyougetmorefor yourmoneywhenbuyingsilver.But thesituationissomewhatmore complex:purchasesofinvestment goldintheUKdonotcurrently attractVAT,forinstance,whereas silverpurchasesdo.
IfyouarealsointerestedinCGTexemptbullionproducts,TheBullion Club’srangeofSovereign,Britannia andQueen’sBeastsbullioncoinsare CGT(UKcapitalgainstax)exempt forUKresidentsduetotheirstatusas legaltender.
4. TYPES OF PHYSICAL GOLD INVESTMENTPROS AND CONS
Therearethreemainwaystobuy physicalgold:intheformofbars, coins(orrounds)andjewellery.
Morerecently,peoplehavebeen optingfordigitalpreciousmetals programmes,particularlythosethat arebacked100%byrealphysical investmentbars.However,owning anactualpieceofpreciousmetalis anattractiveprospectatthe momentbecauseitkeepsyour wealthawayfromhackers.Investing inphysicalgoldalsoprotectsyour wealthintheunfortunatecaseofa stockmarketcrash.
It’sthe‘savingsunderthemattress’ philosophybutwithacommodity thatisfarlesslikelytofallinvalue thanmoney.
If you’re looking to buy gold, your best bet is to use established British or European dealers who will deliver it straight to your house through trackable insured couriers. Go to a large, well-known firm with a good track-record such as The Bullion Club.
“You can also buy gold through The Bullion Club’s website “
Whenever you buy gold, make sure you get a receipt and confirmation of delivery details before paying. Most dealers will offer a discount for buying in large quantities: at the other end of the scale, there will usually be a minimum purchase applied. You can expect to pay for shipping and handling.
CONT. TYPES OF PHYSICAL GOLD INVESTMENT - PROS AND CONS
Amajorissuewhenbuyinggoldis storage.Puttingitinasafeathome isagoodoption,butideallyyou shoulduseabanksafedepositbox. Foronething,ifyouhavegold storedathomeyouwillneedto informyourinsurerandthiscould increaseyourpremium.Andof coursethere’sthefactthatnohome securitysystemwillbeassecureas abankvault’s.
GOLD BARS
Buyingbullionbarsisthetraditional wayofinvestinginphysicalgold.
Barsareoftenamorecost-effective wayofowninglargeramountsof physicalgold–thisisbecausethe premiums(thepriceyoupayover thespotpricetocoverthingslike manufacturing)tendtobelower-it costslesstopourgoldintoalarge barmouldthanitdoestominta beautifulcoin,andyou’re benefittingfromeconomiesof scale.
Ifyou’renotcomfortableabout storingpreciousmetalsathome, somecompanieswillnotonlysell youthembutoffertostorethem foryoutoo.TheBullionClubhasa vaultthatislocatedintheSouthof EnglandnearHeathrowAirport. TheVaultisguarded24/7andyour goldisfullyinsuredwhilstitis lockedup.
Unlikecoins,barsarenotCGT exemptastheyarenotlegaltender –butinsomecircumstances,they canbeheldinsideSelfInvested PersonalPensions,whichcanbe freeofCGT.
THE BENEFITS OF INVESTING IN GOLD BARS
Buyershaveconfidenceinbarsas theycanbesatisfiedthatacertified itemconsistsof99.5%puregold,or almost24carat.
Therearealsopracticaladvantages tobuyingbars;mainlythatwhen buyinginbulkthereareless individualitemstodealwiththan therewouldbewithcoins,for example.Manypeopleseebarsasa betterinvestmentthancoins becausetheygenerallycarryalower pricepremiumthancoinsor jewellery.
Storinggoldbarsismadeeasierby theirrectangularshapeastheycan bestackedtogethertobestutilise space.
Sizes of gold bars include, but are not limited to:
400 troy oz (12.4 kg)
1 kg (32 troy oz)
10 troy oz
1 troy oz
100 g
50g 20g
10g
5g
1g
1 tael (50 g)
1 tola (11.7 g)
The London Bullion Market Association classifies gold bars by its Good Delivery specification. This stipulates that bars must have:
A fineness of 99.5%
Marks stating serial number, refiner’s hallmark, fineness and year of production
A gold content of 350 – 430 troy oz
GOLD COINS
Coinsarevaluablefortwodifferent reasons–metal(weight)valueor antique(numismatic)value.
Coinsareseenasamoreflexible investmentthanbarsasit’seasierto sellapercentageofcoinsthana wholebar.Coinsarealsooneofthe morecollectableformsofgold.The mostpopulargoldcoinsarethe SovereignandBritanniaaswellas theKrugerrand.Thesebullioncoins arerecognisedandtrustedallover theworld.
JEWELLERY
Jewelleryisoftenseenasamore everydayorinheritedwayof attainingphysicalgold.Oftenseen asamoredesirablewayof collecting,jewelleryofferseveryday joyfromthepreciousmetal.
Jewelleryaccountsfortwo-thirdsof theworld’sannualgolddemand. Unlikebarsandcoins,jewellerycan beboughtandusedfordecorative purposesasanaccessoryrather thanalwaysbeingstoredinasafe.
Unfortunately,thejewellerymarket isnotoriousforhavinghugemarkupsovertheactualmetalvalueof theitemitself.Somelargepieces canbepricedat250%ofthemarket priceforgold,whereasthemark-up withbarsandcoinstendstobe around5%.
Thisisapremiumforthe craftsmanshipofthedesignandis oneofthereasonswhyjewellery maynotbeyourbestforan investment.
JEWELLERY ACCOUNTS FOR TWOTHIRDS OF THE WORLD’S ANNUAL GOLD DEMAND.
Therearealsotaxissues,asSimon Templeexplains:“Jewelleryincurs VATandthereforetheconsumer hastomakeback20%ontopofthe premiumtheyareinitiallypaying.”
Youmaythentakeahitwhenit comestoselling,becausewhile thereisaninternational marketplacewherethepriceofgold isatanacceptedrate,thevaluation ofjewelleryisasubjectivebusiness andopinionscandiffergreatly betweenvaluers.
Eventhoughthevalueofgold continuestorise,it’sestimatedthat sellersofjewelleryreturnonly30% ofthecostprice,withmany jewellersreluctanttoconsider buyingpiecesback.Therefore,the biggapbetweenthebuyandsell priceforjewelleryissowidethat makingadecentreturnonitisquite unlikely.
5. OWNING GOLD WITHOUT OWNING GOLD - FUNDS AND FUTURES
The ownership of gold has come a long way since treasure chests bursting with bullion. Many people who now invest in the precious metal may never see so much as a coin, because it is all done digitally.
We really recommend that you equip yourself with knowledge and understanding of the rich and varied gold market. Because while both digital and physical products track the same gold spot price, that doesn’t necessarily mean they have the same net effect. For example, UK coins graded by The Bullion Club are exempt from Capital Gains Tax for UK investors – though you’ll usually pay a little extra in terms of premiums (the price you pay over the spot price to cover things like manufacturing) in comparison to digital gold, which is not in itself CGT exempt but offers a lower premium than coins and bars.
Digital gold products, such as ETFs and gold bonds, give investors ownership of fractions of large bars held in vaults. Investing through a fund or bond is a flexible way to buy gold, without having to worry about physical storage. These assets are also easier to sell - ETFs typically come with high liquidity and can be traded in the same way as stocks and shares.
The physical gold used to back digital gold is fully allocated and owned by DigiGold customers. Investors can trade in and out of their positions 24/7 via online brokerages.
Some gold products, can also be held inside ISAs or SIPPs, which may offer additional benefits to some investors.
Ultimately, individuals should carefully consider their own circumstances taking into account their overall strategies, pricing and product features and seek financial advice from a regulated entity if unsure.
GOLD MUTUAL FUND
Oneofthemostcommonwaysof investinginpreciousmetalsisviaa goldmutualfund.Agoldmutual fundisessentiallybuyingsharesin miningcompanies.Becausemining companieshavefixedcosts, wheneverthepriceofgold increases,thepercentageofprofit risesquitedramatically.For example,ifitcostsamining company£700tomineanounceof goldwhenthepriceis£900,the profitis£200.Whentheprice goesupto£1,000,themining costsremainthesamesotheprofit is£300–a50%increaseinprofits causedbyan11%riseintheprice ofgold.
GOLD FUTURES
GoldFuturesareconsidereda severelyhigh-riskstrategyandare onlyreallyforveryexperienced investors(andpeoplewithenough moneytotakerisks).
Of course, the opposite would be true if prices go down. So for this reason, the prices of mutual funds that invest in gold mining companies tend to move about twice as much as the gold price. Other events which can affect the prices of gold mining funds would be company-specific issues like operational problems or just the overall stock market – if the market goes down, all stocks go down, including gold stocks (regardless of the price of the metal).
This could be the option for you if you’re confident that gold prices are going to continue to rise. Here’s a selection for you to look into:
• FrankTemp/FrankAdv Gold PrMadv
• Vanguard FDS Precious Metals and Mining
• First Eagle Funds Gold
• Permanent Portfolio
FUTURES CONT
Itinvolvesguessworkandan investorpredictinghowtheprice ofgoldwillchangeintheshort termandinvestingmoney accordingly.Therearesomany factorsthatcanimpactthepriceof gold,makingitextremelydifficult toforecastchangesinthemarket.
Thereforeputtingyourmoneyintoany metalfuturescan’treallybecalled investing–it’sspeculating,whichisa politewordforgambling.
Asyou’veprobablygathered,wedon’t advisespeculatingonfutures,butif you’redeterminedtochanceyourarm, here’sthebestwaytogoaboutit:
A) ACCEPT THE RISKS INVOLVED
Whenbuyinggoldcoinsorbars, youpaythecurrentaskingprice.A futurescontractdiffersinthatit’s anagreementthatyou’llpaythe currentpriceatsomepointinthe future,regardlessofthepriceat thetime.
Therefore,ifthepricegoesdownyou’ll losemoney;butifthepricerises,you makeaprofit.Thisisknownasa“call” contract;youcandothesamethingin reversewitha“put”contract.What makesinvestingingoldfutures potentiallybothprofitableandriskyis themargin.
Futurescontractsareboughtandsold withthetraderputtingupasmall amountoftheactualprice(say10%).
Whenyouinvestinfuturescosting £100,000youputup£10,000(orless). Ifthepricegoesup10%youcandouble yourmoney.Butifthepricegoesdown 10%you’llloseyourentireinvestment.
B. WHAT FACTORS AFFECT THE PRICE
Therearethreemajoreconomic forcesthatcanaffectthepriceof preciousmetals.Firstly,demand increaseswhennewbuyersare enteringthemarket.Thishasbeen evidentinrecentyearsasnewlyemergingindustrialnationssuchas Chinacreategrowingdemandfor gold.
Secondly,there’sthevalueofcurrency itself.Ifthevalueofcurrencyfalls, eitherbecauseofrisinginflationora weakdollaronthecurrencyexchanges, ittakesmoremoneytobuymetalsand consequentlythepricerises.Thirdly, economicuncertaintyplaysabigpart. Gold,aswe’vementioned,isa relativelysafeinvestment.
Duringtimesoffinancialhardship, investorspulloutofriskystock marketsandputtheirmoneyinsafer investments,ofwhichpreciousmetals arefirmfavourites.
C. OPEN A BROKERAGE ACCOUNT
Abrokerisamiddlemanusedby investorstobuyandsell,andtheir knowledgeandup-to-date informationisinvaluable.Although brokerschargecommissionfor overseeingtrades,youcankeep coststoaminimumbyusing discountbrokeragefirms.
D. KEEP YOUR FINGER ON THE PULSE
Thesmallestofchangesinthe priceofgoldwillhaveasignificant effectonwhetheryoumakea profitoraloss.
YoucangetlivequotesatGoldPrice websites.Futurescontractsarealways somewhatdifferentinpriceandneed tobewatchedseparately.Mostbrokers haveonlinesiteswhereyoucan monitorpricesinrealtime.
E. STUDY THE MARKETS AND TRADING PATTERNS
Onceyou’reconfidentthatyou’re readytotryyourhandattrading goldfutures,makesureyoustart withsmallamountsuntilyoufind yourfeet.Youshouldalsolimit yourriskbyincludinga‘stopsell order’witheachtrade.Thisisan ordertoyourbrokertosell automaticallyifthepricefallsa certainamount.Thisisasensible waytolimitanylosses.
6. THE ART OF DIVERSIFICATION WHEN INVESTING IN GOLD
Aswithanyinvestment,equipping yourselfwithknowledgeofthe marketiskeyandoften diversificationofinvestmentis recommendedbyyourbroker.
OnesuchmethodisExchange TradedFunds(OrETFs).
ETFsaresimilartotrackerfunds andareasharebasedtrade.Theytry tocopytheperformanceofamarket suchastheFTSE100.Theshares areissuedbasedonanamountof storedphysicalgoldandastheprice increases,sodoesthesharevalue.
These are seen by many as a useful investment because they give you exposure to physical gold without the hassle of having to insure, store, move or resell it. To invest you can expect to pay a small commission fee, which is normally around 0.5%.
Most ETFs have a minimum investment but you don’t have to buy large amounts. ETFs can also be held tax free in an ISA and although ETFs are traded like standard shares, they are exempt from stamp duty.
CONT. THE ART OF DIVERSIFICATION WHEN INVESTING IN GOLD
Therearecaveatstoinvestingingold ETFsasthegoldinsomeofthemcan be‘rehypothecated’,i.e.lentoutto borrowersofgold.Ifyou’reminded tobuyaGoldETF,thenonethatis backedbyactualphysicalgoldbars makesmoresense,ratherthana “synthetic”ETFwhichinsteaduses financialinstrumentstotrackthe goldprice.TheRoyalMintPhysical GoldETC-RMAUfitsthebillinthis regard.
Interestingly,theReserveBankof Indiahascalculatedthatthereare roughlyahundredclaimsongoldfor everyunitthatactuallyexists.So whenthere’sarunongold,which theremaybeinthenearfuture,you needtobesurethatyouownwhat youthinkisinyouraccount!
It’sworthtakingalookatthe ExchangeTradedGoldwebsite, whichisupdatedeveryminutewith thepriceofgoldanddetailsthevalue ofinternationalshares.ETFstrack thepriceofgold(orwhichever preciousmetalyouhaveinvestedin, forthatmatter).
An ETF that tracks gold is regarded as a relatively safe option. If you’re still fairly new to the investing game, it’s best to steer clear of ‘derivative’, ‘leveraged’ and ‘short’ ETFs. These have the potential to make you huge profits, but also bring a much higher level of risk and are best left to the professionals.
If you’re serious about investing in ETFs, it’s advisable to sign up to a relevant newsletter to receive trading alerts and advice. The Gold and Oil Guy is a reputable one.
You may want to consider investing in Indian gold markets. In India, gold is seen as a symbol of power and wealth and the country is the world’s largest buyer of gold (having 9.5% of global gold holdings).
If you’re unsure about whether to opt for physical metal or ETFs, then consider your reason for investing. If you’re looking to insure against financial crisis then buying and storing your own bullion is preferable as ETFs can fluctuate.
DIGIGOLD
Anothermethodsimilar(yet cruciallydifferent)toanETFis digitalgold,anewmethodof owningphysicalgoldindigital form.WhenyouinvestinDigi Gold,eachpurchaseofisbacked byaportionofarealphysicalgold bar,fullyinsuredandstored securelywithinTheRoyalMint’s vault.DigitalGoldinvestment offersinvestorsdirectownership ofrealphysicalgold,minusthe feesassociatedwithcoinsandbars.
Unlike coins and bars, DigiGold ownership enables you to purchase gold based on value rather than weight e.g. £25 instead of a 1 oz. coin or bar. As you purchase fractions of a large bar, your product cannot be delivered, and unlike larger coins and bars, you can spend exactly what you choose. The ownership of gold is yours however. You can accumulate and ask for delivery only when required or after reaching the denominations like 1gm, 2gm, 5gm ,10gm etc. of Physical Gold Coins & Bars. You may sell DigiGold without even ordering delivery if you want to.
DIVERSIFYING YOUR PORTFOLIO WITH GOLD
Somegoldproducts,canalsobe heldinsideISAsorSIPPs,which mayofferadditionalbenefitsto someinvestors.
Ultimately,individualsshould carefullyconsidertheirown circumstancestakingintoaccount theiroverallstrategies,pricingand productfeaturesandseekfinancial advicefromaregulatedentityif unsure.
CONT...DIVERSIFYING YOUR PORTFOLIO WITH GOLD
Goldisoftenknownasagreatway todiversifyanyinvestmentportfolio. Asmentionedintheintroduction,as opposedtoinvestingallofyour moneyingold(foranexampleofa singlemarket)investmentingoldis oftenviewedmoreasagoodwayto hedgeagainstotherriskier investments.
Itisafinancialno-noacrossthe boardtoputallofyourmoneyin oneinvestment,becauseifthereisa dipinthemarketitcouldresultin hugefinancialtrouble.Therefore, portfoliodiversificationisapractice usedtoreduceriskofinvestment.
IItiswhenaninvestorspreadstheir investmentsacrossarangeofassets orinvestmentvehicles.The approachisn'tintendedtomaximise returns;itisundertakentolimitthe impactofvolatility.Bydoingthis, investorshelpprotecttheirmoney fromtherisksinherentinmany investmentvehicles.
Physical gold bullion is one of the best ways to diversify your portfolio and it is suggested that by transferring 5%15% of your money to gold, you can help protect your wealth against the volatility of the current financial system.
Gold especially is considered a hedge against inflation, and inflation is one of the key risks for economy-based investments like stocks or ISAs. Gold is also a safe-haven asset; as mentioned previously, when other markets crash, gold typically sees its value increase.
One of the difficulties faced by those who diversify only within the stock market is the cost and complication involved. Multiple stocks, across different trading markets, will often involve several brokerage fees, management margins, and more. With physical bullion you simply buy your metal and you're done.
7. GOLD SCAMS TO LOOK OUT FOR
Here’sourguidetoavoidgetting scammedwhenitcomestogold.
Aswithanypurchasingdecision,it’s alwaysworthmakingsurethat you’rebuyingfromareputable dealer,andifyou’reusingathirdparty,thatyou’restoringwitha trustworthycompanywithadequate insurance.
TheBullionClubgradesalloftheir goldcoins,whichofferssomepeace ofmindoverthelegitimacyofthe assetsthatyouarebuying.Coin gradingistheevaluationofacoin’s conditionandotherfactorsto determineitsvalue.Thisassignsa ratingtothecoinbasedonvarious criteria,includingsurfacecondition, strike,colour,lustre,and attractiveness.Byinvestingingraded coins,youcanbesureofthevalue andcondition.
However,notallonlinedealersoffer thisleveloftrustandtherearestill someunscrupuloussellers attemptingtosellcounterfeitgold coinsonline. .
It’s worth warning about some of the ‘cash for gold’ companies. Most of these operators offer decent and fair prices for gold you send them but during difficult times for finances, there are always people trying to take advantage of desperate or unwitting dealers, and the gold market is no exception. Avoid being one of those poor souls who sends expensive jewellery or family treasures, only to get a paltry cheque. Be smart: if you have any doubt about a merchant, don’t deal with them.
Also be aware that even though you may be keen and excited to be dealing in gold, you should be careful who you trust with this information: people don’t need to know you have gold in your home or place of business.
One of the main ways to ensure your gold is genuine is by testing it. Here is a comprehensive round-up of all the ways of doing this.
MARKINGS CHECK
Inspectyourgoldfor officialmarkings.A stampshowsits fineness(1-999or .1-.999)orcarat (10K,14K,18K,22K or24K).
Magnet test
Gold is non-magnetic, so if it sticks to a strong magnet then it’s fake. However, if it doesn’t stick to the magnet, that doesn’t necessarily indicate it to be real: much counterfeit gold is made from non-magnetic metals.
Density test
When it comes to gold, there aren’t many metals denser: pure 24K gold is somewhere around 19.3 g/ml – much higher than most other metals. So, measuring density is a pretty reliable way to see if your gold is real: the higher the density, the purer the gold. Also, ensure that you perform the density test on gold that has no gemstones attached.
You can perform a density test by following these steps:
Weigh your gold. A jeweller might do this for you gratis if you don’t have your own scales. The weight needs to be in grams.
:
Discoloration
Gold discolouration, paying attention to the key bar areas such as the corners, is a reliable sign that it’s fake. If the gold is rubbing off and you can see another metal, sadly it’s only a gold-plated bar.
Fill a measuring container with water: it will help if the container has mm markings on the side; don’t fill container to the top or it’ll flow over when you add the gold. Note carefully the exact amount of the water level.
Place your gold in the container, taking note of the new water level and calculating the difference between that and the original level in ml.
DENSITY CALCULATION
Use the following formula to calculate density:
Density = mass / volume displacement. A result close to 19 g/ml indicates either real gold, or a material with a density similar to gold. Here is an example calculation:
Your gold item weighs 38 g and it displaces 2 ml of water.
Using the formula of mass (38 g) / volume displacement (2 ml), your result would be 19 g/ml.
Bear in mind that different gold purity will have a different g/ml ratio:
14K = 12.9 to 14.6 g/ml
18K yellow = 15.2 to 15.9 g/ml
18K white = 14.7 to 16.9 g/ml
22K = 17.7 to 17.8 g/ml
Ceramic Plate Test
This is potentially the easiest way to tell if your gold is fool’s gold, but do bear in mind that your item may end up scratched.
1.
Find an unglazed ceramic plate to use; if you don’t have this, you can buy a piece of unglazed ceramic cheaply.
2.
Drag your item across the surface: if a black streak appears, your gold is counterfeit, whereas a gold streak indicates your item is genuine.
7.WHEN IS THE RIGHT TIME TO BUY GOLD?
Ah,theage-oldquestion:whenis theperfecttimetobuygold?
Intruth,thereisn’treallya‘right’ timetobuyGold.Instead,thebest optionistograduallyincreaseyour investmentovertime.Thisisbecause goldtendstoholditsvalueyearroundandhasfewseriousupsand downs,unlikestocksandshares whichcanexperienceseasonal fluctuations.
Gold has a way of drawing investors in, especially during times of uncertainty, but timing your entry into the market can feel like a game of chance. The good news? You don’t need to be a fortune-teller to make smart decisions. With a little strategy and some patience, you can maximize your returns and build a solid portfolio.
BUYING THE DIP
Ifyou'rekeentomaximizeyour investment,youcouldconsider buyingthedip.Thisinvolvesbuying goldwhenitspricedropsto maximizethereturnsthatyoucoul makewhenitrisesagain.
BUT HOW DO YOU KNOW WHEN THE DIP IS ACTUALLY A DIP?
Gold’svaluemightwobbleinthe shortterm,buthistorically,ithas alwaysbouncedbackstronger.Look atpastpricecharts,followmarket news,andkeepaneyeonglobal events.
Asuddenpricedropcouldsignala primebuyingopportunity,especially ifit’scausedbytemporarymarket jittersratherthanafundamental shift.
Setapricealertonyourchosen investmentplatformsoyou’llbe notifiedwhengoldhitsatargetprice. Thisway,youcanswoopinwithout constantlymonitoringthemarkets likeahawk.
Thisstrategyisbestforinvestors whoarelookingtoinvestingold throughETFsordigitalproducts. Whenthepriceofgolddips,you havetoactquickly.Therefore,the processofbuyingphysicalgoldmight betootime-consumingforthis strategy.Stickwithdigitalproductsif youwanttomovequickly.
BUYING DURING ECONOMIC UNCERTAINTY
Ifthere’sonethinggoldloves,it’s uncertainty.Economicdownturns, politicalupheavals,warsoreven whispersofarecessionsend investorsflockingtogoldtoprotect theirwealthagainstvolatility. Why?Becausegoldhaslongbeen seenasasafehaven something tangibleandreliablewhenpaper moneyorstocksstarttofeelshaky.
BUYING LITTLE AND OFTEN
Timingthemarketoftencomeswith morestressthanitisworth.Instead, thebestapproachtoinvestingingold isbuyinglittleandoften. Thisisalsoknownasdollar-cost averaging(orpound-costaveraging forusBrits).Thismethodinvolves investingasetamountingoldat regularintervals,regardlessofthe price.Soforexampleyoucouldseta standingordertogointogoldoncea monthautomatically.
Thebeautyofthisstrategyisthatit smoothsoutthehighsandlowsof themarket.Whenpricesareup, yourmoneybuyslessgold,andwhen
Duringperiodsofeconomic uncertainty,goldpricesoftenriseas demandincreases.Whilethismight meanyou’rebuyingatapremium,it alsomeansyou’readdingalayerof stabilitytoyourportfolio.
Thetrickistokeepaneartothe groundandbuyassoonasthe marketbecomesunstable.Waiting toolongcouldmeanpayingahigher pricelater.
Watchforredflagslikehigh inflation,fallingstockmarkets,or centralbanksloweringinterestrates. Theseareusuallysignsthatgoldis abouttogoup.
pricesaredown,yourmoneybuys more.Overtime,you’llhavebuiltup anicelittlestash,atanaverage overallprice,withouthavingto worryaboutwhetheryougotinat the“right”time.
Forexample,TheBullionCluballows youtoinvestinsinglegoldcoins whichmakesitpossibletogradually increaseyourinvestmentovertime ratherthaninvestingahugesumat once.GoldETFsarealsoagood optionfordollar-costaveraging. Withoutsoundingtoorepetitive, thereisno“right”timetobuygold. Butthesooneryoustart,thesooner youwillbeabletobenefitfrom gold’ssteadyreturns.
7. PAYING TAX ON GOLD INVESTMENTS
Beforeyoudiveintoany investmentopportunity,it’s importanttounderstandthe taximplications.
VAT ON GOLD IN THE UK
Most physical gold investments are exempt from VAT in the UK. This applies to gold bullion bars and coins that meet certain criteria, such as being at least 99.5% pure. This means when you purchase these items, you don’t pay VAT a nice bonus for those looking to invest in physical gold.
CAPITAL GAINS TAX CGT
Now, let’s talk about profits. If you sell your gold at a higher price than you paid, you may be liable for Capital Gains Tax (CGT).
As of April 2024, the CGT allowance (the amount of profit you can make before paying tax) is just £3,000 per year, down from £6,000 in 2023. If your profit exceeds this threshold, the amount above it will be taxed at your applicable rate:
10% for basic-rate taxpayers 20% for higher- and additional-rate taxpayers
You can minimze the CGT that you pay on your gold with the following strategies:
Sell within your allowance: Keep profits under the CGT threshold by selling smaller amounts over time. Invest in legal tender coins: Focus on tax-exempt gold coins to sidestep CGT altogether.
Diversify holdings: Balance your portfolio with assets that have different tax implications to spread your liabilities.
The only gold investment that is exempt from CGT are gold coins from The Royal Mint. These coins are classed as legal tender in the UK which means that you do not need to pay CGT on any returns that you make.
According to The Bullion Club, “gold coins from The Royal Mint are exempt from Capital Gains Tax (CGT) for UK residents, thanks to their status as legal tender. This means you can enjoy your profits without worrying about CGT, making these coins a smart and tax-efficient addition to your portfolio.”
If you sell gold and your profit exceeds the CGT threshold, you must report it to HMRC. Keeping detailed records of purchase prices, dates, and any associated costs is essential to accurately calculate your tax liability.
8.HOW TO BUY GOLD COINS FROM THE BULLION CLUB
We’ve already mentioned that The Bullion Club is a trusted supplier of Graded Gold Coins, based here in the UK.
Luckily, the process of buying gold from them is simple. Here are the steps involved.
1. INITIAL CONTACT AND GUIDANCE
The first step involves reaching out to the team at The Bullion Club, either through their website or by phone.
Their London-based professionals will provide personalized advice about starting or expanding your gold collection.
Onceconnected,theirgoldspecialists canhelpyoudesignaportfoliotailoredto yourgoals.Whetheryou'reafirst-time buyeroraseasonedcollector,theyoffer optionsrangingfromgoldcoinstoother
3. DETAILED DISCUSSION
You’llhavethechancetoreview yourchoicesthoroughly.Thisstep includesexploringstorageoptions, paymentmethods,andpostage arrangements.
Youcanstartwithasmallpurchase andbuildupovertime.
TheBullionClubencouragestaking yourtimetomakedecisions, ensuringyoufeelconfidentabout yourinvestment.
4. COMPLIANCE AND DOCUMENTATION
Tocomplywithanti-moneylaundering regulations,you’llneedtoprovideproof ofidentity.
Theircomplianceteamwillguide youthroughthislegalrequirement, ensuringalldocumentationis
5. DELIVERY OR SECURE STORAGE
Onceyourpurchaseisfinalized,your coinscanbeshippedtoyour preferredaddressorstoredsecurely.
TheBullionClubprovidesinsured deliveryandstorageoptionstogive youpeaceofmind.They’llnotifyyou aboutthedeliveryscheduleor confirmwhenyourcoinsaresafely stored.
BUYING DIGITAL GOLD PRODUCTS
If you don’t fancy buying digital gold, you can also invest through digital products such as Gold ETFs, DigiGold or Gold Bonds.
The process of investing in these products involves opening an account with an online brokerage. Buying gold in this way feels very similar to investing in stocks. Here are the steps involved:
Research your options. Find a digital gold product that aligns with your risk tolerance and long-term goals. Find a brokerage. Search for reputable online brokers that offer the asset that you would like to invest in. Make sure that the broker is registered with the FCA (if you are investing from the UK).
Create an account. You can do this by filling out the basic registration form (usually available from the homepage) and then providing further information about your trading experience and goals.
Investing in gold is a timeless strategy that combines the allure of a tangible asset with the practical benefits of wealth preservation. As we’ve explored throughout this eBook, gold offers a unique blend of stability, flexibility, and historical value, making it an excellent addition to any investment portfolio.
Connect a payment method to your account. Most brokers accept debit cards and bank transfers. Search for the gold product. The best way to do this is to search for the ticker symbol using the broker’s explore feature. Buy shares of the asset. Fill out the order form with the details of your purchase and click ‘Buy’ to confirm the transaction. Your gold investment will appear in your brokerage account within minutes.
Whether you're looking to hedge against inflation, diversify your assets, or simply enjoy the prestige of owning a precious metal, gold provides opportunities that are as rewarding as they are enduring.
