www.InvestmentGuide.co.uk
www.InvestmentGuide.co.uk
GOLD
A convenient means of investing in gold. You hope to make a capital gain by selling for more than you paid but you may end up with a loss by selling for less. The price of gold coins is closely linked to the price of gold but different coins may sell for a different premium over the price of gold. Second-hand gold coins or bars in the UK are not libale to the full rate of VAT, with the dealer paying VAT only on the dealer's overall sales margin. Second-hand applies only within the EU (second-hand coins imported from outside the EU count as new). Sovereigns contain .2354 of a Troy ounce of pure gold. The other main coin traded, the Krugerrand, contains one Troy ounce of pure gold. Other gold coins are the Britannia, Maple Leaf, Double Eagle, Nugget. With a new coin, in the UK you normally have to pay 17½% VAT on the whole cost of a new coin or new bar. Half sovereigns and certain dates of sovereigns sell for a higher premium because of rarity.
Who can invest Anyone.
How worthwhile Gold is generally not a good investment when inflation is low as it is at present. Make sure you don't pay VAT on the whole price as the dealer margin scheme for second-hand coins is optional. Another way to invest in gold is to buy shares of gold mining companies or a unit trust specialising in these companies and now there is a tracker fund called Gold Bullion Securities which is quoted on the London Stock Exchange. Gold is traded in US$ so fluctuations in the £/$ exchange rate can also affect how much money you can make or lose.
Minimum The price of 1 coin. With gold at £187.35 a Troy ounce, one second-hand sovereign might cost £51 including VAT on the dealer's margin. To sell you would get £44 each. Krugerrands might cost £201each and sell to a dealer at £189. The dealers margin is closer for larger deals, say, 100 sovereigns and 25 krugerrands. For 25 krugerrands the buying price might be £199 and the selling price back to a dealer £190. You may, however, find difficulty trading in large amounts while wishing to avoid VAT.
Maximum None.
Suitable Lump sums. Regular savings.
Money back At once at the market price.
Interest None.
Tax Gains you make on the sale of coins are liable to capital gains tax.
Fees to pay None: commission is usually included in the buying and selling price. If coins are delivered to you, postage and insurance. VAT at 17½% on the purchase price if you buy what is deemed to be a 'new' coin from a VAT registered supplier (most dealers are registered). You can buy second-hand coins without VAT providing the dealer uses the scheme.
Passbook None. You get the coins.
Children Suitable as gifts especially from parents. Children's capital gains are not aggregated with their parents.
Risk High. The value of gold can go down as well as up. Keep the coins in a safe place like a deed box in a bank, and/or have them insured.
How to invest Check the current price here in most major currencies. Check with a few dealers how much their coins will cost to buy. When you sell, do the same. When you ask for the price, don't say whether you are buying or selling. Check whether the price quoted includes any VAT and that you are not paying VAT on the whole price, only the dealer's margin at most.
Where from Visit the Coin Dealers Directory.
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Last updated 22 December 2003