Advice Guide for UK Bullion Investors
SynopsisConcise but comprehensive information for anyone thinking of investing in gold, silver, platinum, palladium, or other precious metal bullion coins or bars. With detailed links covering almost every aspect. Written from over 50 years of experience. If you're just starting investing in precious metals there are many things to consider, including the benefits of investing in Gold over other precious metals in terms of VAT. CGT (Capital Gains Tax) and its's effect on your investments if you do not purchase British legal tender coins, premiums of coins, ratios of each precious metals. Additional things to consider is storage for your investments, shipping costs and the difference between new v. secondary market.
Investing in Gold
Gold should be your first choice because:-
- Investment gold is exempt from VAT in the UK (& also EU).
- You should aim to buy at the lowest percentage premium within reason.
- Does size matter? Yes!
- One ounce gold bullion coins are usually available at low premiums.
- Gold sovereigns are often available at only slightly higher premiums, and are more affordable because they are smaller, containing just less than a quarter ounce of fine gold.
- Gold bars are usually available at premiums similar to, or slightly less than, equivalent gold coins.
- Most coins and bars smaller than one ounce usually cost a relatively high premium, and therefore are not such good value.
Investing in Silver
Silver is also a popular investment and has many enthusiastic fans.
- Silver is subject to VAT, so in the UK, you pay the current rate of 20% tax at the front end on your investment, which is not really sensible or recommended.
- Percentage premiums are higher on silver than on similar size gold coins and bars, because the manufacturing cost is relatively higher. For example, if a one ounce silver coin costs £1 to make, that’s about 6% to start with. If a one ounce gold coin cost £2 to make, that would only be about 0.2%.
- Transport and shipping will cost disproportionately more for silver than for gold.
- Affordability. If you only have a very limited amount to invest, say £100, then you may prefer to buy silver rather than gold, but you will be paying higher premiums plus VAT, and you would be better off buying one sovereign when you have accumulated enough spare capital.
Investing in Platinum
Platinum is also worth thinking about.
- For many years, its price was higher than gold. At the time of writing, it was much lower, making it more attractive.
- It does cost slightly more to process platinum than gold, but not vastly more, so premiums are only slightly higher, unlike silver.
- VAT is payable on platinum, as on silver, and almost everything but investment gold.
Investing in Palladium
We do deal in palladium coins and palladium bars, but the retail investment market is minuscule, and any stock we have is usually secondary market.
Offshore Secure Storage Can Avoid VAT
Offshore storage is worth considering for larger investors. Many bullion investors are paranoid about being in physical possession of their investment, so it is not for everyone, but from a purely logical point of view, it makes good sense, as it can avoid having to pay VAT on silver, platinum or palladium.
Insurance and Secure Storage
Security and insurance are also factors to consider. While many people may be happy to hide a few gold sovereigns under the floorboards, insurance of high values at home can be expensive or impossible. Most people could not afford a high security safe or vault, with alarm systems. Safe deposit boxes are not universally available, and are often not covered by insurance. Third party secure storage is an option.
There are some providers of secure storage, including us. Minimum fees do apply, but our Fully Insured Secure Storage is very competitive, and, for most people, costs much less than doing it yourself.
Bullion Coins vs. Bullion Bars
Coins vs. Bars
Bullion bars are usually slightly cheaper to buy than bullion coins, but are not always as easy to dispose of, and any cost advantage when you buy is likely to be lost when it comes to selling.
Bullion coins and bars in sizes larger than one ounce are available, and are usually at lower premiums, but are not always the best answer. Silver kilo bars are a possible exception. Kilo gold bars, for example, are high value, and not everyone can afford them, so even though slightly cheaper to buy, there is a more restricted choice when it comes to sell them.
Aesthetics should not be of prime importance when investing, except that it may be slightly easier to sell an attractive item than an ugly one. If the design or appearance of your bullion is important to you, then you may be more of a collector than an investor. Different principles and logic may therefore apply.
Fakes, Forgeries, Frauds and Scams
Fakes exist of many bullion coins and bars. It is important to be aware that they exist, but don’t become paranoid. Some fakes are better, or worse, than others. Some gold coins for example contain the correct amount of gold (and sometimes too much). This limits their deficiency in value, but we advise against buying fakes. While the standard advice might be to buy from reputable dealers, not all dealers are as expert or as scrupulous as they should be. Many auction houses for example give little or limited guarantees against counterfeits. We, on the other hand, unconditionally guarantee the authenticity of what we sell.
Scams exist because there are potentially large amounts of money involved, there always have been, and always will be scams, frauds, and deceptions. It pays to be aware and cautious, but don’t get paranoid.
Designs of coins and bars vary. Our advice here is similar for aesthetics. If you prefer the design or appearance of different coins or bars, then it may not be stupid to pay extra for them, but do consider whether you will recoup any extra when you sell. There is nothing wrong with being a collector, but you may wish to apply different principles compared with purely investing.
CGT – Capital Gains Tax
Most British legal tender coins are exempt from Capital Gains Tax, so it may be worth larger investors paying slightly higher premiums when buying. Other coins and bars are not exempt from CGT, but this might not matter for many smaller investors.
We have already touched on these under “smaller sizes”. Premiums will almost always be higher than for the “sweet spot” sizes. Most quarter ounce gold coins, for example, will have a higher premium than for similar sized gold sovereigns, which are available at competitive prices. Tiny sizes, such as 1 gram or less, are usually best avoided because they will be at high premiums.
Advice in Your Interest
The advice we give is intended to be in your best interest, and not in ours. Some dealers will give you advice slanted towards whatever makes them more profit. We don’t do that!
There are quite a few foreign mints issuing bullion coins, which provides healthy competition, and choice. The British Royal Mint are competitive nowadays, on price and design. If you prefer to collect a variety, then do so, but be aware of the difference between collecting and investing.
Crown Gold or Fine Gold
Gold bullion coins need to be a minimum of 90% fine gold to qualify as investment gold. Older USA, and many European gold coins were made of 90% (.900 fine). British gold sovereigns are 22ct gold (91.66%), while some modern gold bullion coins are 99.9%, 99.99%, or even 99.999% fine gold (often slightly incorrectly called 24ct). There is no major reason to choose one standard over another in the UK, although some countries have different tax or import charges on coins lower than “24ct”.
Gold bars need to be at least 99.5% to qualify as investment gold for VAT exemption.
Old v. New Coins
By "old” we mean traditional circulation coins such as gold sovereigns, as opposed to “new” modern bullion coins which are mainly in ounces, fractions or multiples of ounces. There is no real benefit in buying modern one ounce gold bullion coins compared with older traditional types such as gold sovereigns, except that it makes the arithmetic or maths slightly easier. One plus point in favour of buying “older” bullion coins is there is more upside potential demand from collectors compared with modern one ounce pieces.
New v. Secondary Market
Generally speaking, secondary market coins and bars will cost less (lower premiums) than their new equivalents, in which case, they are the better buy. Because their premiums are lower, they are often in greater demand, and are therefore not always instantly available, and you might have to wait. This year’s brand new coins are usually more readily available, but will usually be at slightly higher premiums than secondary market coins.
Supply and Demand affects premiums and availability. In times of increased demand, there may be delays in getting anything, including new coins. Spikes in demand can outstrip transport, production of blanks, minting / stamping, packaging, and distribution, as well as cleaning out dealers’ stocks.
Financial Crises, such as the Sub-Prime, Credit, and Banking crisis, can and do cause stampedes into bullion and safe haven assets.
Covid caused demand to increase, and also caused production and transport problems. Although the worst of these now seem to have passed, the pandemic is still adversely affecting supply and transport lines, and not just for bullion products.
Bullion Market Prices
Spot and live market prices can now be found on many websites, including ours. Spot prices fluctuate almost constantly, but price feeds are only updated periodically, say every 15 seconds. All price feeds can be subject to interruptions, outages, latency, caching, technical glitches and other factors.
The best way to compare value, prices, and deals, is to look at the percentage premiums, rather than at actual monetary differences. If you are someone who does not understand percentages, you may be at a disadvantage. Some dealers and websites make it easier to compare premiums than others. We try to make things transparent and clear because we want to make it easy for investors to make the best decisions. Most of the time, this will mean dealing with us, which is a major reason we try to make it easy. Where VAT is involved, it is not as easy to compare premiums, but then the best premiums will almost always be on VAT exempt investment gold.
Nobody in their right mind gives credit on bullion. It would be almost impossible to do so and remain competitive.
Like buying a house or shares, to buy bullion competitively requires immediate or advance payment in cleared funds. Most dealers do not accept payment by credit card, with some exceptions for low value or high margin transactions. Similar applies also to debit cards to a slightly lesser degree. For high value transactions, most dealers have moved to require prepayment.
Legally Binding Contracts
Most bullion deals involve legally binding contracts between both parties. Although most dealers fully understand and comply, not all private investors understand this, but should do.
Most bullion transactions are exempt from, and not subject to The Consumer Protection (Distance Selling) Regulations 2013, or similar UK laws. Most bullion dealers state this in their terms and conditions.
Bricks and Clicks
We have been around since well before the internet, so you can visit our physical showroom. Currently you need to make an appointment. Pricing is not included as standard in our prices, so personal callers do not pay extra for postage they do not use. Naturally, we also deal by telephone and internet, as an extension of mail order which we have always operated.
We calculate shipping (postage) and insurance costs separately for a number of good reasons. It is simpler to programme, clearer and more transparent to display, and more realistic. “Free Postage” is an illusion. On many of our bullion products, we also show prices including shipping costs.
We also show competitor comparison prices on most of our popular bullion products. This is for transparency, and to make it easier for you to see that we are usually the most competitive UK supplier. These comparisons are shown with and without shipping costs.
Money Laundering, ID, and Compliance
Because we are major UK dealers, including high value, we are required to enforce anti-money laundering, anti-fraud, and other security measures. For most customers, this includes us taking full ID. Please understand this is not extra work we want to do, but we will try to help you through the process; please try to help us. We do not share your data with anybody unless we are required to do so. This would include suspicious behaviour, such as customers trying to evade tax or trying to provide false ID or other information.
Our premises are very secure, while at the same time keeping our showroom accessible.
Secure Website and Hosting
Our websites and systems are highly secure. We commission security and penetration testing (pen tests) above and beyond what we are required to do. Using them provides evidence of extra security.
Know Your Supplier
Do think carefully who you are buying from. There are many impressive websites, which claim to be the biggest, or best dealer, but often with little evidence to back up their claim. Some have prestigious sounding central London addresses, which turn out to be rented virtual office addresses, while the actual business is run from from some seedy back street in Essex. Other websites fail to make it easy or clear to see who the business is, or its address. Exercise great caution when dealing with these. It is worth checking the VAT registration and company number to ensure they are who they say they are. You can do this using Companies House.
Jewellers Pawnshops Auctions and Ebay
We often see worn, damaged, substandard, or fake gold sovereigns and other coins which people think they have bought cheaply from some of these outlets. While it can obviously be possible to get the occasional bargain, the opposite is all too often the case.
Peer to Peer
You may be able to buy some bullion coins from fellow collectors / stackers / investors, at closer to spot than from dealers, but possibly only in small quantities, and there are still matters of trust. Also, postage cost may still be a factor
Buy-Back and Buying
Some “coin marketing companies” appear to be very reluctant to buy coins from ordinary people, while some “buy-back”, which implies they will only buy coins they have sold. Real dealers, like us, are more than happy to buy bullion and other coins from multiple sources, and pay competitive prices for them; typically around spot (100%) for the most popular bullion coins.
Although we have done our best to ensure our advice is sound, it does not constitute financial advice, and we do not accept any legal liability for it.
Any Other Business?
If there is something we have not included in this page, anything you don’t understand, or have other questions which you think we should include, then please do get in touch.
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We are not financial advisers and we would always recommend that you consult with one prior to making any investment decision.