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Physical Gold

innocuous
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Physical Gold

#363052

Postby innocuous » December 5th, 2020, 12:02 am

Was thinking of holding a small amount of physical gold. Nothing crazy, ~£8k worth. I was looking at the different options, Sovereigns vs other coins or bars, even playing with the idea of silver/platinum vs gold as they have industrial uses. I understand the capital gains benefits of a sovereign but I doubt this investment is ever going to get high enough to go beyond the personal allowance, so not sure they are worth the premium vs say gold bars (which are 12% cheaper).

The only factor I cannot get my head around is the collectors factor. If I bought some sovereigns that are seen as very desirable, but still within the 180% gold price level (to avoid VAT) then the chances are that over time (10-20yrs) the coin would increase in value from both the price in Gold and as a collectable therefore outperforming the market.

So I am now trying to understand if this is a sensible approach or just me overthinking?

What do you think?

JohnW
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Re: Physical Gold

#363062

Postby JohnW » December 5th, 2020, 7:30 am

No idea, but consider this bit of cynicism:
'My only advice is NOT to buy "numismatic" coins unless you are a hard core coin collector. (I own two.) They will be sold to you as "uncirculated" but when sold by you they will be will be magically downgraded to "awful" (a fly skidded while landing on them and are now terribly worn, etc.).'
https://www.bogleheads.org/forum/viewtopic.php?t=118731

Adamski
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Re: Physical Gold

#363087

Postby Adamski » December 5th, 2020, 9:58 am

I'd say consider the popularity to help ability to sell ie.sovereigns which have a big market make it easier to sell. I'd also add a high end gold watch. The latest iwatch will be zilch in 12 months. But a high quality, antique gold watch always be in demand. Just to see one, eyes pop out. So that will never go out of fashion.

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Re: Physical Gold

#363104

Postby scotview » December 5th, 2020, 11:00 am

Some points to note.
1 You pay VAT on silver coins you don't pay VAT on gold coins. You generally wont recoup the VAT on selling.
2 Silver is very bulky to store, gold sovereigns are much smaller to store.
3 Silver can be prone to discolouration/milk spotting, gold generally keeps its finish.
4 Older Sovereigns are "gold" colour, recent sovereigns are more "coppery" colour, not so attractive.
5 An alternative silver strategy is to aquire some Half Crowns. Pre 1920 coins are 92.5% silver. They have implicit authenticity and they give you a sence of owning recent history.
6 You need to decide your purpose for buying gold/silver. Is it for end of society barter, is it for trading, is it for inheritance or is it for a store of wealth in the event of the great reset. ;)
Hope this is useful.

innocuous
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Re: Physical Gold

#363125

Postby innocuous » December 5th, 2020, 11:55 am

scotview wrote:Some points to note.
1 You pay VAT on silver coins you don't pay VAT on gold coins. You generally wont recoup the VAT on selling.
2 Silver is very bulky to store, gold sovereigns are much smaller to store.
3 Silver can be prone to discolouration/milk spotting, gold generally keeps its finish.
4 Older Sovereigns are "gold" colour, recent sovereigns are more "coppery" colour, not so attractive.
5 An alternative silver strategy is to aquire some Half Crowns. Pre 1920 coins are 92.5% silver. They have implicit authenticity and they give you a sence of owning recent history.
6 You need to decide your purpose for buying gold/silver. Is it for end of society barter, is it for trading, is it for inheritance or is it for a store of wealth in the event of the great reset. ;)
Hope this is useful.


I think I like the idea of Gold as a combination of investment in the commodity and a backup for the reset. I'm not going to collect, and inheritance would be a long time off. Society banter would be off the cards, if I have the gold I wont be talking about it to anyone except internet forums apparently!

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Re: Physical Gold

#363232

Postby stevensfo » December 5th, 2020, 5:44 pm

JohnW wrote:No idea, but consider this bit of cynicism:
'My only advice is NOT to buy "numismatic" coins unless you are a hard core coin collector. (I own two.) They will be sold to you as "uncirculated" but when sold by you they will be will be magically downgraded to "awful" (a fly skidded while landing on them and are now terribly worn, etc.).'
https://www.bogleheads.org/forum/viewtopic.php?t=118731



Agree totally about not going in that direction. It's just like stamp collecting. You'll think your collection must be worth millions till the day you try to sell it and discover the truth. Sovereigns are being minted every year and I can't see non-numismatic coins ever becoming collectible. I reckon that my Dad came to the same conclusion about his stamp collection in the 1950s. I spent ages as a child in our village prefab library with his collection open, next to the Stanley Gibbons catalogues. Very few would have covered the cost of a Sherbert Fountain or CurlyWurly! ;)

I would simply pick up sovereigns as cheaply as possible. It's years since I did this but I remember that the cheapest were in Guernsey and some German websites. It was also possible to quite legally buy silver at much lower rates of VAT. I think it is Latvia or Estonia that has a lower rate, and Germany on silver bars, though the laws may have been changed. Of course, you could always drive down to Switzerland and fill your boot with silver at a low VAT rate, but not being in the EU, you'd have to declare them.

Then of course, is the question, where to store them.

Steve

GrahamPlatt
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Re: Physical Gold

#363245

Postby GrahamPlatt » December 5th, 2020, 6:24 pm


Padders72
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Re: Physical Gold

#363296

Postby Padders72 » December 5th, 2020, 9:36 pm

Be careful of the spread on any physical metal transaction. Regarding gold, you will buy at best at around 105% of spot and sell at around 97% at most so the spread is a pretty nasty ~8%+. I too would be wary of supposed collector grade coins. The spread there will be much greater still. As already noted the VAT issue makes silver even less attractive. I have a kilo bar of silver put by myself (and a few florins and half crowns too) and will probably flog it on ebay when the time comes since they seem to make ~110% of spot there, a dealer will offer at most 90% of spot, usually less. In short, unless you expect metal prices to shoot up, physical metal isn't a sure thing.

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Re: Physical Gold

#363323

Postby seekingbalance » December 5th, 2020, 11:19 pm

A few points - I hold a fair bit of both physical gold and silver, and also silver and gold ETFs and also some gold miners

Silver is not worth it - too cheap, VAT, big spreads. It is cheap relative to its historic ratio to gold, but that VAT and big spreads are a big headwind to overcome. Even buying from abroad and lucking out on import taxes you’ll still pay some form of European tax, and also £8000 worth of silver weights a LOT, so will cost a fair bit to ship - if you buy at exact spot price (you can’t) that is 444 ounces of silver, more realistically between 350 and 400 ounces.

Gold is much easier. No VAT, no CGT in your scenario (unless Rishi raids the allowances!) for some time, much lighter per £ value. And to be clear, CGT is not an issue anyway, as you need to buy coins, Sovereigns to be precise.

I don’t know where you got your 12% price advantage for bars over bullion coins - this is not true. Both Sovereigns and Krugerrands are cheaper per g than any gold bar, unless you have found an oddity, and are either seeing overpriced sovs or dirt cheap bars. My favourite site, Atkinsons, has random dated Sovereigns at £45.54 per g of gold, One ounce gold bars at £45.74 per g. Krugerrands are a fraction cheaper at £45.26 per g of gold (note that both Sovereigns and Krugerrands are not 100% gold but my numbers reflect the actual gold content).

So, Krugerrands are the cheapest way in, but my advice would be to forego the small price difference and stick to sovereigns. You get more coins, so can get closer to your stated spend target - 24 currently, versus 5 Krugerrands with a big underspend, or 6 with a small overspend. If you do later wish to sell, selling one or two of your 24 sovereigns gives you more flexibility v a minimum of 1 of your 5 Krugerrands.

Buying small bars is crazy expensive, and medium sized (1oz, 100g, 50g) bars are more expensive than Sovereigns. Only when you get to the crazy sized bars do they become cheaper than Sovereigns, and these cost way more than £8k, and even the 1000g bar at £45k works out at £45.09 per g, not much cheaper than Sovereigns.

A quick point on numismatic coins. Buying the exact right coin/s at the right price now may well result in a better outcome, but if you do that you are not buying “gold” you are buying a collectible, so may as well buy a bottle of Laffite wine or a Tracy Emmin print. Getting the future value of a collection right is not the same thing as betting on the future value of gold. Perhaps a store of value for a different part of your portfolio?

Selling price is very dependent on demand, less so than buy price. Currently the spread for selling your Sovereigns back to Atkinsons is £13. I have seen it at £11 but also at £20. £13 is 4% - way worse than a top flight share or a gold ETF, but in line with some smaller shares or say preference shares.

Gold is near all time highs, though has dropped a lot recently. Where does it go from here? That is for you to guess and decide if buying is for you. I personally struggle to buy here, but only because I bought all of mine at sub £200 per Sovereign, versus current price of £333 - but I never was great at averaging up!

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Re: Physical Gold

#363436

Postby stevensfo » December 6th, 2020, 11:38 am

Some excellent advice here. If interested in anything 'collectible', make sure it's really an enjoyable hobby so that you get pleasure and some education as well as an investment. I collected stamps and coins when much younger and got tired of it after a while, especially when I realised how difficult and subjective the grading was. But I got a lot of pleasure and learned a lot of geography and history.
I had a phase where I was interested in silver decanter labels and silver wine filters (mainly 1770s - 1900) and sometimes used to bid in online auctions (not Ebay). I learned a lot about the history of silversmiths and how to identify hallmarks, so it was great fun, but the commissions and postage charged by the auction houses were totally exorbitant and although I can consider them as 'tangible assets' and thus an important part of a diversified portfolio, I doubt that I'll ever sell them. If anything, I'll probably resume the hobby when I retire in a few years.
So definitely stick with gold sovereigns. Small, easy to hide and transport and nice to pass on to your kids if you never have to sell them. I agree about silver being a pain, but some coins, e.g. the Panda and Australian Lunar coins, are beautiful and make excellent presents. Most people have no idea whatsoever about the price of silver and assume they must cost far more.

Steve

PS I've often wondered if you take a pocketful of change through airport security, if the scanner can spot the difference between pound coins and sovereigns. Project for a rainy day. ;)

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Re: Physical Gold

#363611

Postby Bubblesofearth » December 7th, 2020, 7:52 am

I'd echo much said on here and add that I've always found Chards pretty good for buying sovereigns;

https://www.chards.co.uk/gold-bullion-s ... arket/1990

If buying £8k worth then the premium to the gold price is around 3.5%. Better than most bars and you get the CGT exemption.

However, they seem to be out of stock of some options at the moment.

BoE

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Re: Physical Gold

#363634

Postby 1nvest » December 7th, 2020, 9:44 am

Other than for relatively small amounts I wouldn't personally carry physical gold across borders, instead convert it to money, electronically transfer that money and reconvert back to gold again at the target destination. Or with some services I believe you can 'transfer' your gold from one of their vaults to any other, again electronically.

Most Britannia's are also legal tender and hence don't incur VAT (any more than you pay VAT on the metallic value of other coins). Spreads also tend to be slightly narrower than for Sovereigns, more like 5% average, with dynamic variations around that over time.

Investing in general fundamentally captures gains from one or a combination of price appreciation/interest/volatility-capture factors. Some investors focus on individual elements, Options traders might target volatility capture, stock investors target price appreciation/income, cash deposits target just income. Long term history - if you'd yearly rebalanced 50/50 stock/gold then broadly you would have seen accumulation of ounces of gold that compared to inflation, whilst the price per ounce also broadly paced inflation. Not trading results in just price appreciation alone, foregoes the volatility capture benefit. Some electronic gold (ETF) some physical provides optionality - the capacity to select which or a combination of both to add/reduce potentially more tax efficiently. Over the 1980/1990's for instance whilst the price of gold broadly declined, rebalancing saw ounces of gold expanded, as though the ounces of gold in the safe had magically created dividends. That expansion of ounces of gold turned around in the 2000's, as the price of gold soared and ounces of gold were reduced in order to expand number of stock shares being held.

Gold is another currency, and trading the volatility in currencies can be beneficial. If for instance you held gold, $ and £ in equal measure, rebalanced yearly, then even just hard currencies stuffed under a mattress would have helped reduce inflation compared to holding just one currency alone. Better of course if the £ and $ were more productively employed, perhaps invested in a UK home and US stocks (holding some UK stocks (perhaps even REIT type stocks) as part of the 'UK home' asset holding element provides liquidity benefits). Three currencies, three assets (land, commodity (gold), stocks) diversity, such that even the total loss of one would be more a discomfort than being critical.

As previously mentioned the first rule of owning physical gold is ... you don't own any. Even the strongest safe can be opened with a knife (threat of open it .. or else). Or if you to publicise it, then utilise a honey-pot, one obvious safe with enough gold/cash in it to satisfy the thief that they'd captured your entire 'stash', the rest more discreetly hidden perhaps in plain sight, such as within a metallic curtain rail, or wherever https://www.familyhandyman.com/list/20- ... ng-places/

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Re: Physical Gold

#364894

Postby seekingbalance » December 10th, 2020, 6:31 pm

Bubblesofearth wrote:I'd echo much said on here and add that I've always found Chards pretty good for buying sovereigns;

https://www.chards.co.uk/gold-bullion-s ... arket/1990

If buying £8k worth then the premium to the gold price is around 3.5%. Better than most bars and you get the CGT exemption.

However, they seem to be out of stock of some options at the moment.

BoE


Yes, Chards are good. I personally use Atkinsons as they are often cheaper and have better personal service. It is interesting to compare prices on the two sites - at this instant Atkinsons are fractionally cheaper if you buy 10 or more, Chards are cheaper for 9 or less - but we are talking pennies per Sovereign unless you are buying 200 or more, which is still only around £1 difference.
https://atkinsonsbullion.com/gold/gold-coins/sovereign-gold-coins/pre-owned-uk-full-gold-sovereign-mixed-dates

as an example - and these prices literally change by the 30 seconds - 24 Sovereigns are £8080.32 at Chards, £8065.20 at Atkinsons - a £15 saving.

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Re: Physical Gold

#364896

Postby seekingbalance » December 10th, 2020, 6:41 pm

1nvest wrote:Most Britannia's are also legal tender and hence don't incur VAT (any more than you pay VAT on the metallic value of other coins). Spreads also tend to be slightly narrower than for Sovereigns, more like 5% average, with dynamic variations around that over time.


I agree - Krugerrands and Britannia's are the absolute cheapest way to buy, but for an £8000 purchase I would still recommend Sovereigns, just for the flexibility and convenience.

Current spot difference for buying prices are 2.9% for £8000-ish of Britannias versus 3.3% for Sovereigns. For 5 ounces of gold that is a decent saving - about £27 on a £7000 outlay. But to get close to £8000 you have to buy 6 Brittanias, which may be fine, but is £500 over an £8000 budget. If that is an issue you can buy 24 Sovereigns for £65 over budget, albeit paying a little more for the gold for the privilege.

Or of course, mix and match!

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Re: Physical Gold

#480216

Postby 1nvest » February 12th, 2022, 3:48 pm

seekingbalance wrote:
1nvest wrote:Most Britannia's are also legal tender and hence don't incur VAT (any more than you pay VAT on the metallic value of other coins). Spreads also tend to be slightly narrower than for Sovereigns, more like 5% average, with dynamic variations around that over time.

I agree - Krugerrands and Britannia's are the absolute cheapest way to buy, but for an £8000 purchase I would still recommend Sovereigns, just for the flexibility and convenience.

Current spot difference for buying prices are 2.9% for £8000-ish of Britannias versus 3.3% for Sovereigns. For 5 ounces of gold that is a decent saving - about £27 on a £7000 outlay. But to get close to £8000 you have to buy 6 Brittanias, which may be fine, but is £500 over an £8000 budget. If that is an issue you can buy 24 Sovereigns for £65 over budget, albeit paying a little more for the gold for the privilege.

Only just now seen your reply! :oops: On other boards such as thesilverforum some typically both buy and sell individual coins for around spot+2%, so for a single 1 ounce Britannia coin via Special Delivery (insured up to £2500) a round-trip buy/sell total cost of just under £10. Less than a round trip brokers fee to buy/sell stock/shares, and if held/secured privately no yearly fees/expenses - other than I guess you should also include the time value of the 2% above spot paid that isn't 'returned' until sold, lost interest on the £26 above spot amount assuming a £1300 spot gold price, around £1/year if interest rates were 4%, 0.077%/year (half that if interest rates were 2%). Which of course also excludes human capital/time costs.

Buyers are happy to get the discount relative to other sources that might be levying a 5% premium. Sellers are happy to get the premium to spot rather than spot or perhaps 2% below spot.

Shouldn't do that via the likes of EBay however, but instead via trusted individual with a history of such trust/reputation having been established.

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Re: Physical Gold

#480484

Postby ayshfm1 » February 14th, 2022, 10:47 am

Sovs get my vote for gold. The one ounce coins have too much value.

For silver UK pre decimal coins have silver in them pre 1947 it's 50% pre 1920 is 92.5% (IIRC). Since these were real coins there is no VAT on them and they retain the benefit that everyone (who cares) knows what they look like and how much silver is in them. Worth having a few tucked away along with the sovs just in case! (I don't view either as an investment, more limited insurance)

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Re: Physical Gold

#480538

Postby 1nvest » February 14th, 2022, 2:21 pm

ayshfm1 wrote:Sovs get my vote for gold. The one ounce coins have too much value.

For silver UK pre decimal coins have silver in them pre 1947 it's 50% pre 1920 is 92.5% (IIRC). Since these were real coins there is no VAT on them and they retain the benefit that everyone (who cares) knows what they look like and how much silver is in them. Worth having a few tucked away along with the sovs just in case! (I don't view either as an investment, more limited insurance)

A Sovereign has a legal tender value of £1, for 1 ounce Britannias's its £100, so approximately 4 Sovereigns per ounce = £4 comparative legal tender value to Britannia's £100. Back in 2005 or so a Britannia's gold content value was around just twice its legal tender value, only since then has the gap widened. A nice floor characteristic. Imagine Britannia's available back to pre 1987 (when the first were struck) and go back to the early 1970's when a ounce of gold cost less £20, but the legal tender value of a coin = £100.

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Re: Physical Gold

#580020

Postby jaizan » April 1st, 2023, 1:23 pm

innocuous wrote:Was thinking of holding a small amount of physical gold. Nothing crazy, ~£8k worth. I was looking at the different options, Sovereigns vs other coins or bars, even playing with the idea of silver/platinum vs gold as they have industrial uses. I understand the capital gains benefits of a sovereign but I doubt this investment is ever going to get high enough to go beyond the personal allowance, so not sure they are worth the premium vs say gold bars (which are 12% cheaper).


1 The capital gains tax limits will fall to £3000, so it would not take much of a gain on £8k to be above the limit.

2 The cheapest way to buy gold is via an etf, with a very low spread. So that's all you need, when things are going well.....
In my view, one of the main reasons to buy physical gold is for the long term AND just in case we have very unpleasant economic issues. Like hyperinflation or extreme levels of taxation.
The other main reason might be for people who have already used their ISA allowances etc, so want a further capital gains tax free opportunity.
Either way, sovereigns seem perfect to me.

I can think of nothing better than a few gold sovereigns for such a case.
Preferably purchased in small quantities with no traceability at a reputable gold seller, such as Sharps Pixely.

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Re: Physical Gold

#580026

Postby moorfield » April 1st, 2023, 1:52 pm

jaizan wrote:In my view, one of the main reasons to buy physical gold is for the long term AND just in case we have very unpleasant economic issues. Like hyperinflation or extreme levels of taxation.



If you follow the Dow-Gold ratio (*) then gold is relatively (17x) very cheap currently, but you will need the patience of a saint before you start buying stocks again.

(*) see https://www.bullionvault.co.uk/gold-new ... buy%20gold.

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Re: Physical Gold

#580049

Postby 1nvest » April 1st, 2023, 3:58 pm

jaizan wrote:
innocuous wrote:Was thinking of holding a small amount of physical gold. Nothing crazy, ~£8k worth. I was looking at the different options, Sovereigns vs other coins or bars, even playing with the idea of silver/platinum vs gold as they have industrial uses. I understand the capital gains benefits of a sovereign but I doubt this investment is ever going to get high enough to go beyond the personal allowance, so not sure they are worth the premium vs say gold bars (which are 12% cheaper).


1 The capital gains tax limits will fall to £3000, so it would not take much of a gain on £8k to be above the limit.

2 The cheapest way to buy gold is via an etf, with a very low spread. So that's all you need, when things are going well.....
In my view, one of the main reasons to buy physical gold is for the long term AND just in case we have very unpleasant economic issues. Like hyperinflation or extreme levels of taxation.
The other main reason might be for people who have already used their ISA allowances etc, so want a further capital gains tax free opportunity.
Either way, sovereigns seem perfect to me.

I can think of nothing better than a few gold sovereigns for such a case.
Preferably purchased in small quantities with no traceability at a reputable gold seller, such as Sharps Pixely.

Tavex have tighter spreads, and spreads of Britannia coins are tighter than Sovereigns

Even with supposed physically backed ETF's there are risks, in-hand (physical) is better than not IMO, but has its own distinct risks. ETF's are better for (regular) traders.

Whist Britannia spreads can be 3%, on the likes of thesilverforum many trade between themselves so you might both buy and sell at around spot.

For stocks, some pay 1.5% FX to convert Pounds to Dollars to buy a ETF/whatever that trades in US dollars, and 1.5% to convert dividends and sales back again to Pounds, 3% round trip, such as in ISA's.


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