Gold Bars or Gold Coins: Which is Right For Me?
Whether you're a newbie to the world of gold or not, deciding whether to invest in bullion coins or bars indeed provides some food for thought. Before diving headlong into investing this way or that, it's advisable to conduct some in-depth research given that there is no right or wrong answer, it will vary depending on the individual investor.
As with any investment, there are a few key factors to consider:
- What is the value of the investment?
- What are the product premiums?
- What is your investment horizon?
- Where do you intend to store it?
- Is it eligible for Capital Gains Tax exemption?
- How will you go about achieving the return on your investment?
What Are Product Premiums?
The premium is the added cost charge above the spot gold price which is associated with manufacturing, handling, packaging, insurance and delivery expenses.
Most bullion dealers will only charge as small a percentage as possible, but it is an unavoidable cost as the dealers must also pay these costs.
If you’re looking to pay as low a premium as possible, then it is best to purchase gold bars. Bars have smaller premiums attached to them as their size keeps the manufacturing costs down. For example, it would be much more lucrative to buy a 1-kilo gold bar rather than ten 100g bars, and although there is no difference regarding the amount of gold, you would be looking to save about 1%, which equates to just over £300.
If you plan to buy gold as part of a long-term investment strategy, then larger gold bars are perfect. However, the flip side of this is that even though you've made a small saving, it means you will lack the flexibility that smaller denomination bars might afford.
How Will You Achieve ROI?
Buying gold bullion is typically purchased with the goal of preserving wealth and making a return over an extended period. Gold or silver bars provide excellent value at the point of purchase. However, they may not always replicate that value when you’re looking to sell.
Gold coins or smaller bars of gold and silver offer much more adaptability when it comes to getting the best value for resale. This elasticity could become very handy when you're looking to part company with your investment for quick cash.
During gold ownership, investors often wish to rebalance their portfolio, for example, let's say that someone has 20% of their portfolio tied up in a 1kilo gold bar, but they want to relinquish half of this to free up funds to play the markets.
This presents a tricky situation; they'd have to either sell the whole bar or pass on another potentially valuable investment. If they had invested in smaller gold values or gold bullion coins, they would have been granted more leeway. Gold coins are a hugely popular option for investors because their benefits are widely known and are easy to store as well as being perfect for trading if the global economy collapses.
British gold sovereign coins, in particular, are ideal for small-time investors and those who hold a significant amount of their investment in gold because they are free from Capital Gains Tax.
How to Use A Large Investment Fund…
For those who have more significant amounts of capital to invest, the decision should be based on getting the maximum return on your investments, which means only the more substantial gold bars are appropriate.
Investment experts also advise having a selection of British coins to diversify a portfolio. As previously mentioned these types of coins don’t attract Capital Gains Tax due to their class as legal tender.
While buying sovereigns tends to generate slightly raised premiums compared to larger gold bars, they represent excellent value for those looking to achieve substantial profits from their initial outlay.
How to Use Small & First Time Investment Funds…
At Sharps Pixley, we often advise that first-time investors investigate coins and bars as a viable option, despite the differing value. Our 100g and 1-ounce gold bars are the most common starting points for smaller investments, along with the sovereign and half-sovereign British coins, which offer a more modest investment.
Where Do You Plan to Store Your Investment?
If you're investing in a 1-kilo gold bar or thirty 1oz gold coins, the mass and size would be practically indistinguishable, but from a practical point of view, one would be much easier to store than the other.
Gold bars are much easier to store and therefore should be stored in a safe deposit box or a safe part of your home. But, with multiple coins, you can split your investment and place them in different locations, which lowers any risks associated with misplacing or losing them.
At Sharps Pixley, we always advocate bullion products that offer the very best value for money. The best way to go about this will be different for each, but as long as you keep the above factors in mind, you should find that making the right decision becomes a lot easier.
For more advice and information on any of our products feel free to contact us today or visit us at our St. James Street showroom.