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How to invest in gold

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Michael Brown

Content Writer

At a glance

• You can choose to buy physical gold such as coins, bars and ingots
• Some banks offer gold accounts where you invest in gold that they own
• You can also invest in gold related companies through the stock market

Gold, throughout human history, has been considered a rare commodity and an integral part of our monetary system. According to the World Gold Council, the precious metal was first used as a form of currency in 550 BC. 

In fact, the gold standard, when a nation’s currency is directly linked to the value of gold, was still used in the UK until 1931. It was only when former USA President Richard Nixon abandoned the gold system in 1971 that countries began using the dollar as the reserve currency.

Still, this did not affect gold’s value. Central banks around the world often store gold to diversify and protect their reserves. Similarly, some invest in gold to protect their investment portfolio from market volatility too.

How to invest in gold for beginners

Those wanting to invest in gold for the first time often start by buying physical gold. Gold can be purchased in the form of coins, ingots, bars and wafers.

What are bullion coins?

Bullion coins can be easily sourced, and their price is based on the spot value of gold plus a small premium. These are legal tender that are of the required investment-grade.

They are available in a range of weights, including in oz such as 1/10oz, 1.4oz, 1/2oz and 1oz. Krugerrands or Britannias are popular 1 ounce gold bullion coins.

What are gold bars?

Gold bars are available as cast or minted gold bars. Cast gold bars are when molten gold is poured into a mould. It then cools to form a gold brick and is removed from the mould. A minted gold bar is created by using several dies to cut out the bar and embossed lettering from a larger sheet of gold and metal.

Investors can buy gold on an allocated or unallocated basis either with a bank or through a bullion brokerage.

Featured gold investment providers

    • Vaulted is the mobile platform and app that allows investors to purchase physical gold.
    • The gold is real and stored at the Royal Canadian Mint, or you can take physical delivery right to your home.
    • It takes less than one minute to set up an account.
    • Vaulted offers the lowest transaction fees and features the best cost structure in the industry.
    • There is even an automatic savings program called Vault Plan, that investors can set up to automatically purchase gold every month.
    • Buying or Selling Gold is as easy as buying a stock.
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Disclaimer

The list of gold investment providers on this page is a selection of services available and gives you an idea of the kind of options available. You can find out more about the individual products by visiting any of the providers listed. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts.co.uk will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts.co.uk recommends you obtain independent financial advice.

How is gold used?

Gold is currently used across the world in a variety of different sectors.

Approximately half of the demand for gold in the world comes from the jewellery sector, but this is reducing according to the World Gold Council.

Central banks and the investment sector also have a large appetite for the precious metal.

Central banks also form a significant part of the demand as emerging market central banks tend to rely on gold to diversify their own reserves.

To a lesser extent, gold is also used in technological innovations. While the volume of gold used in this sector may not be substantial, it still plays an important role in creating computer chips to building methods for delivering drugs into the human body.

Gold is also used in medicine, aerospace, and environmentally-friendly technology. For example, NASA’s Webb Space Telescope is covered with a microscopically-thin gold coating. This is used as an efficient reflector of infrared light, according to the World Gold Council.

What is the difference between an allocated and unallocated gold account?

The main difference is about the ownership of the gold and who is responsible for the security and insurance of that gold.

When you buy gold on an allocated basis this means you have the title for this gold and are the legal owner. This means you are also responsible for its safe storage. As discussed, this also means you will have to consider security and insurance fees.

However, when investing in gold in an unallocated account from a bank or third party, you do not retain the legal ownership of the gold. Rather than buying the gold and you owning this asset, you will deposit funds to the bank. The bank in return would then repay your investment when requested at the appropriate value at the time.

The upside is that the bank is responsible for the security of the gold and the relevant insurance, but there is the risk that if the bank went bust then these gold reserves could be at risk and would not be protected under the Financial Services Compensation Scheme (FSCS).

How do I invest in gold mining companies?

You can choose to buy shares in those companies involved in the mining and exploration of gold or invest in financial instruments that base their performance on the future value and changes in gold prices. These include products such as options, futures and spread betting. You can also invest in investment funds that themselves invest in gold to benefit from its value. You do not own any gold in these examples.

 Gold investment pros and cons

 Gold investment pros and cons

 Gold investment pros and cons

 Gold investment pros and cons

 Gold investment pros and cons

 Gold investment pros and cons

Investing in gold can be an important part of a larger investment portfolio, especially when diversifying your types of investment.
Throughout history gold has kept its value, especially in times of economic uncertainty and rising inflation. Therefore, you might consider investing in gold as a store of value. In other words, when interest rates are low, the stock market is uncertain, or inflation continues to rise, you can rely on gold as a tangible asset to stabilise your investment portfolio. For example, in July 2020 gold prices reached record levels as a response to growing economic uncertainties, while the value of the stock market had sharply declined. Gold also saw an increase after the 2008 financial crisis too, while the stock market dropped in value.
This investment is also known to favour long-term investors, who are looking to start saving for future generations. To illustrate, consider this example. In January 1992 gold was priced at £186.85 per ounce (oz) according to the World Gold Council. Extrapolate this over 30 years into the future and that same ounce would be now worth £1,339.17, which is well above the rate of inflation.
Investing in gold can be an important part of a larger investment portfolio, especially when diversifying your types of investment.
Throughout history gold has kept its value, especially in times of economic uncertainty and rising inflation. Therefore, you might consider investing in gold as a store of value. In other words, when interest rates are low, the stock market is uncertain, or inflation continues to rise, you can rely on gold as a tangible asset to stabilise your investment portfolio. For example, in July 2020 gold prices reached record levels as a response to growing economic uncertainties, while the value of the stock market had sharply declined. Gold also saw an increase after the 2008 financial crisis too, while the stock market dropped in value.
This investment is also known to favour long-term investors, who are looking to start saving for future generations. To illustrate, consider this example. In January 1992 gold was priced at £186.85 per ounce (oz) according to the World Gold Council. Extrapolate this over 30 years into the future and that same ounce would be now worth £1,339.17, which is well above the rate of inflation.
It is important to remember that gold is just a commodity. Therefore, unlike other investments such as stocks and savings accounts, it does not reward its investors with an income. Instead, you will have to rely on its value increasing over your investment period to make gold worth your while.
While investing in gold is perceived as a place of safety during difficult economic times, there are no guarantees that its value will always increase.
Gold is based on supply and demand. As with many investments, if you buy gold when demand is high, then it is possible that you can lose value on your investment.
In addition to a potential drop in value, investors buying physical gold need to consider its maintenance fees. Gold is heavy and cumbersome to store, requires expensive security, and needs insurance to protect you from theft.
Investors need to also be aware that investing in physical gold is an unregulated activity. This means there is no UK regulator that monitors those involved in the selling of physical gold as an investment.
It is important to remember that gold is just a commodity. Therefore, unlike other investments such as stocks and savings accounts, it does not reward its investors with an income. Instead, you will have to rely on its value increasing over your investment period to make gold worth your while.
While investing in gold is perceived as a place of safety during difficult economic times, there are no guarantees that its value will always increase.
Gold is based on supply and demand. As with many investments, if you buy gold when demand is high, then it is possible that you can lose value on your investment.
In addition to a potential drop in value, investors buying physical gold need to consider its maintenance fees. Gold is heavy and cumbersome to store, requires expensive security, and needs insurance to protect you from theft.
Investors need to also be aware that investing in physical gold is an unregulated activity. This means there is no UK regulator that monitors those involved in the selling of physical gold as an investment.
Investing in gold can be an important part of a larger investment portfolio, especially when diversifying your types of investment.
Throughout history gold has kept its value, especially in times of economic uncertainty and rising inflation. Therefore, you might consider investing in gold as a store of value. In other words, when interest rates are low, the stock market is uncertain, or inflation continues to rise, you can rely on gold as a tangible asset to stabilise your investment portfolio. For example, in July 2020 gold prices reached record levels as a response to growing economic uncertainties, while the value of the stock market had sharply declined. Gold also saw an increase after the 2008 financial crisis too, while the stock market dropped in value.
This investment is also known to favour long-term investors, who are looking to start saving for future generations. To illustrate, consider this example. In January 1992 gold was priced at £186.85 per ounce (oz) according to the World Gold Council. Extrapolate this over 30 years into the future and that same ounce would be now worth £1,339.17, which is well above the rate of inflation.
Investing in gold can be an important part of a larger investment portfolio, especially when diversifying your types of investment.
Throughout history gold has kept its value, especially in times of economic uncertainty and rising inflation. Therefore, you might consider investing in gold as a store of value. In other words, when interest rates are low, the stock market is uncertain, or inflation continues to rise, you can rely on gold as a tangible asset to stabilise your investment portfolio. For example, in July 2020 gold prices reached record levels as a response to growing economic uncertainties, while the value of the stock market had sharply declined. Gold also saw an increase after the 2008 financial crisis too, while the stock market dropped in value.
This investment is also known to favour long-term investors, who are looking to start saving for future generations. To illustrate, consider this example. In January 1992 gold was priced at £186.85 per ounce (oz) according to the World Gold Council. Extrapolate this over 30 years into the future and that same ounce would be now worth £1,339.17, which is well above the rate of inflation.
It is important to remember that gold is just a commodity. Therefore, unlike other investments such as stocks and savings accounts, it does not reward its investors with an income. Instead, you will have to rely on its value increasing over your investment period to make gold worth your while.
While investing in gold is perceived as a place of safety during difficult economic times, there are no guarantees that its value will always increase.
Gold is based on supply and demand. As with many investments, if you buy gold when demand is high, then it is possible that you can lose value on your investment.
In addition to a potential drop in value, investors buying physical gold need to consider its maintenance fees. Gold is heavy and cumbersome to store, requires expensive security, and needs insurance to protect you from theft.
Investors need to also be aware that investing in physical gold is an unregulated activity. This means there is no UK regulator that monitors those involved in the selling of physical gold as an investment.
It is important to remember that gold is just a commodity. Therefore, unlike other investments such as stocks and savings accounts, it does not reward its investors with an income. Instead, you will have to rely on its value increasing over your investment period to make gold worth your while.
While investing in gold is perceived as a place of safety during difficult economic times, there are no guarantees that its value will always increase.
Gold is based on supply and demand. As with many investments, if you buy gold when demand is high, then it is possible that you can lose value on your investment.
In addition to a potential drop in value, investors buying physical gold need to consider its maintenance fees. Gold is heavy and cumbersome to store, requires expensive security, and needs insurance to protect you from theft.
Investors need to also be aware that investing in physical gold is an unregulated activity. This means there is no UK regulator that monitors those involved in the selling of physical gold as an investment.
Investing in gold can be an important part of a larger investment portfolio, especially when diversifying your types of investment.
Throughout history gold has kept its value, especially in times of economic uncertainty and rising inflation. Therefore, you might consider investing in gold as a store of value. In other words, when interest rates are low, the stock market is uncertain, or inflation continues to rise, you can rely on gold as a tangible asset to stabilise your investment portfolio. For example, in July 2020 gold prices reached record levels as a response to growing economic uncertainties, while the value of the stock market had sharply declined. Gold also saw an increase after the 2008 financial crisis too, while the stock market dropped in value.
This investment is also known to favour long-term investors, who are looking to start saving for future generations. To illustrate, consider this example. In January 1992 gold was priced at £186.85 per ounce (oz) according to the World Gold Council. Extrapolate this over 30 years into the future and that same ounce would be now worth £1,339.17, which is well above the rate of inflation.
Investing in gold can be an important part of a larger investment portfolio, especially when diversifying your types of investment.
Throughout history gold has kept its value, especially in times of economic uncertainty and rising inflation. Therefore, you might consider investing in gold as a store of value. In other words, when interest rates are low, the stock market is uncertain, or inflation continues to rise, you can rely on gold as a tangible asset to stabilise your investment portfolio. For example, in July 2020 gold prices reached record levels as a response to growing economic uncertainties, while the value of the stock market had sharply declined. Gold also saw an increase after the 2008 financial crisis too, while the stock market dropped in value.
This investment is also known to favour long-term investors, who are looking to start saving for future generations. To illustrate, consider this example. In January 1992 gold was priced at £186.85 per ounce (oz) according to the World Gold Council. Extrapolate this over 30 years into the future and that same ounce would be now worth £1,339.17, which is well above the rate of inflation.
It is important to remember that gold is just a commodity. Therefore, unlike other investments such as stocks and savings accounts, it does not reward its investors with an income. Instead, you will have to rely on its value increasing over your investment period to make gold worth your while.
While investing in gold is perceived as a place of safety during difficult economic times, there are no guarantees that its value will always increase.
Gold is based on supply and demand. As with many investments, if you buy gold when demand is high, then it is possible that you can lose value on your investment.
In addition to a potential drop in value, investors buying physical gold need to consider its maintenance fees. Gold is heavy and cumbersome to store, requires expensive security, and needs insurance to protect you from theft.
Investors need to also be aware that investing in physical gold is an unregulated activity. This means there is no UK regulator that monitors those involved in the selling of physical gold as an investment.
It is important to remember that gold is just a commodity. Therefore, unlike other investments such as stocks and savings accounts, it does not reward its investors with an income. Instead, you will have to rely on its value increasing over your investment period to make gold worth your while.
While investing in gold is perceived as a place of safety during difficult economic times, there are no guarantees that its value will always increase.
Gold is based on supply and demand. As with many investments, if you buy gold when demand is high, then it is possible that you can lose value on your investment.
In addition to a potential drop in value, investors buying physical gold need to consider its maintenance fees. Gold is heavy and cumbersome to store, requires expensive security, and needs insurance to protect you from theft.
Investors need to also be aware that investing in physical gold is an unregulated activity. This means there is no UK regulator that monitors those involved in the selling of physical gold as an investment.
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What are gold exchange-traded funds (ETFs)?

Gold exchange-traded funds (ETFs) or exchange traded commodities (ETCs) are listed on the stock market like a traditional equity but they hold only assets centred on gold.

Your ETF performance will be based similarly on the performance of physical gold on the market.

What is the best way to invest in gold in the UK?

Investors can either use a gold bullion brokerage to buy gold, contact a bank that offers a gold account or speak with a financial adviser or stock broking service for broader gold investments.

An adviser or broker can help to review your investment portfolio and find the best gold investment strategy for your circumstances. 

Investing in gold FAQs

Is investing in gold free from VAT?

Those investing in gold bullion of investment-grade quality can do so without paying VAT in the UK, although investors should check the status of VAT for gold investments with HMRC.

Do I pay Capital Gains Tax on gold coins?

Gold coins minted in and after 1837 that are legal UK tender at the time they were purchased or sold should be exempt from Capital Gains Tax (CGT). They also need to be in Sterling to qualify, so a Sovereign that is a £1 sterling-based gold coin, would qualify for the exemption, while Kruggerrands would not as these a form of South African currency. Those buying gold coins minted before 1837 should be aware these are not classed as legal tender and are treated as chattels. There is the possibility that these could be exempt from CGT, if the gain does not exceed certain values set out in HRMC guidance.
Investors also need to bear in mind the rules for the selling of sets of coins and again should refer to HRMC guidance.
Gold that is not deemed to be legal tender will have CGT applied at the appropriate rate for profits over a set amount.

Read the Moneyfacts Taxfacts to find out the current rates and limits for CGT.

Can I buy gold from the Bank of England?

No, while the Bank of England holds more than 400,000 bars of gold, it stopped selling gold in the 1930s.

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