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An Introduction to Investing in Gold: Five Key Questions to Get You Started

Investing in gold is something that most people have heard of as a good way to build a financial portfolio. Gold is straightforward and tangible. It has been considered a highly-prized precious metal for centuries and it can be made into lots of beautiful and useful items. The price of gold is carefully tracked to allow investors to work out when to buy and sell. Interested in learning more? Read on to discover our introduction to gold investment.

 

5 Key Questions About Investing in Gold

 

1. Why Should You Invest in Gold?

Adding gold to an existing investment portfolio, or creating a new one, has long been seen as a savvy move, due to the relatively stable price of gold and its enduring popularity amongst investors, collectors and the general public. Gold is known and understood the world over and offers excellent insurance and financial protection during turbulent times, such as those we are witnessing right now.

Global issues such as the pandemic and international conflicts and wars create uncertainty in the markets, which lead to rising inflation levels, reduced public spending and increased national debt. The traditionally safe option of buying gold can offer some much-needed reassurance in a volatile environment.

 

2002 Britannia Gold Coins Set - NGC PF70 ULTRA CAMEO

 

2. What Is the Difference Between Physical Gold and Gold EFTs?

Being able to physically hold something objectively valuable in your hands is an attractive proposition for those seeking security in their investments. Gold is not only valuable, it is also beautiful. Smooth, shiny and tactile, it gleams and pleases the eye in any form – gold bars, coins or jewellery. Physical gold is timeless and understandable. Gold EFTs, or Exchange Traded Funds, are a form of ‘electronic gold’.

In other words, they are funds that track gold prices or represent investments in gold mining companies. You own shares that are valued against the gold price or the company’s stock value. Gold EFTs are more complex; however, they don’t involve any physical assets that must be stored, protected and transported.

 

The Royal Arms 2019 1 oz Gold Bullion Coin

 

3. How Do You Know What Type of Gold to Buy?

As with any investment portfolio, the type of gold you buy is a very personal decision. It will depend on a lot of factors, including how much money you have to invest, what storage facilities you have, how much time you can commit to building up the portfolio and your own particular interests. For example, buying gold coins could appeal to history enthusiasts who will relish the chance to own a piece of the past.

Jewellery is a good option for people hoping to wear and enjoy their investments, rather than keep them locked away. There is a lot of information available online about each type of gold. It is worth doing careful research before committing to any particular one. Then, speak to a reputable gold expert who will help you get started and choose your first pieces to purchase.

 

Perth Mint 1oz Gold Bar

 

4. What Is the Tax Position on Building up a Gold Investment Portfolio?

In the UK, investors normally have to pay Capital Gains Tax on any assets worth more than their annual tax-free allowance, or Annual Exempt Amount. At the time of writing (Spring 2022), this amount stands at £12,300 or £6,150 for trusts.

You might be able to claim reliefs or deduct losses to reduce your tax bill. For many gold investors, this may never become relevant if the value of their portfolio does not surpass the Capital Gains Tax threshold. Speak to your accountant for more details about how the UK tax situation will affect any investment decisions you are planning to make.

 

Investing in Gold

 

5. How Should I Look After My Gold?

Gold must be safely and securely stored to avoid theft, loss or damage. Depending on the amount and size of your gold portfolio, options could include keeping it at a bank or specialist storage company. Otherwise, it can be kept in a safe or hidden place in the home. Store it in any packaging that it comes with and keep all paperwork with the gold.

This could include important authentication certification or proof of provenance that will make it easier to resell the gold later on. Make sure you have added the value of your gold to any house contents or other relevant insurance policy to protect yourself against potential risks. Don’t tell too many people about your gold, or show it off in public. If you wear gold jewellery, clean it afterwards with a lint-free cloth and replace it in its box to keep it clean and damage-free.

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