A Beginner’s Guide to Investing in Gold

Written by Karen Bryan

The investment world can be utterly daunting at times. There are so many options to choose from, such as: stocks, bonds, certificates of deposit, countless commodities, real estate, exchange traded funds, venture capitalism, and currency. There’s an overwhelming amount of choice and it can feel like the investment world is reserved purely for the super-rich and economics experts. But this isn’t the case at all. If you take a little time to research one type of investment at a time, you can avoid feeling overwhelmed and you can arm yourself with the practical knowledge required to start making well-informed investment decisions. This guide will look specifically at gold – helping you understand more about the merits of investing in gold and how you can get started.

Why Should You Invest in Gold?

This is perhaps the best question to ask first; if you have no reason to invest in gold, then there’s no point in learning more about it. However, there are lots of reasons to invest in gold:

  • In the UK, gold bullion is VAT free, so you will not have to pay extra taxes like you do with many other commodities.
  • Unlike when you buy a property, where you have to pay stamp duty (additional lump-sum land tax) when a property is over £125,000, a large investment in gold bullion can be made without an additional surprise tax bill.
  • A few specific gold coins are exempt from capital gains tax, such as gold sovereigns and gold and silver Britannia coins. So, if you’re very close to a high capital gains tax threshold, investing 5–15% on specific gold coins could help you continue to make money without incurring a much bigger tax bill.
  • Gold is a non-perishable, physical commodity. So, unlike any farming produce or biological commodity, there is no danger of a climate cycle like El Niño or bad weather ruining a whole year’s crop yield and thus destroying your investment. Put simply, gold is a considerably reliable commodity.
  • With gold bullion, there is no need for a third party to be involved. You will likely have your gold insured and stored in a safe, but you do not need anyone else to be involved with your gold bullion investment. This cuts down on risk significantly.
  • Unlike silver (which fluctuates significantly with the global economy), gold is known for its market stability. So although gold’s value does go up and down in accordance with the global markets, it does so in a much smaller, less volatile manner. This makes it easier to predict when its value will change and to then change your buying or selling actions accordingly.
  • You can also get a tax break from the HMRC on portions of your income you use to invest in pensionable assets. This means that investing in gold on years when you make a lot of extra money could help alleviate your tax bill a little, as well as helping you save up for your retirement.

There are more good reasons to invest in gold coins and bullion, but this list covers the main benefits. If one or some of these benefits pique your interest in investing in gold, then you’ll need to know how to do it…

How to Invest in Gold

Now that you’re interested in investing in gold, you just need to know where you can buy it, how much it’s worth, and what to do with it.

It used to be much trickier for normal people to purchase gold bullion, but the internet has given rise to reliable and convenient gold bullion online stores like London Gold Bullion. You can buy gold in either bullion or coin form from a supplier like LGB. In fact, these online gold sellers often offer the cheapest prices and the best additional benefits, such as free UK delivery on all orders and resources that help you learn how to save gold for your pension and advice on how to store your gold bullion.

Before you buy gold bullion, it’s important to learn about the London Gold Fix – which you might also hear referred to as the London Fix. The London Gold Fix is a fixed gold value that much of the world trades on from day to day. As the name suggests, the London Gold Fix is based off the London gold auctions at 10.30am and 3.00pm each day. What happens is that the value of gold is decided in the auctions and that value is then frozen and many countries around the world use that fixed price for several hours, until it is updated. To get familiar with gold’s value and how it fluctuates, it’s a good idea to keep an eye on the London Fix from day to day. Make a note of the value each day and compare them once you have a month’s or several months’ worth of data. This will give you a precise understanding of gold’s value first-hand and will help you recognise the best time to buy.

Now that you know how to watch the gold market for the ideal time to invest, you need to know gold’s unit of measurement. Gold is measured in troy ounces, an old imperial measurement that equates to 31.1034768g, which is roughly equivalent to 1.0971oz, but any good online gold bullion store will supply you with a conversion to grams and kilograms, which is the unit of mass we’re all more used to dealing with. Put this together with the London Fix and you’ll be able to tell that if gold is worth £979.43 per troy ounce, then it is worth £31.49 per gram. So, if you had £10,000 to invest, you’d be able to buy up to 10.21 troy ounces of gold, which is equivalent to 317.566498g. Knowing this, you can look through an online gold retailer’s selection of gold bullion and find the most suitable size of bullion or coins for your buying power.

How to Store Gold

As mentioned briefly and linked to above, most reputable online gold retailers will give you advice on how to insure and store your gold. Some of them may even provide you with a free shipment service to an assay office of your choice. An assay office is a secure location in which you can store your gold bullion. The best gold bullion companies, as in London Gold Bullion’s example, have their own assay office and can offer to store your purchased gold bullion for you. This is incredibly convenient and usually saves you a bit of money – and all money saved can go into investing in even more gold bullion.

So that’s all of the gold investment information and advice we have for you in this guide. We hope you’ve learned a significant amount about gold and that you feel much more empowered to begin investing in gold bullion and coins.