We ask the question gold bars or gold coins for investment purposes?
Gold is a popular investment choice because it is seen as a safe haven asset and a good store of wealth. When it comes to investing in gold, there are two main options: gold bars and gold coins. Both have their own advantages and disadvantages, so it is important to decide which one is right for you before you invest.
Gold Bars
Gold bars are the most common form of physical gold investment, largely the type owned by countries and institutional investors. The majority of bars tend to be larger and heavier than gold coins. When people think about gold investments they are the types of bars you see in movies, the 400 ounce (equivalent to 12.44Kg ) “Good Delivery” LBMA bars. For those of you who have seen the Italian Job, a Mini Cooper could only carry 34 real bars plus one driver.
In the retail market gold bars are sold in a variety of weights, from 1 gram to 1 kilogram.
Large gold bars can also be more affordable to purchase than gold coins, as they typically have a lower premium due to lower production cost. What you save on premium, you lose on flexibility.
Gold Coins
Gold coins are another popular form of physical gold investment. They are typically smaller and lighter than gold bars, and they come in a variety of designs and legal tender denominations. Gold coins can also be more expensive to purchase than gold bars, as they typically have a higher premium.
What is the Premium on Gold?
The premium is the additional cost charged above the gold spot price. This covers manufacturing costs, handling, packaging, insurance and delivery.
Gold bars can be cheaper than gold bullion coins and smaller bars, due to lower manufacturing costs. The larger the gold bar, the smaller its premium. For instance, a one kg gold bar will have a lower manufacturing cost than 10 x 100 grams gold bars. This makes gold bars a cost-effective option for investors with large budgets.
Gold bullion coins tend to have higher premiums due to their intricate designs, smaller sizes, and additional costs associated with minting and distribution. The manufacturing process for coins is more complex and involves additional expenses compared to gold bars. Many investors make the mistake of getting fixated by the premium and take a tax hit later on so let us save you that pain. Please read on….
What Tax do I pay on Gold?
When buying or selling investment gold (bars and coins) in the UK there is no VAT to pay. All investment grade gold is VAT exempt.
Capital Gains Tax, though, is something that you need to consider carefully when it comes to selling your bullion. UK coins produced by The Royal Mint with a face value are classified as legal tender in the UK. (For Example: Britannia coins and Sovereigns) This means they are exempt from any CGT. There is no CGT exemption for gold bars.
In April 2023, the government reduced the CGT exempt allowance by more than half to £6,000 per annum. In April 2024, this amount will be halved again to £3,000 per annum.
Buying gold coins may be slightly more expensive per gram than a bar, but could result in greater returns upon sale given the CGT exemption. Buying UK legal tender gold coins is therefore a popular choice for many investors.
Flexibility and Liquidity
Although larger size gold bars offer the best value when buying, they do not necessarily represent flexibility when selling. Smaller gold bars such as the 1oz, 50g and 100g bars, and gold coins offer greater flexibility at resale and still have fairly low premiums.
There are many reasons where this flexibility would come in handy, when releasing part of your investment for quick access to cash or changing the balance of your portfolio. Considerations would include the ease and safety with which you could send your gold. Larger, more valuable pieces may need to be personally delivered as insurance is limited.
Gold Bars or Gold Coins?
The best way to decide whether to invest in gold bars or gold coins is to consider your individual investment goals and risk tolerance.
Here are some additional things to consider when making your decision:
- Investment goals: What are you hoping to achieve with your gold investment? Are you looking for a short-term or long-term investment? Do you want to invest in gold for its value as a precious metal or for its collectable value?
- Tax situation: Are you likely to exceed capital gains tax thresholds?
- Risk tolerance: How much risk are you comfortable with? Gold is generally considered to be a safe haven asset, but it is still subject to price fluctuations.
- Budget: How much money do you have to invest?
- Storage: Where will you store your gold investment?
- Liquidity: How important is it to you to be able to sell your investment quickly?
If you are still unsure which option is right for you, it is a good idea to speak with a trusted bullion dealer. We can help you assess your individual investment goals and risk tolerance, and talk through the options with you.
Invest with Bleyer
Our friendly, award-winning Bleyer customer service team is always on hand to assist you. If you’d like to talk to a specialist on the phone and have a free 1-2-1 consultation, please call the office on 01769 618618. We’d love to hear from you.
