A tax-free investment for the Golden Age? Gold!

19 July 2011

goldNo-one’s a winner at the moment. Loan finance is hard to get, the interest return on investments practically non-existent.But if you are of an investing bent, there is a market player that has consistently performed, and now gold has hit a new record price of $1,610 an ounce (almost £1,000).

Of course, this would be better news if you had taken our non-financial advice and trotted down to Harrods and bought your bullion back in 2009, as that would mean you were sitting on, um, a pile of gold. However, despite Monday’s bonanza price, the general consensus is that the price will continue to rise, with some experts predicting a price topping $2,000 an ounce in the coming years.

But is gold for you? Although it is normally considered a fairly safe investment, and one that rides a recession well, there are always winners and losers. After all, that savvy old Chancellor of the Exchequer, Gordon Brown, sold off more than half of the UK's gold reserves, about 395 tonnes, between 1999 and 2002, when the price of bullion averaged $275 an ounce. Ouch.

The practicalities

Everyone knows that Gold is, well, a big lump of metal, normally found in slightly smaller quantities* around people's necks and fingers. So how do you actually invest in it?

Well, you can invest in actual gold. Either in bullion form or in coins, the most widely known of which are gold Sovereigns and Krugerrands. Sovereigns normally cost slightly more (because they are prettier) but post-1837 coins have the huge advantage of being exempt from Capital Gains Tax, owing to the fact that they are actually legal tender. (In case you are interested, their legal value is £1. But whatever you do, do not go and spend them in Poundland. Please.)

But what if you can’t get to Harrods to pick up your bullion or you can’t quite manage a whole bar? You can even buy gold online these days, and on GoldMadeSimple.com you can even buy your gold by the gram as a fraction of an actual bar. On the downside you can’t actually hold your (partial) bar of gold, but neither do you have to pay for storage.

Before you go handing over wodges of cash to  bloke in the pub, make sure you are dealing with someone reputable- check on the World Gold Councils - 'Where to buy directory' which can be found on its website at gold.org and the London Bullion Market Association members list which can also be located online at lbma.org.uk.

Other ways of investing in Gold could be to invest in gold-mining companies, which is the riskiest method of gold investment as you are also exposed to fluctuations in the stock market, or through exchange traded funds (ETFs), which works in a similar way to a unit trust, but the fund then invests in actual gold on your behalf.

Whoa. Back up. Tax?

Just like any other investment, any gain made on gold will be subject to UK capital gains tax, unless you hold legal tender coins (as above). Gold does not, in itself, produce an income, but if you invested in gold-mining shares for example, any dividends paid would also be subject to UK income tax.

However, if you are the canny sort and are wondering about tax-free wrappers, there is good and bad news. You cannot invest in actual gold (bars, bullion or coins) through an ISA, but you can hold gold-mining or ETF shares and benefit from tax free growth. Also, if you have a SIPP, you can invest in gold however you like, if that’s what you fancy, and get income tax relief up front and over time within the fund.

Anything else?

Well, while we’re looking at alternative investments, why limit yourself to gold? Why not look at investing in wine, provided you can be sure your mother-in-law won’t drink it all. A number of specialists now focus on wine as an investment. Or what about art and antiques? Bet the chap who bought Jane Austen’s unfinished manuscript back in 1988 for £90,000 was chuckling into his sleeve when it sold at Christie’s last week for almost £1million...

*Or, in the case of certain ‘bling’ celebrities, not that much smaller a quantity at all.

TOPICS:   Tax

4 comments

  • MrRobin
    It seems bonkers to invest in a commodity when it is at a record high, but then I've been saying that to myself about gold for around 2 years now and look what's happened. The odd thing about gold is that, apart from jewellery, it has no real 'use'. The price is rising because of an increased demand in the safe haven that it is perceived to have. It's gold's turn to be in the bubble and one day soon that demand will end and the price will crash. Pop!
  • mein c.
    Do not buy gold.
  • Not M.
    Fucking Gold Diggers http://www.foxnews.com/world/2011/07/13/man-searches-for-over-year-for-enough-gold-to-make-engagement-ring/
  • Energy S.
    Good article. Personally, I've been following natural gas stokcs for a while now and see tons of growth potential throughout the next decade or so. Natural gas is trading at it's lowest price in nearly ten years, but experts are predicting that by the year 2016 we will start to see the price of natural gas soar in response to higher demand. Ive also been watching smaller companies too like Alon U.S. Energy Partners, whose stock recently soared 56% in a two week period.

What do you think?

Connect with Facebook, Twitter, or just enter your email to sign in and comment.

Your comment