Investment Forum - Buying some gold

OK, so we (Shareworld) decided we wanted to buy some gold. Why? For the fun of it, as an exercise for a future Shareworld article to help others, as a hedge against inflation, instead of spending/wasting the money. Firstly decide how we are going to "buy" gold. As we have limited funds (about £500) mining shares etc. are out, so it comes down to physical gold. Narrow that down to Krugers or Sovereigns. We would only get one Kruger and maybe want to sell half the investment in the future (also there are two of us!). So looks like Sovereigns. The full sovereign is probably the best bet as we want to get as close to buying pure gold as possible. OK, maybe look at a small bar (but aren't they minmum 1oz?). First thing to establish is what is the intrinsic value?
Gold price (as I write) is USD932 and GBP/USD is 1.6485
A sovereign is 0.2354 oz (Troy) and 22K or 22/24 pure gold. So I make that £126
The Royal Mint sells the new sovereign from £199. If my figures are correct that's ridiculous.
Any comments on my calculations so far?

Where can we buy Sovereigns from other than the Royal Mint then? Because we dont want to pay £199 if their gold value is only £126 do we?

Well there is more to it than that. The gold sovereign has some other value other than the gold content. Like the fact that it is a coin and therefore collectable. However the coin that you buy for £199 would fetch about £135 from a dealer. Had a very long and interesting chat with a guy called Ingram from the London Coin Company. Their price is around £160-£170.

Good point.

£160 - £170 sounds better.

For some reason we never bought the coins (I think Dave spent the money!). I heard the other day that Sovereigns were going for £500 partly because of the limited minting of other gold coins. That's about £300

Should that be 500USD?

Aye, well spotted!

There is no better time than now to invest in gold sovereigns and  and protect your wealthThe coins increase in value with the gold price which has risen steadily over the last few years and according to experts still has a long way to go. They also attract a premium over the value of gold which is dependant on supply and demand and currently world mints cannot keep up with demand. E.g. American eagles are on allocation as the US mint cannot get enough blanks. There are tax benefits as Sovereigns do not attract neither VAT or  as legal tender Capital Gains Tax. You will own beautiful coins that have historic and aesthetic value, plus an insurance for your wealth as you also have a tangible asset that has world wide liquidity. http://goldcoin.org/numismatic/the-premium-on-gold-coins/56/

I am not so sure I would be so bullish on the gold price. Where would you suggest buying (and selling) gold coins and what is the usual spread?
What do you think about buying gold ETFs?

Hildon,
Do you know the exact situation about the tax position. Presumably it is just gold sovereigns that are exempt form CGT (as opposed to Krugerrands etc.). What about VAT? Is there VAT/CGT on new coins & bullion?

VAT—From January 1st  2000 VAT rate on « Investment  Gold» in the UK and the rest of the EU were harmonised making it exempt which is similar to zero rated.
What is investment Gold? -
Gold of a purity not less than 995 thousands in a form of a bar or wafer, of a weight excepted by bullion markets
A gold coin minted after1800 , a purity not less than 900/1000, is,or has been legal tender in country of origin, is sold at a price not exceeding 180% of the market value of the gold or is a coin specified in HMRC notice 701/21A
Capital Gains Tax– in addition to VAT exemption coins of legal tender, sterling gold coins including Soverigns and Britannias are also excempt from Capital Gains Tax (CGT)
Kuggerands, Eagles and other bullion coins which are not legal tender in the UK are free from VAT but subject to CGT

Thanks, Hildon. Very concise.
Thoughts on Gold ETFs and cheap place (close spread)to buy and sell gold coins for investment (like sovereigns, Krugers etc.)?

There is not a perfect answer in the UK yet but I do know of a solution in France http://aucoffre.com/ where the idea is to set up a membership community where members can buy and sell amongst themselves or buy from the company at very low premium. Currently a Sovereign is €186 (£163) which is only just over 2% premium over yesterdays spot price. Obviously if you buy and sell within the community there is no dealer cut.  The company also offers third party vaulted storage so your coins are safely stored and insured and can be sold without movement.  Its a pretty neat idea and I believe they are opening a branch in the UK soon. There are ways to take advantage of the French passion for hoarding gold  by investing in gold Napoleons where you have the possibility of selling at higher premiums than you bought as the French will panic buy as soon as there is some form of crisis. http://goldcoin.org/gold-coins/goldnapoleons-why-are-they-of-interest-in-the-uk/305/

Seems a good idea. Unfortunately I couldn't get into that site-maybe wrong browser or is it Flash? Anyway it's in French!
What is the spread on, say, Krugers? What about liquidity.What about security? And settlement?
Many years ago you could buy and sell Krugers at the LSE (unofficially or course). The spread was about £2. Of course the price was a lot lower then £150?