Advice Guide for UK Precious Metal Bullion Investors

[LawrenceChard]

 

This is actually a draft of what I hope will be a concise but comprehensive advice page for anyone thinking of investing in gold, silver, or platinum bullion coins or bars.

The definitive version of it will be appear soon on the Chards website, but I hope it will also be a useful resource for "newbies" on TSF.

I also invite suggestions, criticisms, and other comments.

The final online version will have links to expanded, detailed pages about the various topic headings and bullet points included here:

 

Advice Guide for UK Precious Metal Bullion Investors 

Gold Should Be Your First Choice

• Gold should be your first choice, because investment gold is exempt from VAT in the UK (& also EU). 
• You should aim to buy at the lowest percentage premium within reason. 
• Does size matter? Yes! 
• One ounce gold bullion coins are usually available at low premiums. 
• Gold sovereigns are often available at only slightly higher premiums, and are more affordable because they are smaller, containing  just less than a quarter ounce of fine gold. 
• Gold bars are usually available at premiums similar to, or slightly less than, equivalent gold coins. 
• Most coins and bars smaller than one ounce usually cost a relatively high premium, and therefore are not such good value. 

Silver Is Also a Popular Investment

• Silver is also a popular investment, and has many enthusiastic fans. 
• It is subject to VAT, so in the UK, you pay the current rate of 20% tax at the front end on your investment, which is not really sensible or recommended. 
• Percentage premiums are higher on silver than on similar size gold coins and bars, because the manufacturing cost is relatively higher. For example, if a one ounce silver coin costs £1 to make, that’s about 6% to start with. If a one ounce gold coin cost £2 to make, that would only be about 0.2%. 
• Transport and shipping will cost proportionately more for silver than for gold. 
• Affordability. If you only have a very limited amount to invest, say £100, then you may prefer to buy silver rather than gold, but you will be paying higher premiums plus VAT, and you would be better off buying one sovereign when you have accumulated enough spare capital. 

Platinum Is Also Worth Thinking About

• Platinum is also worth thinking about. For many years, its price was higher than gold. At the time of writing, it was much lower, making it more attractive. 
• It does cost slightly more to process platinum than gold, but not vastly more, so premiums are only slightly higher, unlike silver. 
• VAT is payable on platinum, as on silver, and almost everything but investment gold. 

Palladium

We do deal in palladium coins and bars, but the retail investment market is minuscule, and any stock we have is usually secondary market. 

Offshore Secure Storage Can Avoid VAT

Offshore storage is worth considering for larger investors. Many bullion investors are paranoid about being in physical possession of their investment, so it is not for everyone, but from a purely logical point of view, it makes good sense, as it can avoid having to pay VAT on silver, platinum or palladium.

Insurance and Secure Storage

Security and Insurance are also factors to consider. While many people may be happy to hide a few gold sovereigns under the floorboards, insurance of high values at home can be expensive or impossible. Most people could not afford a high security safe or vault, with alarm systems. Safe deposit boxes are not universally available, and are often not covered by insurance. Third party secure storage is an option. 

Secure Storage

There are some providers of secure storage, including us. Minimum fees do apply, but our Fully Insured Secure Storage is very competitive, and for most people, costs much less than doing it yourself. (See Secure Storage page).

Bullion Coins v. Bullion Bars

 Coins v. Bars

Bullion bars are usually slightly cheaper to buy than bullion coins, but are not always as easy to dispose of, and any cost advantage when you buy is likely to be lost when it comes to selling. 

Ratios

The relative prices of gold, silver, platinum, or palladium, are worth looking at, and taking into consideration. We have pages for Gold:Silver and other ratios, and advice pages about them. (Links) 

Larger Sizes

Bullion coins and bars in sizes larger than one ounce are available, and are usually at lower premiums, but are not always the best answer. Silver kilo bars are a possible exception. Kilo gold bars, for example, are high value, and not everyone can afford them, so even though slightly cheaper to buy, there is a more restricted choice when it comes to sell them. 

Aesthetics should not be of prime importance when investing, except that it may be slightly easier to sell an attractive item than an ugly one. If the design or appearance of your bullion is important to you, then you may be more of a collector than an investor. Different principles and logic may therefore apply. 

Fakes, Forgeries, Frauds and Scams

Fakes exist of many bullion coins and bars. It is important to be aware that they exist, but don’t become paranoid. Some fakes are better, or worse, than others. Some gold coins for example contain the correct amount of gold (and sometimes too much). This limits their deficiency in value, but we advise against buying fakes. While the standard advice might be to buy from reputable dealers, not all dealers are as expert or as scrupulous as they should be. Many auction houses for example give little or limited guarantees against counterfeits. We, on the other hand, unconditionally guarantee the authenticity of what we sell.  

Scams exist. Because there are potentially large amounts of money involved, there always have been, and always will be scams, frauds, and deceptions. It pays to be aware and cautious, but don’t get paranoid.

Design

Designs of coins and bars vary. Our advice here is similar for aesthetics. If you prefer the design or appearance of different coins or bars, then it may not be stupid to pay extra for them, but do consider whether you will recoup any extra when you sell. There is nothing wrong with being a collector, but you may wish to apply different principles compared with purely investing. 

CGT – Capital Gains Tax

Most British legal tender coins are exempt from CGT, so it may be worth larger investors paying slightly higher premiums when buying. Other coins and bars are not exempt from CGT, but this might not matter for many smaller investors. 

Fractional Sizes

We have already touched on these under “smaller sizes”. Premiums will almost always be higher than for the “sweet spot” sizes. Most quarter ounce gold coins, for example, will have a higher premium than for similar sized gold sovereigns, which are available at competitive prices. Tiny sizes, such as 1 gram or less, are usually best avoided because they will be at high premiums. 

Advice in Your Interest

The advice we give is intended to be in your best interest, and not in ours. Some dealers will give you advice slanted towards whatever makes them more profit. We don’t do that! 

World Coins

There are quite a few foreign mints issuing bullion coins, which provides healthy competition, and choice. The British Royal Mint are competitive nowadays, on price and design. If you prefer to collect a variety, then do so, but be aware of the difference between collecting and investing. 

Crown Gold or Fine Gold

Gold bullion coins need to be a minimum of 90% fine gold to qualify as investment gold. Older USA, and many European gold coins were made of 90% (.900 fine). British gold sovereigns are 22ct gold (91.66%), while some modern gold bullion coins are 99.9%, 99.99%, or even 99.999% fine gold (often slightly incorrectly called 24ct). There is no major reason to choose one standard over another in the UK, although some countries have different tax or import charges on coins lower than “24ct”. 

Gold Bars need to be at least 99.5% to qualify as investment gold for VAT exemption. 

Old v. New Coins

By "old” we mean traditional circulation coins such as gold sovereigns, as opposed to “new” modern bullion coins which are mainly in ounces, fractions or multiples of ounces. There is no real benefit in buying modern one ounce gold bullion coins compared with older traditional types such as gold sovereigns, except that it makes the arithmetic or maths slightly easier for those who or lazy or innumerate. One plus point in favour of buying “older” bullion coins is there is more upside potential demand from collectors compared with modern one ounce pieces. 

New v. Secondary Market

Generally speaking, secondary market coins and bars will cost less (lower premiums) than their new equivalents, in which case, they are the better buy. Because their premiums are lower, they are often in greater demand, and are therefore not always instantly available, and you might have to wait. This year’s brand new coins are usually more readily available, but will usually be at slightly higher premiums than secondary market coins.  

Supply and Demand affects premiums and availability. In times of increased demand, there may be delays in getting anything, including new coins. Spikes in demand can outstrip transport, production of blanks, minting / stamping, packaging, and distribution, as well as cleaning out dealers’ stocks. 

Financial Crises, such as the Sub-Prime, Credit, and Banking crisis, can and do cause stampedes into bullion and safe haven assets. 
Covid caused demand to increase, and also caused production and transport problems. Although the worst of these now seem to have passed, the pandemic is still adversely affecting supply and transport lines, and not just for bullion products.

Bullion Market Prices

Spot and live market prices can now be found on many websites, including ours. Spot prices fluctuate almost constantly, but price feeds are only updated periodically, say every 15 seconds. All price feeds can be subject to interruptions, outages, latency, caching, technical glitches and other factors. 

Comparison

The best way to compare value, prices, and deals, is to look at the percentage premiums, rather than at actual monetary differences. If you are someone who does not understand percentages, you may be at a disadvantage. Some dealers and websites make it easier to compare premiums than others. We try to make things transparent and clear because we want to make it easy for investors to make the best decisions. Most of the time, this will mean dealing with us, which is a major reason we try to make it easy. Where VAT is involved, it is not as easy to compare premiums, but then the best premiums will almost always be on VAT exempt investment gold. 

Credit

Nobody in their right mind gives credit on bullion. It would be almost impossible to do so and remain competitive. 

Cleared Funds

Like buying a house or shares, to buy bullion competitively requires immediate or advance payment in cleared funds. Most dealers do not accept payment by credit card, with some exceptions for low value or high margin transactions. Similar applies also to debit cards to a slightly lesser degree. For high value transactions, most dealers have moved to require prepayment. 

Legally Binding Contracts

Most bullion deals involve legally binding contracts between both parties. Although most dealers fully understand and comply, not all private investors understand this, but should do. 

Distance Selling

Most bullion transactions are exempt from, and not subject to The Consumer Protection (Distance Selling) Regulations 2000, or similar UK laws. Most bullion dealers state this in their terms and conditions. 

Bricks and Clicks

We have been around since well before the internet, so we have a physical showroom which you can visit. Currently this requires an appointment. Postage is not included as standard in our prices, so personal callers do not pay extra for postage they do not use. Naturally, we also deal by telephone and internet, as an extension of mail order which we have always operated. 

Shipping Costs

We calculate shipping (postage) and insurance costs separately for a number of good reasons. It is simpler to programme, clearer and more transparent to display, and more realistic. “Free Postage” is an illusion. On many of our bullion products, we also show prices including shipping costs. 

Competitor Comparison

We also show competitor comparison prices on most of our popular bullion products. This is for transparency, and to make it easier for you to see that we are usually the most competitive UK supplier. These comparisons are shown with and without shipping costs. 

Money Laundering, ID, and Compliance

Because we are major UK dealers, including high value, we are required to enforce anti-money laundering, anti-fraud, and other security measures. For most customers, this includes us taking full ID. Please understand this is not extra work we want to do, but we will try to help you through the process; please try to help us. We do not share your data with anybody unless we are required to do so. This would include suspicious behaviour, such as customers trying to evade tax or trying to provide false ID or other information. 

Security

Our premises are very secure, while at the same time keeping our showroom accessible. 
Secure Website and Hosting. Our websites and systems are highly secure. We commission security and penetration testing above and beyond what we are required to do, Our PEN tests, for example, are only required for “payment processors”. We are not “payment processors”, but having them provides evidence of extra security.

Know Your Supplier

Do think carefully who you are buying from. There are many impressive websites, which claim to be the biggest, or best dealer, but often with little evidence to back up their claim. Some have prestigious sounding central London addresses, which turn out to be rented accommodation addresses, while the actual business is run from from some seedy back street in Essex. Other websites fail to make it easy or clear to see who the business is, or its address. Exercise great caution when dealing with these.  

Jewellers Pawnshops Auctions and Ebay

We often see worn, damaged, substandard, or fake gold sovereigns and other coins which people think they have bought cheaply from some of these outlets. While it can obviously be possible to get the occasional bargain, the opposite is all too often the case. 

Peer to Peer

You may be able to buy some bullion coins from fellow collectors / stackers / investors, at closer to spot than from dealers, but possibly only in small quantities, and there are still matters of trust. Also, postage cost may still be a factor  

Buy-Back and Buying

Some “coin marketing companies” appear to be very reluctant to buy coins from ordinary people, while some “buy-back”, which implies they will only buy coins they have sold. Real dealers, like us, are more than happy to buy bullion and other coins from multiple sources, and pay competitive prices for them; typically around spot (100%) for the most popular bullion coins. 

Disclaimer

Although we have done our best to ensure our advice is sound, it does not constitute financial advice, and we do not accept any legal liability for it.

Any Other Business? If there is something we have not included in this page, anything you don’t understand, or have other questions which you think we should include, then please do get in touch. 

 

All comments welcome.

Spot an error, and you might win a pint!

😎

 

Edited May 25, 2022 by LawrenceChard

[dicker]

Excellent.

A small table explaining Product vs CGT and VAT might be very useful for a punter to quickly establish the relative virtues of each metal and the form in which it is available?

Additionally, the term “accommodation addresses” might be changed to something like “service addresses” or “virtual office addresses”.  

PEN testing - shouldn’t be capitalised in my experience. Pen or pen is more standard.

In the section “Know your supplier”, can I suggest that checking VAT registration and Company number is also a good check.  

Also might be worth suggesting checking out companies Companies House returns to understand a dealers balance sheet!  Publicly available documents on Companies house.  (Several times I have looked at the annual returns of a company with a flash website and found that they have less capital than I carry in my wallet on a daily basis!)

Best

Dicker

 

accommodation addresses

[LawrenceChard]

15 minutes ago, dicker said:

Excellent.

A small table explaining Product vs CGT and VAT might be very useful for a punter to quickly establish the relative virtues of each metal and the form in which it is available?

Additionally, the term “accommodation addresses” might be changed to something like “service addresses” or “virtual office addresses”.  

PEN testing - shouldn’t be capitalised in my experience. Pen or pen is more standard.

In the section “Know your supplier”, can I suggest that checking VAT registration and Company number is also a good check.  

Also might be worth suggesting checking out companies Companies House returns to understand a dealers balance sheet!  Publicly available documents on Companies house.  (Several times I have looked at the annual returns of a company with a flash website and found that they have less capital than I carry in my wallet on a daily basis!)

Best

Dicker

 

accommodation addresses

Thanks for that very quick and detailed critique.

Some of the points should get included in the linked pages, but I will also copy your suggestions to Amy who is doing the formatiing on our new page, and should also be working on the links.

This could take a week or so, and I may need to draft a few new, improved link pages.

😎

[dicker]

I look forward to reading it.  

A long long time ago, when I first started to have an interest in various PM’s I found some of your websites (the dawn of the internet).  

The information was fascinating, unavailable elsewhere, so feeding back is a pleasure.

Best

Dicker

 

 

 

[LawrenceChard]

40 minutes ago, dicker said:

I look forward to reading it.  

A long long time ago, when I first started to have an interest in various PM’s I found some of your websites (the dawn of the internet).  

The information was fascinating, unavailable elsewhere, so feeding back is a pleasure.

Best

Dicker

 

Thanks yet again!

With our old websites, I aimed to create a balance between information and sales, and structured the sites so that each had a clear information section, and a separate, but linked products section. I believe it worked, and am pleasantly surprised that some our our old heritage pages still get found on Google, despite not being mobile friendly, and lacking quite a few features which Google algorithms now reward.

We also took some advice when revamping our new, main site, that people wanting to buy wanted to get to the sales pages in as few clicks as possible, and did not want, or have the patience to wade through, or past, information pages. This apears to be valid, and to apply strongly to people using their mobile phones. I think much of this is rather sad, but it seems essential to cater for their needs.

Meanwhile, I still believe that infomation, advice, and opinion is well worth trying to provide, but our site design does not make this easy to provide. In the days of simpler website design, I would have banged out the page as soon as I had finished drafting it, hoping someone would proof-read it for me, and adding links and refinements as I went along.

I have noticed that most new members on TSF start off by asking for advice. They generally get lots of it, but don't often get a comprehensive guide. I have found myself wanting to point them to an existing page on any of our sites, rather than compose a new, custom answer. Sometimes we do indeed have pages which answer their questions. We already have some "investing" advice pages, but they are rather disjointed, and this is my attempt to rectify the situation.

Some advice offered by dealers is an obvious sales pitch to sell something they want to push, and I have always tried to give advice which is in the best interest of the customer, rather than my own commercial interest. The payback I hope comes when the recipient realises that we are genuine, have given good advice, and get rewarded with their trade. This fits nicely with wanting to make a modest profit at competitive prices, and do so frequently and repeatedly, as opposed to making a big fat profit once. I still believe this is a good long term strategy, although I do notice quite a few short-termist competitors doing quite well.

😎

 

[Gordy]

just about to read it, you owe me a pint! first line..... i'll let you be the detective though 😂🍷

[Roy]

5 minutes ago, LawrenceChard said:

In the days of simpler website design, I would have banged out the page as soon as I had finished drafting it, hoping someone would proof-read it for me,

Old habits die hard! The composition is dreadful Lawrence. 

https://www.grammarly.com

😇

[Roy]

2 hours ago, LawrenceChard said:

Percentage premiums are higher on silver than on similar size gold coins and bars, because the manufacturing cost is relatively higher. For example, if a one ounce silver coin costs £1 to make, that’s about 6% to start with. If a one ounce gold coin cost £2 to make, that would only be about 0.2%

I have to ask about this:

'Premiums on silver are higher than gold because of the manufacturing cost'.  But, in your example, a 1oz silver coin costs £1 to make and a 1oz gold coin costs £2 to make?

Please explain.

 

(I know the answer, but I'm a newb 😃)

Edited May 24, 2022 by Roy

[Gordy]

nice read, look forward to more, cheers

[LawrenceChard]

16 minutes ago, Gordy said:

just about to read it, you owe me a pint! first line..... i'll let you be the detective though 😂🍷

Did you want draft, or draught?

😎

[LawrenceChard]

12 minutes ago, Roy said:

I have to ask about this:

'Premiums on silver are higher than gold because of the manufacturing cost'.  But, in your example, a 1oz silver coin costs £1 to make and a 1oz gold coin costs £2 to make?

Please explain.

 

(I know the answer, but I'm a newb 😃)

Percentage premiums are higher on silver than on similar size gold coins and bars, because the manufacturing cost is relatively higher.

Yes, it would be easy to write this stuff if I could KIS, but still cover everything, without exceeding anyone's attention span limit.

I did read your P.S., and appreciate it.

😎

Edited May 24, 2022 by LawrenceChard

[Roy]

8 hours ago, LawrenceChard said:

The definitive version of it will be appear soon on the Chards website, but I hope     will be a useful resource for "newbies" on TSF.

You've corrected line 1, now line 2.

I'd proof read the whole thing for a half sovereign 😎

Edited May 25, 2022 by Roy

[ArgentSmith]

 

4 hours ago, LawrenceChard said:

• Transport and shipping will cost proportionately more for silver than for gold. 

Transport, shipping and storage will cost proportionately more for silver than for gold. 

?

[LawrenceChard]

8 hours ago, ArgentSmith said:

 

Transport, shipping and storage will cost proportionately more for silver than for gold. 

?

Good spotting!

I had to think about that, and how to correct it:

Transport, shipping and storage will cost disproportionately more for silver than for gold.

You dissin' me bro'?

😎

[modofantasma]

A question @LawrenceChard 

With inflation, operating costs for many businesses and individuals rise, are we likely to see increasing premiums on coins generally as buyers, as dealers are met with higher bills? 

If a dealer has a 5% spread say on £100k of sales today, their £5k margin would be covering less bills and expenses than it did in the past. I appreciate if gold price rises then selling the same oz of gold (call it 280 sovs) today might be keeping up with inflation automatically?

 

[LawrenceChard]

2 minutes ago, modofantasma said:

A question @LawrenceChard 

With inflation, operating costs for many businesses and individuals rise, are we likely to see increasing premiums on coins generally as buyers, as dealers are met with higher bills? 

If a dealer has a 5% spread say on £100k of sales today, their £5k margin would be covering less bills and expenses than it did in the past. I appreciate if gold price rises then selling the same oz of gold (call it 280 sovs) today might be keeping up with inflation automatically?

 

"increasing premiums" - I don't see why, except possibly on lower value items and smaller quantities, where the labour cost becomes disproportionately higher.

"keeping up with inflation automatically?" - Probably.

It might mean dealers need to be more efficient to stay in business.

😎

[LawrenceChard]

The new page went live today, with a few edits:

https://www.chards.co.uk/blog/advice-guide-for-uk-bullion-investors/1041

Thanks for all the helpful suggestions.

We do still need to add explanatory expanded links to it, so it might be a few weeks before we are perfectly happy with it.

😎

[Stuntman]

Hi Lawrence,

Really nice and comprehensive stuff.  As others have said - I enjoyed reading that.

I haven't clicked on your link yet, but in relation to your original post - in the Comparison section you use the word 'discreet' (monetary differences) when I think you probably mean 'discrete' (i.e. distinct, separate).

EDIT - the live webpage says 'discreet' at time of writing 😉

Edited May 25, 2022 by Stuntman

[LawrenceChard]

1 hour ago, Stuntman said:

Hi Lawrence,

Really nice and comprehensive stuff.  As others have said - I enjoyed reading that.

I haven't clicked on your link yet, but in relation to your original post - in the Comparison section you use the word 'discreet' (monetary differences) when I think you probably mean 'discrete' (i.e. distinct, separate).

EDIT - the live webpage says 'discreet' at time of writing 😉

Thanks. That was a good find.

I had to look long and hard at that. I don't remember using "discreet" or "discrete", and neither convey what I intended. The best I can think of is "actual monetary differences", which is what I have changed it to.

I am still puzzled about what I intended to write!

😎

[Gordy]

On 24/05/2022 at 20:21, LawrenceChard said:

Do think carefully who you are buying from. There are many impressive websites, which claim to be the biggest, or best dealer, but often with little evidence to back up their claim. Some have prestigious sounding central London addresses, which turn out to be rented accommodation addresses, while the actual business is run from from some seedy back street in Essex. Other websites fail to make it easy or clear to see who the business is, or its address. Exercise great caution when dealing with these.  

excellent point Lawrence, due diligence is a must when using new sources.... 

[ArgentSmith]

As this is a guide for noobs would it be worth a word of caution regarding numismatics. 🤔

[Groundup]

Is there a section about how to squeeze the most % out of a dealer when selling. 

All advice welcome.

Edited May 26, 2022 by Groundup

[LawrenceChard]

On 26/05/2022 at 00:32, ArgentSmith said:

As this is a guide for noobs would it be worth a word of caution regarding numismatics. 🤔

Can you provide some explanation?

Is that beware of numismatics, or what?

🙂

[LawrenceChard]

On 26/05/2022 at 03:08, Groundup said:

Is there a section about how to squeeze the most % out of a dealer when selling. 

All advice welcome.

No.

We do already have a few pages about selling in general, although it look like I need to re-write a similar, comprehensive one.

Some of my basic advice includes:

Know what you have got.

Know what you hope to get for it.

Shop around if necessary.

Be aware that auctions, including ebay, are often not a good answer.

Have a polite, pleasant conversation, rather than being confrontational.

Other suggestions welcome!

😎

 

[Stuntman]

^^^ all good, sensible advice there.  Possibly the only other thing to consider adding alongside "know what you hope to get for it" would be something along the lines of "Do some research into recent completed sales to give you an idea of a realistic price".

And maybe something like "Be prepared to agree to disagree with the dealer's offer.  They also have to make a living..."