One of my oldest friends from my early accountancy days is Hugh Williams who practices in the West Country. He produces his own newsletter, which he is kind enough to send me. This article on gold by Nevile Gwynne is first class – in essence, he debunks the more esoteric methods of acquiring gold (eg. exchange-traded funds [ETFs]) and recommends instead that you buy gold sovereigns; that you buy these through one dealer and one dealer only (John Haynes and Co) and that you trust absolutely no-one but “one or more trustworthy family members…” with the information as to where these are kept.
1. In what form to buy the gold.
At least for British taxpayers, English gold coins are clearly the only choice. By contrast with non-British gold coins and with gold bullion, they are completely free from capital gains tax. Along with gold coins of all other countries, but not always with gold bars, they are also VAT exempt.
People who were to buy and sell gold in any form very frequently might become classed as traders, and therefore enter the income tax net. It is, however, unlikely that any of the sort of investors in gold that I have in mind will want to trade in it in this way. First reason: as I made clear in the last article, gold should be seen as a defensive, protective investment, rather than as something to be let go as soon as it rises in price. Second reason: there is a fairly wide gap between the buying and selling price, and, while this is of negligible importance over the long term, it means that gold bought for physical ownership is not really conducive to “churning”.
One can of course trade in gold without taking delivery, as, for instance, through the so-called exchange-traded funds (ETFs). I do not, however, recommend that. In the first place, I am not recommending gold on the basis that it is certain to go up in the short-term. As to that, I simply do not know, and indeed I am only mildly interested. The purpose of buying gold, as far as I am concerned, is strictly as a long-term, protective investment, principally as a hedge against the raging inflation which has seemed to me inevitable – and fairly soon — ever since governments worldwide have started the – dishonestly titled – “quantitative easing” policy. In the second place, it is never possible to know for certain that such funds actually do possess the physical assets that they claim to possess.
2. The choice in British gold coins.
There are three British gold coins: the sovereign, which of course originally represented £1, the half-sovereign and, as of fairly recently, the quarter-sovereign. Double-sovereigns (representing £2) and quintuple sovereigns (£5) have also been struck at various times, though not recently. The smaller the coin is, the higher is the premium over the price of the gold content (and all gold coins are at a higher premium over the gold-content than gold bars are). People making a substantial investment would therefore want it to be mainly in sovereigns rather than in either of the two smaller coins. The latter do, however, have the occasional advantage of enabling one to buy gold with less money than one sometimes might have conveniently available. They also they make nice presents at less cost than one might want to incur in some cases.
3. A little bit of historical background.
There is something genuinely romantic about sovereigns. They were first issued as long ago as in 1489, for King Henry VII. They were discontinued in 1604 and replaced with various other gold coins such as the guinea, until production was finally restored in 1817 – since when production has never ceased.
4. Where to buy it.
This is definitely an important matter, because, as a very recently, there are quite a number of fake gold coins around. Fakes are, for instance, quite common at eBay. I have no hesitation in recommending one dealer and one dealer only: —
John Haynes & Co.
6 St. Michaels Alley, The City
London EC3V 9DL
Telephone 020 7621 0358
They are principally jewellers, and, as the address indicates, they are in the City in London (four or five minutes’ walk from Bank underground station). For some years, they have been the only people I deal with. There are just three who work there, and they are extremely nice and utterly trustworthy. Those who want to make purchases can either go there with cash, or send a cheque for an amount to buy what is wanted once the cheque has been cleared, with a view to picking up the coins or having them sent. They deal in all the gold coins and also in gold bullion.
5. Where to store it.
Not, not in any of the normal places for investments-safe-custody, such as with dealers or in bank safe-deposit-boxes. Emphatically, such purchases should be kept at home — under the bed, in a teapot, buried in the ground, wherever. You do of course need to trust one or more trustworthy family-members or friends with the information on where it is kept. During the course of history, considerable quantities of gold have quite certainly been lost – in many cases for good – as a result of being “hidden away” and with the owner having then died or having even forgotten where he or she hid them!