There are many ways that a private investor can invest in gold but is the gold sovereign a sensible choice amongst these options. Certainly you could invest in the shares of gold mining companies directly or in a gold ETF (exchange traded fund) which is basically a fund that holds nothing but gold. The favourite way for an individual, however, still remains the purchase of gold bars or coins and these are now considered to be a sensible part of many people’s balanced portfolios.

What is the gold sovereign?

The gold sovereign is one of the oldest gold coins in production having first been made over 500 years ago by the Royal mint. The current coin has a picture of St George and the Dragon has been minted for just over 200 years and this one remains the favourite amongst private investors.

Why are they a good investment for investors?

The size of the coins, at one ounce, makes the sovereign a very accessible investment for the private individual who may not be in a position to buy or indeed safely store a gold bar. Their relatively small size means that the coins can be stored safely and easily at home and can be sold quickly and easily should the need arise as there is a very active secondary market. In an emergency the appropriate number of coins can be sold to cover the situation rather than selling a gold bar which may be worth far more than is required by the individual.

Another advantage over the gold bar

Most gold bars are 99.99% pure gold and as such they are ‘worth their weight in gold’. If the spot price drops then the value of your gold bar also drops commensurately. Coins, however, and especially the gold sovereign are what is known as semi numismatic, they aren’t just valuable for the amount of gold they contain but they have a collectable value as well which appeals to collectors of coins and banknotes. In fact gold coins very often trade at a value well in excess of the gold value for this reason. 

Why are sovereigns so collectible?

Despite the fact that they have been produced for over 500 years, it is estimated that only about 1% of the gold sovereigns that remain are in fact in collectable condition which creates a rarity factor not necessarily enjoyed by other coins.

Particularly advantageous to investors in the UK

Investing in gold sovereigns is particularly advantageous to UK residents. The sovereign is considered to be legal tender and therefore the Government doesn’t tax  any movements in value of a legal currency and so there is no capital gains tax liability. So the investor gets to keep 100% of the profits which is in contrast to investing in some foreign coins, like the Maple Leaf or the Krugerrand, where capital gains tax is applicable.

In conclusion…

The gold sovereign is a very good way for a private investor in the UK to invest in gold. As part of a diversified portfolio, the sovereign offers the obvious tax advantages as well as ease of storage and liquidity combined with a value premium for its collectability.

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