Guide to gold

Gold investment choices

400 oz LBMA approved good delivery gold bar for investment

In this gold investment guide, we explore why and when gold investing can make a good decision, and we compare the best ways to invest in gold. For physical gold investing with unequivocable ownership your options include coins or small bars and allocated gold bullion. Alternatively for gold exposure there are unallocated accounts, gold exchange-traded funds (gold ETFs or ETPs) or gold-backed stablecoin crypto tokens.

Why choose gold investing?

There are 3 main reasons why people invest in gold bullion: as insurance for their wider investments, to counter inflation, and because of its security as a physical asset.

Investment insurance: Gold prices generally rise in times of financial stress, when investors and wealth managers buy the metal to diversify and spread risk in their portfolio. So gold could make a good investment today if you think that stock markets, world trade, house prices or the value of your retirement savings are likely to lose value in the months or years ahead.

Inflation: Because gold is naturally rare, people often invest in bullion bars, coins or gold ETFs when consumer prices rise sharply, hitting the purchasing power of cash savings. Gold's role as an 'inflation hedge' has worked best when interest rates lag behind the pace of inflation. Gold investing prices rose 20-fold in the 1970s but fell again in the 1980s when interest rates were then hiked above inflation.

Security: Unlike stocks and bonds or even cash in the bank, physical gold owned as your personal property is an investment which no-one else's financial failure can take away. While you must ensure that it is safely stored and insured, history shows that gold has never devalued to zero. Today gold trades in a deeply liquid, truly global market where jewellery purchases often grow when investing demand slips, helping put a floor under prices.

Some people also buy gold as a currency hedge, because it offers a simple way to invest a portion of your wealth outside your domestic currency if you think that it may lose value versus other currencies.

Speculative investors might choose gold because they simply believe its price is trending upwards. Then they might trade in and out of the precious metal as it gains or falls.

On top of that, analysts and wealth managers may consider the long-term outlook for supply and demand as well, such as mining output, central-bank gold investing, and jewellery demand.

Options for gold investment

Because gold is a physical asset, the way you choose to invest in it raises questions you probably don't think about when buying financial assets like shares or bonds or picking a bank account.

None of these issues should stop you investing in gold. Thinking about them now will help you choose which option works best for you and your investment aims.

  • What form do want your gold to take?

  • Can you compare prices to get a good deal?

  • Where's the best place to keep your gold?

  • How will you store it?

  • Will you need to buy insurance?

  • How easy will it be to sell the type of gold you've chosen?

  • Will you need to pay any tax when you buy or sell gold?

To answer all these points, this guide explains the 3 simple questions to consider, because making good decisions today will make a big difference to your potential profits and protection from investing in gold.

Gold investing question #1: Your gold or someone else's?

First, do you want to own gold as your personal property or will you be happy to just track the gold price by relying on a finance-industry product?

Gold ETFs go up and down with the price of gold. That's because these investments, broadly known as an exchange-traded product (gold ETP) or sometimes an exchange-traded commodity (gold ETC), are backed by the value of bullion held in a bank vault.

You buy and sell gold ETP shares using a stockbroker. (There is no stamp duty tax to pay on ETFs in the UK). Some ETCs are created as "debt linked to physical gold" while other trust funds own gold, and you then own shares in the ETF. Either way, you won't actually own any metal through a gold-backed ETP, yet you will be charged you for its safekeeping.

Gold ETF fees range from 0.15% to 0.40% of your investment's value each year, charged by slowly reducing the quantity of gold backing each of your shares. Note that any gold ETF shares you buy probably won't belong to you either. That's because, just as with any other stock-market shares you hold in a 'nominee' account, your broker will be the direct owner.

An alternative to gold ETPs is so-called "unallocated" gold. Investing this way gives you the gains (or losses) from the value of gold belonging to a bank or a bullion refinery. Because you don't own the gold, you won't pay for its storage or insurance. You are however exposed to the bank or refinery's financial survival, because you are one of their creditors. Technically speaking, you will be owed gold, rather than owning it.

Gold investing question #2: At home or in safe-keeping?

If you prefer the security of owning physical gold as your personal property, then the second step is to decide whether you want to keep your gold at home in your house, or will you use a specialist to safeguard your bullion for you?

Keeping gold at home can feel reassuring. The metal clearly belongs to you, and you can see or touch your investment whenever you like. This might bring a feeling of wealth, because nothing matches the gleam or shimmer of physical gold. But any pleasure you get from holding gold in your hand will carry high costs in terms of both money and hassle.

First, your decision to keep gold in your house will restrict you to buying 'retail' gold investment products. Whether as gold coins or small bars, these products shouldn't trigger any VAT sales tax when you buy, but they can cost you significantly more than the value of their bullion content, and they will also return less than their bullion value when you sell.

The gap between these purchase and sale prices, known as the 'spread', runs from 3-4% on gold kilobars (currently costing almost £50,000) through to 15% on Sovereign or Britannia coins (erasing any savings which a UK taxpayer might expect from their CGT-free status).

Second, hiding high-value assets in your house involves some difficult decisions around trust. Will you tell your family, or will you risk your gold being forgotten if you die? Will you tell your insurance company, or will you risk losing your investment in a burglary?

You can't claim for stolen gold if you don't declare that you are holding it first. But if you do, your insurers will probably demand that anything over £2,500-worth needs to be kept in an insurance-rated safe (starting at £300 for well-known security brands) fitted by a professional (charges vary. This will of course mean telling a stranger you are keeping high-value items at home). Your insurers will also probably raise the cost of your annual home insurance premiums.

One alternative is to rent a safe-deposit box, perhaps at your bank (if they still offer this service; most do not today) or with a company that provides lockers for storing your valuables. Prices vary widely, with a small box only 0.5cm deep (1/5th of an inch) ranging in the UK from £75 per year to £200. You will need to buy insurance on top – a step some people skipped at terrible cost when Hatton Garden Safe Deposit turned out not to be so 'safe' in 2015's famous burglary.

Whether you keep retail gold products at home or in a safe-deposit box nearby, it's important to think about the work you will face when you decide to sell. Comparing prices when you buy gold coins or small bars is much easier than trying to shop around when you want to cash in.

That's especially true if you're looking to bank the biggest gain you can when gold prices are high, because it's likely that lots of other gold investors will also be rushing to sell their coins or small bars at the same time. Retail coin and bar dealers swamped by supply will naturally cut the price they're willing to pay. You will also need to mail or carry your gold to the shop that's buying it from you, adding costs and risk again.

Gold investing question #3: Retail or wholesale?

If you feel that the investment costs, hassle and risk of keeping gold at home or in a nearby safe-deposit box will outweigh any pleasure you might take from it, then you are freed from the need to buy only small bars or coins. No matter the size of your initial gold investing outlay, vaulted bullion in the form of large, wholesale bars is a viable option to consider.

This type of bullion – defined as "investment gold" under UK tax law and requiring no VAT on purchase or sale – carries three clear benefits over retail bars and coins.

Price: Good Delivery gold bars are refined and cast to strict standards by a small and closely-monitored number of the world's leading refiners, each of them accredited by trade-body the London Bullion Market Association. Investing in a gram of gold held in one of these large bullion bars will cost you less than buying 1 gram in any other kind of gold product, and the value you get back from selling will be the highest. This is because large wholesale bars are the form out of which all other products are made, adding costs at each step of manufacturing, handling and distribution. For vaulted large-bar gold in contrast, trading spreads between buy and sell prices on BullionVault, the largest provider for private investors, run to 0.3% or less.

Liquidity: Because large bullion bars are the form out of which all other gold products are made, they are the units which the global wholesale market trades. Centred in London, with Zurich and New York among the other main hubs, this market turns over $50 billion or more in gold every day. It includes central banks, large gold dealers, specialist technology firms, jewellery manufacturers, ETF managers, bullion banks and sovereign wealth funds, all trading bullion bars only from LBMA-accredited refiners. BullionVault makes this market accessible 24/7, one gram at a time.

Security: Nowhere is safer for physical gold than a specialist bullion vault. Often sited within major airports to make international deliveries quick and safe, these vaults have armed response are rated so secure by the insurance industry that full cover costs a fraction of what you'd pay for insuring gold at home or in a safe-deposit box. On BullionVault, the cost of storage with insurance included runs as low as 0.01% per month ($4 per month minimum, currently £3.40).

The comparison table below shows the relative advantages and disadvantages of different ways to invest in gold.

 

* Paying a storage fee for the safe-keeping of physical assets has, in the past, been decisive in proving that an investor owned the property in law. So where no storage fee is charged, this evidence is lacking.

What about digital gold?

One development over the last 10 years has been so-called "gold-backed crypto", also known as "tokenised gold", "digital gold" or sometimes "gold-backed stablecoins". Trying to build on the popularity of digital assets led by Bitcoin, dozens of blockchain tokens claiming to be backed by gold have been launched and promoted. Many of them no longer exist, but the 2 largest providers added together now claim to hold some $1 billion of gold to back the tokens they have issued. That's just 1/3rd of the gold currently owned by people using BullionVault to buy, store and sell physical investment gold.

Do you own any gold through a gold-backed crypto stablecoin? The 2 largest providers both define their product as "A digital token, backed by physical gold". Where anything is "backed" by gold, the investment is abstracted from the metal, which becomes a physical asset underlying a financial instrument. In this case, the investor owns the token, not the gold, and the token gains its value in the same way as unallocated accounts or gold ETPs are backed by gold but don't give you any ownership of physical metal.

Importantly, none of the largest gold-backed stablecoins charge any storage or insurance fees, again matching the position of unallocated gold. In those investment accounts, the buyer is owed gold and does not own any metal. More secure allocated gold does carry storage and insurance fees, and such fees have in the past been decisive in proving true ownership of physical assets where an investor's title has needed confirming in law.

Gold ETFs

Our Gold ETF page goes into more detail on this type of investment, and compares holdings and costs for the biggest ETFs in the UK, USA, Europe and Japan against the costs of using BullionVault to own physical gold as your personal property instead.

As the table above demonstrates, there can be significant downsides to investing in gold coins and small bars. Nonetheless, BullionVault understands that some gold investors may like to hold a little bullion at home, and for these users we offer the opportunity to withdraw and take possession of gold in the form of a 100g Pamp Fortuna gold bar or to purchase popular gold coins from our store.

When is a good time to invest in gold bullion

Gold bullion doesn't pay any interest or dividends. So as with any other physical asset, the biggest profits from investing in gold come from buying low and selling high.

Trying to time the very bottom and very top in gold prices, however, can mean missing out on valuable gains in the meantime, most especially if gold is rising as other things such as shares or house prices are struggling.

The precious metal famously shot higher during the double-digit inflation and stock market slump of the 1970s. It then fell for two decades until the year 2000 as interest rates were raised above inflation and Western stock markets delivered year after year of strong gains, led by the USA.

By then gold had become very cheap on a historical basis as European central banks sold off some of their bullion reserves and private investors were pouring money into the DotCom Bubble instead.

The global financial crisis then took gold prices over 650% higher, before falling back only to rebound on the UK's Brexit referendum result of 2016. Bullion then set fresh all-time highs once more during the Covid Crisis of 2020, with further records coming for UK Pound and Euro investors as Russia invaded Ukraine in 2022.

What factors drive gold investment prices

The upswings in gold prices listed above were driven by heavy investment demand, most of all from asset managers running large portfolios. Key moments likely to see gold investment rise like this include:

  • When other investments start to lose value year after year

  • When inflation increases faster than interest rates

  • When your primary currency loses its purchasing power

  • At times of economic uncertainty or political crisis

Because gold tends to perform well when other investments do badly, its price has tended to peak when economic sentiment hit rock-bottom. Such moments can make selling gold feel difficult, but if you are using gold to hedge against investment risk in other assets such as shares or bonds, then it makes sense to rebalance your holdings after significant price moves.

The fact that gold tends to 'zig' when other assets 'zag' also means that the very best time to invest in gold might be when economic sentiment is strongest and the precious metal isn't making headlines. Again, it can be hard to take the plunge when

Should you invest all at once or break it up?

Once you decide to buy gold, how can you time your purchase to get the best value? Precious metal prices change on a minute-by-minute basis in the global wholesale market. So it is impossible for anyone to know with 100% certainty when is the best possible time to buy or sell precious metals.

Therefore, savvy investors wanting to trade gold more actively will constantly monitor the gold price as well as global news, international markets and macro-economic activity, choosing to add or divest from their holdings at regular opportune moments. For the majority of investors, in contrast, gold's primary appeal is as a form of long-term investment insurance for their wider portfolio, and over-trading can put any existing gains at risk.

Who invests in gold?

With more than 100,000 users worldwide, BullionVault has a wide customer-base of people from all backgrounds and of all ages. It ranges from new investors starting with $100 and making small monthly purchases through to family offices wanting to own several millions-worth of secure, insured bullion held ready for sale at full value.

The most common gold holding on BullionVault builds to around $15,000 in total, usually through a series of purchases made over several years. Talking to investors, we believe that tends to represent 10% of the wealth they manage for themselves, not including their home or any employer-provided pension products.

Because gold often helps act as a form of insurance for a wider portfolio, it makes sense to have something to insure – whether that is shares, bonds, real estate or a combination. So in our experience, people choosing to buy gold tend to be adding it to a mix of other investments.

Age-wise, that means people often start buying gold in their late 30s or early 40s, around the time when they start building their longer-term and retirement savings. BullionVault also has much younger gold investors – including children's accounts funded by parents or grandparents – as well as older customers including retirees aged over 100.

How BullionVault enables you to invest in gold in a cheaper, safer and easier way

Launched in 2005, BullionVault now cares for $3.8 billion in client property for more than 100,000 users worldwide. It enables you to invest in gold in 1-gram increments, all physically allocated within securely-vaulted wholesale Good Delivery bars refined and cast by the specialist refiners approved by industry body the LBMA.

You pay wholesale-market prices, with no VAT or sales tax to pay and no delivery delays or costs. Using professional bullion vaults means you pay the lowest storage and insurance fees. BullionVault's live online platform lets you buy or sell 24/7 and instantly have funds back in your account, ready to be withdrawn, the moment you choose.

Importantly, all gold belonging to BullionVault users is held by independent vaults. The company itself does not own or operate these facilities. Instead it uses specialist facilities, and that separation is vital for the Daily Audit, a unique process which proves your property is where it should be – in full – each day.

The Daily Audit takes the full Bar Lists from the independent custodians, and it publishes them for you to study alongside a full list of each client's holdings. The two totals match down to the last gram, showing that the bullion is fully allocated and eliminating the risk of 'double counting' (also known as 'under vaulting'). This proof can only happen because the client records are held by BullionVault and they are independent from the bullion bar lists.

The bar lists cannot be falsified, because the specialist custodians (Brink's, Loomis, Malca-Amit) see them posted in public on the Daily Audit. The client records cannot be falsified either, because each user also sees their holdings stated in public and can check that figure against the quantity they bought.

Your gold investment holding is anonymized on the Daily Audit, so that only you know which entry refers to your bullion. The whole process is also verified by BullionVault's external, independent financial auditors (Armstrong Watson), who examine the procedures, confirm the arithmetic, and check with each of the vault operators (and also the banks holding client cash) that they did indeed issue the bar lists and statements published on a random selection of dates.

The auditors also receive a further third-party report – a full tally count and physical examination of all the gold and silver bars held for BullionVault Clients – from expert assayers (Alex Stewart International). Bringing together all these independent documents (the client records, the bar lists and bank statements, plus the vault inspection report) the auditors then publish their scrutiny of the Daily Audit on their own website, a site which BullionVault couldn't hope to control.

UK users of BullionVault can make their first investment of up to £5,000 with a debit card. You can read customer comments and reviews on Trustpilot here.

Gold investment FAQs

Gold investing can make a good idea for spreading risk across a balanced portfolio. That's because the value of gold bullion has tended to increase when other investment assets fall over long periods of time.

Historical trends show that investing in gold has made a good if imperfect hedge against poor performance from currencies, shares, bonds and real estate. The idea is to reduce overall losses by using gold to diversify the portfolio's investments.

When investing in gold as a way to spread risk, it's a good idea to think about costs, security and simplicity. For more information on gold investment, read the dedicated guide above.

Choosing the best gold investment will depend on the buyer’s resources and aims. A few gold coins or a very small bar hidden at home needn't cost much. But compared to serious investment gold, they are very expensive by weight, reducing gains or worsening losses if prices fall. Proper insurance really is vital.

Owning gold within a Good Delivery bar, cast by an LBMA-approved refiner and insured inside market-recognized vaults, makes a safer and more cost-effective way of investing in gold. Because the metal's quality and authenticity are warranted, the price spreads (the difference between buying and selling prices) are very tight, and commission fees are lower than for all other bullion products.

For more information on gold investment, read our dedicated guide above.

The best way to invest in gold bullion will depend on the buyer’s resources, as well as their intentions. For example, gold coins and small gold bars are available, with bars ranging in size from 1 gram upwards. But these cost very much more by weight than larger bullion products.

Owning gold within Good Delivery bars, cast by LBMA-approved refiners and weighing around 400 Troy ounces (12.5 kilograms), offers the best way to invest in gold if the buyer wants value, security and the ability to sell quickly for full value.

Stored and insured in specialist vaults, this large-bar gold comes with a warranty of quality and authenticity. It enjoys the tightest trading price spread – the difference between buying and selling prices – and commission fees are lower than any other bullion product.

For more information on gold investment, read our dedicated guide above.

Gold bullion is viewed by many investors as a good way of hedging against risk as part of a balanced portfolio. This is because the value of gold has historically increased as cash, currencies, stocks and bonds lost value, helping reduce overall losses when other assets in an investment portfolio dip.

There are many different ways to invest in gold bullion. Good Delivery bars offer the most cost-effective product, because the deep, global market for these large units makes the price spread (the difference between buying and selling prices) tighter than for any other form of bullion.

For more information on gold investment, read our dedicated guide above.

Some analysts and advisors think investing in gold is a bad idea because it doesn't pay any income or interest. But gold bullion is more widely seen as a good alternative investment, hedging against risk, as part of a balanced portfolio.

Historically, the value of gold has repeatedly increased when domestic currencies, stocks and bonds have performed badly over extended periods of time. This 'see-saw' performance isn't guaranteed however, and gold can fall alongside stocks and bonds during short-term crises.

Over longer periods, gold prices show a similar volatility to the stock market, and most investors using gold to balance risk from other portfolio assets should expect gold to underperform when the economy is growing and wider investment sentiment is positive.

For more information on gold investment, read our dedicated guide above.

Please Note: This analysis is published to inform your thinking, not lead it. Previous price trends are no guarantee of future performance. Before investing in any asset, you should seek financial advice if unsure about its suitability to your personal circumstances.

Contact us

Email

Phone

  • UK and International: +44 (0)20 8600 0130
  • US and Canada toll-free: 1-888-908-2858
  • Opening Hours: 9am to 8:30pm (UK), Monday to Friday

Address

Galmarley Ltd T/A BullionVault
3 Shortlands (7th Floor)
Hammersmith
London   W6 8DA
United Kingdom