Should you invest in gold?
The precious metal will always have value — but there are caveats, says Paul Lewis
I ’m sorry to say one of my readers has lost £25,000 – or, as he put it, £40,000. Four years ago he was persuaded to invest in gold. But instead of buying a lump of the precious metal, he bought what were called “forward contracts”: bits of paper that in two years he could swap for the real thing. Except, of course, he couldn’t. The money has vanished. If he had bought actual gold, it would indeed be worth £40,000 now. But the promises are currently worth zero.
Gold is hugely attractive; just holding it in your hand is a thrill. And since I last wrote about it in Radio Times, the price of a kilogram has risen from around £50,000 to £68,000 at the end of October this year – but within two weeks the price had fallen back down to £65,000. So, if you had bought a kilo in the summer of 2023 and saw that £15,000 profit, would you sell it now, or keep it in case it’s worth more by Christmas? That golden dilemma is made harder because the Chancellor will take a big slice of any profit. On Budget Day the rate of Capital Gains Tax on that rise increased from 10% to 18% for basic-rate taxpayers and from 20% to 24% for those in the higher-rate band. There is a £3,000 allowance on your total gains, but above that nearly a quarter of it could be snaffled by the Chancellor.
Calculate how much more income you could get instantly by using our online annuity calculator.
Gold coins that are legal tender (such as the Britannia or Sovereign) are exempt. But gold is never an investment in the normal sense of the word. It produces no income, comes with storage or insurance costs, and thieves love the fact that it is portable and untraceable.
Having taken all that into account and if you still want to buy gold, maybe as a Christmas present, purchase the actual metal from somewhere respectable, like the Royal Mint or the London dealer Sharps Pixley. There will always be a mark-up on the price and, if you want to cash in on a rise in the price, a mark down when you sell it back. The smaller the amount you buy, the bigger the spread. But gold always looks and feels beautiful and will always have value. Unlike forward contracts, which are just a piece of paper.