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| Collecting and Investing in Gold Coins | |
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Restrictions for UK Residents
Between April 27th 1966 and March 31st 1971, it was illegal for any UK resident to buy gold coins, or to continue to hold more than four gold coins previously owned, with the exception of antique gold coins dated before 1838. This was introduced without warning under a provision of the Exchange Control Act of 1947 (Statutory Instrument No. 438 of 1966). We believe it was a rather pathetic and futile attempt by the then Labour government to shore up a creaking sterling exchange rate. Similar restrictions are still enforced by a few third world or third rate nations nowadays.
There are now no restrictions on UK residents owning or acquiring gold coins.
Gold Coins as an Investment
We usually try to avoid giving specific investment advice. For one thing, we are not registered investment advisors, and do not wish to be. We will always however try to present the more obvious pros and cons, to help our clients reach an informed decision.
Back in the 60's, we were quite actively promoting gold coins as a good investment. Anybody buying then could have averaged over 100% p.a. between then and about 1984.
In 1935 the USA fixed the Dollar at $35 per ounce against gold. The motive was to stabilise the Dollar; however this also had the side effect of pegging gold down to an artificially low price. Most professional investors realise that any artificial constraint placed on commodity prices will eventually fail, having produced ideal speculative opportunities. In 1968, great pressure built upwards on gold and downwards on the dollar. Gold eventually peaked at $850 dollars; as all suchlike market corrections, this was overdone, and gold subsequently dropped to around the $330 mark. This downward correction was also overdone, and was in turn corrected to about $400. It has recently fallen again as Central Banks have made large disposals, and has dipped below £300.
We feel now that the effect of the 35 year artificial restraint on gold's price has now been well corrected, and we feel there is no particular influence which should push gold in either direction in the foreseeable future. Gold is, and always has been a very steady priced, reliable commodity. In our opinion, it is not one which will provide rich speculative profits.
The main benefit of investing in gold is supreme safety. A mattress full of bank notes can go up in flames, or be devalued or demonetised overnight. This just cannot happen to gold. In countries like Britain, where we have a relatively stable currency, there is not a high risk of devaluation, although this did happen in 1964 and again in 1992, but for people in third world countries, or even in superpowers like the late USSR countries, it is probably a very desirable insurance against devaluation or even complete collapse of their currency. It is also very compact and portable.
Even in stable, civilised countries, it could be prudent to maintain a small proportion of one's wealth in gold as a form of ultimate insurance.
Our view of Gold as in investment is therefore rather neutral, and restricted to wealthy individuals with an existing wide investment spread, or to those with any reason to expect upheaval and uncertainty.
Our view on gold coins is more positive. They can be bought at a low premium in small dollops, the premium for numismatic interest is virtually zero, each year a large quantity of gold coins get melted as bullion or for manufacture into jewellery, and the large volumes of for example sovereigns that we used to be offered has steadily declined over the past 15 years.
How to Buy Gold Coins
Banks have often sold gold coins. In Britain, the main banks do not usually actively deal in gold coins. They have been known to dabble at times of peak interest, but then drop out again. They are not normally very competitive; their staff can not be expected to know much about it, and most commissions they undertake are done through specialist coin dealers.
Private deals direct with other members of the public can be successful, but there are potential dangers, particularly regarding security and forgeries, which are quite common.
Specialist coin dealers often provide a very competitive service. Naturally it is advisable to find a reputable one. Any members of the BNTA, the British Numismatic Trade Association, should be safe enough. Members operate a code of conduct. We have been members since its inception.
VAT and Gold Coins
VAT was introduced on April 1st 1973, but gold coins were exempt until later in they year, when they became Vatable. Antique coins were excluded, the only VAT element on them being on the dealers margin. Since then we and a few other dealers have operated a brokerage or commission scheme, whereby we would match bargains between private buyer and seller, again the only VAT was on our commission. Since January 1995, the VAT status of second-hand goods has been changed. Now provided a VAT registered dealer sells "second-hand" gold coins at above their bullion value, the only VAT payable is on his margin, and therefore virtually negligible. This would not apply of course to "new" gold coins, only to those already privately held.
As an example, a 1998 Proof Gold Sovereign bought from the Royal Mint or elsewhere would attract VAT. Provided the purchaser does not reclaim this VAT, then when he sells it, the sale and all subsequent sales do not attract VAT on the consideration, only on any profit or commission charged by a VAT registered broker or dealer.
Types of Gold Coin
For the investor, the simplest strategy is to aim to acquire the gold coins with the lowest premium over the intrinsic metal value. This will frequently be Krugerrands, but from time to time other coins may be available at low premiums. Krugerrands just happen to be the most commonly available coin at low premiums. Gold Sovereigns are also commonly available, but premiums are usually higher. Britannias and Canadian Maples are occasionally available, as are USA $20 Dollars, Austrian 50 Coronas, 4 Ducats, Swiss 20 Francs (Vrenelli), French 20 Francs (Napoleons), Italian, German, etc. There are hundreds of different types which turn up occasionally, often only in small quantities.
Gold Coins for Collectors
Krugerrands are not the worlds most beautiful or attractive coin, and their interest for the collector must be limited. However, there may be some potential pleasure in acquiring one of each date, and perhaps Proof examples, and the fractional Krugerrands, Half, Quarter, and Tenth. Many of the recently introduced bullion coins from around the world have been designed to have aesthetic appeal to collectors. The British competitor to the Krugerrand, the Britannia is a very striking and beautiful design inspired from the standing Britannia on silver florins of King Edward VII.
For most collectors, however, modern bullion coins will hold limited appeal, "real" coins originally struck for circulation, and therefore possessing more history, will be far more attractive. In our opinion the British Gold Sovereign is one of the most collectable series of modern coins. They are quite easy to obtain, can be found in good condition, there are many different dates, mint marks, and designs, and they can also be bought for a relatively small premium over their intrinsic metal content. They were first issued in 1817 in their current form, although the sovereign was introduced in 1489.
Half Sovereigns are scarcer, more expensive, and more difficult to get in high grades.
An attractive scheme for a Gold Coin Collection might be:
By "type", is meant major variety, so this would include one of each monarch, and each different obverse (head), and reverse (tail) design or pairing, together with different weight, diameter, and possibly mint mark. The scheme outlined above would give a good balance between the focus of getting every date in the series, and the freedom to add many different designs and varieties from all over the world, more or less randomly, or as market opportunity arises.
As dealers, we often have beautiful coins on our hands which we would readily sell to interested collectors at modest profits, provided we knew we could achieve a quick sale, without too much effort or expense. Co-operation between like minded collectors and dealers can be mutually rewarding.
Typical Prices and Premiums
In the 1960's, bullion sovereigns traded for about 40% to 50% premium over their intrinsic gold value, so also did USA gold $20 Dollar pieces (Double Eagles). When the Krugerrand was first marketed, one of its selling points was that it was readily available at a premium of only 3% over bullion. This excluded dealing "spreads" and commission, so that bid and offer might be 2.5% and 4% depending on quantity. This eventually caused premiums on many other gold coins to be reduced, often as deliberate policy by their issuing country. Nowadays gold sovereigns may be bought for as little as around 10% premium depending on quantity, condition and other factors; Krugerrands and other coins issued primarily as modern bullion coins can be bought for about 2% to 10% premium; other world gold issues can also be bought for about 10% premium. High grades of condition, such as "mint" or "extremely fine", will usually cost a further premium, but this can often be in the region of £5 or £10 per coin, rising to perhaps 100% premium over bullion value. Compare this with perhaps 250,000% premium for a relatively modern base metal coin such as an 1869 penny!
Get to Know Your Dealer
For collectors and investors alike, it can pay to work in harmony with your dealer. We certainly welcome people who wish to talk over their investment or collection strategy, and who instruct us to buy on their behalf or in co-operation.
Naturally, there are also rarities among the world's gold coin issues. There are for example, dates of Victorian sovereigns, and some George V mint mark-date combinations which would cost hundreds or thousands of pounds. This is also true for most other coin issues.
We believe that the interest and fascination in collecting lies mainly in obtaining a wide range of different and attractive things, and if this can be done at reasonable and affordable cost, then so much the better. It is not necessary for a collection to contain great rarities, to make it interesting.
About The Writer
Lawrence Chard formed R&L Coins in 1964, and now trades as Chard Coins, 32 - 36 Harrowside, Blackpool, FY4 1RJ, telephone 01253-343081 .
Other Chard Activities
We also design and manufacture diamond rings. We supply these both to the trade and public through our Cash & Carry Showroom. Our Cash & Carry Prices are typically 30% to 50% below retail shop prices. We also supply high quality 18 carat gold ring mounts to other manufacturers. In our showroom we also stock a selected range of high quality gold jewellery in 9 and 18 carat gold for sale to the public at about 25% to 50% below retail prices. We buy and sell second-hand and antique jewellery, diamond rings, and scrap precious metals.
Tax Free Gold
Investment gold, including most gold coins, became exempt from VAT on January 1st, 2000.
For further information, and offers of tax free gold bullion coins, please visit our new "Tax Free Gold" web site.
More Information
Gold Sovereigns
Krugerrands
The Story of the Gold Sovereign
Gold Bullion Coins Including Sovereigns
Stock List of Gold Sovereigns, by Type
Stock List of Gold Sovereigns by Date
Gold Sovereigns - Dates Issued
Proof Sovereigns
Vintage (1964) Sovereign Advert
1999 Proof Sovereign
If you want to find the value of a coin you own, please take a look at our page I've Found An Old Coin, What's It Worth?
Or contact us for further information on currently available coins.
| ...at the Lowest Possible Price |
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32 - 36 Harrowside, Blackpool, Lancashire, FY4 1RJ, England. Telephone (44) - (0) 1253 - 343081 ; Fax 408058; E-mail: The URL for our main page is: https://24carat.co.uk | Chard(1964) Ltd |