Toby Walne tracks down a glittering investment: I'M GOING FOR …

Sitting in a 150-year-old coin dealership with a magnifying glass in hand is not how I usually go about investing. Like most, I manage my money online, with an occasional trip to my local bank branch.

But, like a growing number of investors I’m considering buying gold, which takes me all across town – from a coin dealership to London’s famous jewellery district Hatton Garden.

The rising interest in gold is pushing up the price of the precious metal to record highs. Its appeal has been growing in the latest banking crisis.

It is historically seen as a safe haven amid financial turbulence, as it can’t be touched by meddling central banks or governments.

Investors are often happy buying gold through shares or funds. These are easy to trade online from the comfort of your own home. But, a growing number of investors are also seeking out physical gold.

At times when other assets such as shares, bonds and currencies are being buffeted about, there can be something comforting about a tangible asset that you can hold, easily transport and that has been admired by humans as a way of holding value for millennia.

Coining it in: Trader Neil Paisley of London’s AH Baldwin & Sons shows Toby Walne a rare sovereign

However, buying gold is not straightforward, as I quickly discover.

Although the Royal Mint publishes the live price by weight – measured in troy ounces – in reality the price at which gold is bought and sold is much more complex. Regardless of how it is bought, gold should only form a small part of most investors’ portfolios.

Gold coins are a good place to start

My first stop is AH Baldwin and Sons, which has been trading in coins since 1872. Its premises on the Strand in London has been given a recent makeover, but it still has an old-world feel.

Shelves are stacked with boxes containing precious rarities.

Managing director Neil Paisley explains that sovereigns or Britannias – gold coins made by Britain’s Royal Mint – are a great option for buying gold. That is because they are treated as legal tender and therefore exempt from capital gains tax. Buying and selling other types of gold – such as jewellery, gold bars or coins minted in other countries – attracts capital gains tax at 20 per cent, once you have used up your capital gains tax allowance.

Paisley shows me a number of gold sovereigns for sale, around the size of a pound coin and marked at around GBP420.

‘The gold content of a coin like this is currently worth around GBP376,’ he explains. ‘However, the price is higher because the gold is in sovereign form, which tends to make it easier to trade than other types of gold.

There is also usually around six to ten per cent added to the price to cover the dealer’s costs and profits.’

Paisley adds that if you’re selling a sovereign to a trader, they may ask you to knock around five per cent off its true worth to make it worth them buying.

Sovereigns are 22-carat gold – in other words 22 parts gold to two parts copper. They are made in this composition because an alloy coin is much tougher and less likely to be damaged. Britannias have been 24-carat since 2013.

The value of sovereign and Britannia coins is also affected by their rarity and condition. The modern 22-carat gold sovereign has been produced by the Royal Mint since 1817. Before this, an earlier sovereign was minted during King Henry VII’s reign from 1489 until soon after when James I took to the throne in 1603.

Paisley shows me a top-condition 1489 sovereign.

Holding this GBP175,000 rarity between my fingers, I can feel why this historical coin is worth far more than the GBP800 value of the gold from which it is minted.

Rare sovereigns have sold for huge sums over the years. A version featuring Edward VIII before he abdicated in 1936 sold for a record GBP1 million in 2020.

Bargain Hunting in Hatton Garden

Next I head to Hatton Garden in the hope of getting an even better deal. People have come here to trade precious metals and gems since the early 19th Century so I’m hoping for a good, trade price.

However, as an outsider, the place feels almost impenetrable.

I try bullion trader Baird & Co, enticed by a sign promising ‘best prices paid’. But when I enter the brightly lit room decorated with gold coins locked behind bullet-proof glass, there is no sign of any sales people.

After ten minutes I leave. I may have more luck on its website, where it says sovereigns can be picked up for GBP419.

It does not offer details of prices paid.

All that glitters…in this Aladdin’s cave

Next I decide to see about buying gold in jewellery form. Surely a pretty necklace would have a higher value than the underlying gold.

However, looking around jewellery stores in the area I am quickly corrected. More often than not, old jewellery is bought by weight.

Items may have sentimental meaning to the owner, but this is unlikely to translate into monetary value.

Glitz: Sovereigns are 22-carat gold – in other words 22 parts gold to two parts copper

There are, of course, exceptions. I visit family-run antique jewellery shop AR Ullman in Hatton Garden, which is like taking a step back in time.

An imposing oil painting of the 1902 founder Joseph looks proudly down from the wall at his great grandson Max Ullman, who welcomes me into this glorious Aladdin’s cave. They buy and sell rare and esoteric small pieces from over the centuries.

Max says: ‘The value of these items is more than that of the precious metal from which they are made.’

However, there is always a risk to buying jewellery as a store of value – unlike with sovereigns, the price that items will command will depend on the tastes of the buyers at the time when you come to sell. As an alternative, Ullman playfully suggests I buy a sovereign that can be worn as jewellery.

That way you get the stored value of gold in sovereign form – and a bit of bling to wear. He shows me a sovereign that sits in a gold ring, pictured. ‘You can buy this for GBP900,’ he says. ‘It’s the height of street fashion.’

However, I am not convinced it’s a shrewd purchase.

I feel more like 1980s football manager Ron Atkinson, who had a weakness for oversized glitz.

For security, try the Royal Mint

IF you don’t like the idea of traipsing around to dealers and experts, the Royal Mint offers a secure way to buy gold. It sells gold coins and bars, with prices starting from GBP76 for a very small minted bar.

However, you will not find a bargain from its online shop. It is currently selling a 2012 Elizabeth II diamond jubilee sovereign with a weight value of around GBP400 for GBP2,320.

Special edition coins or those with presentation boxes can cost significantly more, but these do not necessarily add to their intrinsic value.

When trading sovereigns online also compare prices with other bullion traders and coin specialists, including Spink, Chards, BullionVault, ATS Bullion, Gold and Baird & Co.

Be very careful when buying gold or coins online and only go with trusted companies.

Track the metal price… or invest in miners 

There are several ways to invest in gold without buying physical pieces.

One of the simplest is investing in an exchange traded fund (ETF), which is an investment that tracks the price of gold and is listed on the London Stock Exchange.

Among those to consider is Invesco Physical Gold ETC, which follows the gold price as tracked by the London Bullion Market Association (LBMA). It charges an annual fee of 0.12 per cent.

Another option is Wisdom Tree Physical Gold, which follows the physical gold spot price and charges a 0.39 per cent annual management charge. Also, iShares Physical Gold ETC tracks the LBMA gold price and charges an annual fee of 0.12 per cent.

Alternatively, you might prefer to put money into companies that mine gold and other precious metals.

Mining is difficult and companies sometimes fail, so it can be better to spread your risk by investing in a fund that buys several.

Funds that invest in gold miners include BlackRock Gold & General, which has annual charges of 1.16 per cent. The GBP1 billion fund has 88 per cent of its money invested in mining for gold – with the rest involved in finding silver, copper and platinum. 

Its biggest holdings include seven per cent in British-based Endeavour Mining – which has gold mines in West African locations such as Ivory Coast. The fund holds a similar-sized share in Canadian-based Barrick Gold Corporation, which mines worldwide, including in South American countries such as Argentina, Canada, the United States and across Africa. 

The GBP1 billion JPM Natural Resources fund is another option, with 11 per cent of its portfolio focused on mining for gold and other precious metals.

Its annual charge is 0.83 per cent.