Along with other precious metals, gold is seen as being resistant to inflation and having the capacity to hold onto its relative worth for hundreds or even thousands of years. When stock markets and/or currencies have crashed in the past, gold has historically served as a “economic lifeboat” for those nations. You can keep the wealth that is kept in the gold as long as you can physically remove it from the country. Of course, you won’t need to move the gold if it is kept as an offshore investment.
Another advantage of precious metals is that they can occasionally be worn as jewelry, providing you with an ongoing benefit. Of course, since gold is less secure when used as jewelry, extra insurance is required.
Gold is not a particularly dependable source of growth when compared to the stock market. Despite the fact that its price has been trending up more strongly lately, it still lags well behind the returns of stocks.
For reference, the FTSE and gold price were both high and performing well in 2012. However, gold purchased in 2012 would still cost around the same in 2020. (and would have been less valuable if you had sold it at any other time in the past eight years). In contrast, despite the two separate falls brought on by the Brexit referendum and the coronavirus lockdown, a balanced FTSE 100 share portfolio purchased in 2012 would have seen its value rise by roughly 8.5 percent in those eight years.
In other words, you don’t necessarily buy gold to make money. Because you don’t want to lose it, you purchase gold.
Is buying gold a good investment for me?
This kind of investment is probably not the best course of action if your aim is to expand your money, especially if you are new to the market. You won’t be receiving any income from rent or dividends, unlike other asset classes like stocks or real estate. Additionally, even though stocks have a low risk profile, if you buy or sell at the incorrect time, you could lose money despite the low risk profile of precious metals.
However, over the long run, precious metals do have a tendency to keep their value. In order to protect themselves against short-term economic slump and political uncertainty, consumers frequently utilize them to diversify their portfolios.
Do you pay capital gains tax and VAT on gold?
Gold bullion is exempt from VAT in the UK, despite the fact that most bullion does. You won’t have to pay any further VAT price rises if you purchase gold bullion in the UK.
All profits from assets whose value has increased are subject to capital gains tax. There is a £12,300 annual allowance, but as soon as you start making earnings beyond this amount, you will have to start paying CGT. Investments made in gold are subject to this tax.