Gold produces no income and it also costs you money to keep
If you’re looking for a hassle-free investment, don’t go for gold, says Paul Lewis
The price of gold has never been higher. It has topped £50 a gram for three months, double what it cost seven years ago. That partly reflects current economic uncertainties, because gold is seen as a safe haven, a secure physical store of value that can be bought and sold easily.
But gold is not a normal investment. It produces no income. Its value can only be realised by selling it. So if you need to raise the money at a specific time you are stuck with the market price on that day. It also costs money to keep. It’s easy to steal – a kilogram bar worth more than £50,000 is barely half the size of a smartphone. If you store it at home you must make sure your contents insurance covers it. A rented safe deposit box will cost at least a couple of hundred pounds a year and may also need insurance.
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It costs money to buy gold and to sell it, too. As I write, one top London dealer charges £1,655 for one ounce of pure gold, but the gold itself is worth £1,566 – a mark-up of 6.3%. The more you buy, the lower the margin: a kilogram will cost you £51,138 for a gold value of £50,380 – a 1.5% mark-up.
Another margin will be taken when you sell: currently you’ll be paid less than £50,000 for a kilogram. If you buy more affordable items, such as a gold sovereign for around £400, or a 10-gram bar for £550, the margins are much higher. You will not make a profit until the market price rises sufficiently to cover these costs. At auction, buying and selling margins are both much higher.
You should never buy or sell gold from an online search. Go to a respectable London dealer such as Sharps Pixley or, of course, the complete
security of the Royal Mint, and always check the mark-up. Finally, gold should only be a small part of your savings. Cash can currently earn more than 5% interest, fixed over one year, and is completely safe up to £85,000 in any one bank. Gold has no such protection.
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QUESTIONS? Send any questions to Paul.Lewis@radiotimes.com. Paul cannot answer you personally, but will reflect them in his column.
