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Always Believe In Gold …

With downbeat headlines and economic figures dominating the press these days, it would be easy to bury your head in the sand and hope that everything will be alright. However it is the proactive investor who seeks protection against such economic turmoil, and one asset has always shone bright during downturns. Gold, the ultimate safe haven asset.

With gold prices up YTD nearly 15%, and average annual returns in the region of 20% over the past decade, gold once again has proved the saviour for many. With supply limited due to its very nature as a precious metal, and investment demand up 280%, prices look set to continue their upward march. In particular, investment into physical gold has offered the added security of owning a tangible asset rather than potentially worthless paper assets.

The benefits of gold are obvious, but how do I invest?

Due to the huge press coverage of investment gold during the current downturn, most people already know about the general benefits of owning gold. Physical gold protects against inflation , a weak $, weak Sterling, acts as portfolio balance with traditional assets, is independent of geo-political risk, has no credit risk, and is a perfect heirloom to pass to children. The very fact that its values as a store of wealth has lasted centuries offers a comforting contrast with the constant flow of ‘new’ products.

So gold seems like THE asset to own for portfolio balance, but how do we buy it at the best prices, what type of gold should we buy, and how can we maximise returns with tax free gold?

Dan Fisher, CEO at leading gold dealer Physical Gold Ltd says: “Gold is no longer seen exclusively as an asset for the elite. Everyone is entitled to own some gold, and we look at simple, tax efficient ways to invest, to maximise returns as well as protection.” Amongst the methods available are ways to invest in gold coins that are totally tax free to UK residents, and receiving up to 40% discount off the gold price by placing gold bars into a SIPP pension.

Buy from a renowned dealer

You should always deal with a gold dealer with a proven track record. You need to be comfortable that the type of gold recommended will suit you best, and that the authenticity and condition are as expected.

Dan Fisher: “As a universally traded asset, gold is offered by many different sources. My advice is not to be tempted to buy off Ebay but to go to a reputable dealer. At Physical Gold Ltd, all our gold is checked by numismatic experts, we provide documentation assuring the quality of the gold, and have a large network of IFAs to talk through the risks and benefits with their investor base.”

Pension Gold

Since April 2006, the types of investment permitted into UK pensions has been expanded to include various alternative assets, in an attempt to both encourage more saving for retirement and more balanced pension portfolios. With commercial property dominating the headlines 3 years ago as a new pension asset, it has become very widely available within a SIPP. However, the opportunity to buy physical gold within a SIPP has been very limited until now. Physical Gold Ltd have teamed up with alternative SIPP specialists Pointon York SIPP Solutions, to make the process of buying solid gold bars for your pension simple and readily available.

Now investors of all ages and risk profiles can include gold in their pension plans giving a number of benefits:

  • Gold can be used to hedge against more aggressive high yield and emerging market equity schemes to give capital growth;
  • Gold tends to rise in value when many of the traditional assets fall, providing the portfolio insurance every pension should have;
  • Investors receive up to 40% discount off the price of gold bars through tax relief, and are protected from Capital Gains Tax;
  • Storage of the gold is in a segregated account at The Delaware Depository, one of the largest and most reputable storage facilities in the world. It is licensed to COMEX, NYMEX and CBOT and insured by Lloyd’s of London.
  • With most pension savers experiencing significant falls in their pension values over the past 2 years, the necessity for balance is even more apparent than ever to avoid these nasty shocks. Gold provides the missing link in most people’s investment portfolio.

Tax free coins

The last thing an investor wants in a tough market is to be handing over some well earned profit to the Treasury in the form of Capital Gains Tax (CGT). That’s why the shrewd investor will utilise the experience of a proactive gold dealer to choose coins which do not attract any tax at all!

While all investment gold is VAT exempt, you are liable for CGT when you sell foreign coins or indeed gold bars held outside a pension. Sovereign UK gold coins have been around for hundreds of years and are still classed as legal tender in the UK, so therefore are not taxable. While some investors play safe with recent issues of the coin, which make up roughly 1/4oz each, others indulge in some of the older ‘numismatic’ coins from the late 20th century, to enjoy some of the historical and rarity values. The fact that Sovereigns have a limited annual issuance of 75,000 again supports their rarity, and therefore price.

Britannia UK gold coins are a much larger coin weighing in at 1oz each. These were introduced in the 1970′s to compete with the renowned Krugerrand which was dominating world gold coin investment. As legal tender, it too provides a tax free status, maximising any returns earned.

Physical Gold Limited has seen many everyday people switching some of their savings into gold coins and reaping the benefits of the returns and comfort it can bring. Many savers are even contributing regularly as a savings scheme, to gradually build up a golden nest egg.

“With bank deposit rates around 1% even before savings tax, there is little incentive to park cash there, and be exposed to the risk of the bank going under!” Even more worryingly, with global interest rates near to zero, and the UK Central Bank printing £175bn of new cash through Quantitative Easing, all the foundations exist for high inflation once we emerge from recession. This would further erode the value of savings, and reinforce the case for shifting some money into physical gold. With UK unemployment and borrowing at record highs, it seems the UK gold rush is set to stay for some time.

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