There are many calls on our money, and many financial assets that we may consider acquiring. So why buy gold? The answer, quite simply is that gold is the ultimate store of value. It doesn’t rust or fade and whilst the items we can make from gold can occasionally be counterfeited, the actual element itself cannot be faked, printed or inflated. Over the very long run, it has historically held its worth.
Gold holds its value
The price of buying gold and bullion may move round in the short term e.g. it was very high in the late seventies and early eighties, and historically very low in the late nineties. However, over time it holds its value, with research showing it buys, on average, the same amount of bread over a period of thousands of years.
Gold’s intrinsic value
This quality of gold is often described as arising from the fact that, uniquely, it is “the only asset that is nobody’s liability”. That sounds like jargon, but it contains a vital truth. Gold’s value, unlike that of a banknote, share certificate, or a government bond, does not rely on someone else’s promise to pay.
Gold’s value is “intrinsic” – it’s in the metal itself.
Key features of gold ownership
This value gives rise to a number of other key features about gold ownership:
- Gold is portable, particularly for those who buy bullion coins. This has made it popular over the centuries with those who like to keep their wealth close to hand.
- Gold as an asset is highly transferable. With no need for PIN codes or form-filling, bullion wealth can be moved from one person to the next with minimum fuss.
- Gold is the original and still the most far-reaching global currency. It has value anywhere in the world and can be exchanged among people from very different countries and societies with minimum formality and no foreign currency costs or transaction fees.
The start of the world economic downturn in 2008 has helped spur fresh interest in buying gold, as people seek a safe asset in which to store their money. A range of Bullion coins are struck worldwide, of which The Sovereign, the Britannia, the Eagle, the Maple and the Krugerrand are probably the best known, issued by the United Kingdom, the USA, Canada and South Africa respectively.
The Sovereign, The Royal Mint’s flagship coin is struck in glorious 22 carat gold and is one of the world’s most well-known gold coins, tightly specified, accurate and if not the most trusted coin for more than 500 years. As they are legal tender in the United Kingdom, British gold Sovereigns and gold Britannia coins are Capital Gains tax (CGT) exempt and Value Added Tax (VAT) free.
The intricate designs of these and other bullion coins often provide a secondary reason to buy gold. But, however beautiful and pleasing bullion coins may be to hold, it is gold’s unique role as a store of value that gives the “yellow metal” its real glitter.
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