Gold investment - strategy for avoiding CGT

savingsguy

Hi there!

I'm looking for some advice or thoughts on investing in gold. A few years ago, I bought physical gold through BullionVault, and it turned out to be a good move. Now, I'm thinking of selling that and investing in a gold ETF through my ISA instead. I'd need to sell the gold gradually to stay within the £3,000 capital gains tax allowance, so it would take a couple of years to fully transition.

I see pros and cons— the main reason is to avoid capital gains tax once the funds are in an ISA.  There is the lower cost of a cheap ETF compared to BullionVault's fees. 

But I'm wondering, what are the risks with ETFs compared to holding physical gold? Would it be smarter to go for sovereigns instead, even though I'd need to store them or pay for storage?

Has anyone done something similar? Is there a reason not to go down this path? I don't mind not owning physical gold, but I'm curious if there's a real advantage to holding onto it.

Any advice or thoughts would be really appreciated! Thanks in advance!

Jon

InvesterJones

I guess with an ETF that buys physical gold you're leaving the decisions over which gold to buy to a manager - so if you didn't like ishares' responsible sourcing for example then you'd need to find a different one. On the otherhand, economies of scale likely make it quite a lot cheaper to go via an ETF.

jimjames

What did you actually buy? Coins are CGT exempt

https://www.royalmint.com/gold-price/capital-gains-tax-on-investments/

wmb194

jimjames said:

What did you actually buy? Coins are CGT exempt

https://www.royalmint.com/gold-price/capital-gains-tax-on-investments/

*British legal tender coins from 1837 to date. Foreign coins are subject to CGT.

gravel_2

Bullion Vault is fractional investing in bars held in vaults. CGT applies.

cwep2

ETFs have cheaper transaction costs, lower holding costs and tighter bid/ask spread for buying/selling.

If you are buying gold as an investment because you think it will appreciate more than stocks/cash(with interest) or to diversify this is the right choice. I hold Gold in an ETF, and will continue to do so as a diversification strategy, I have also reduced my exposure to stocks over the last 12 months as I think valuations are stretched (I'm still mostly in stocks, just shifted like 10-15% out) and this has done OK as gold has outperformed stocks in this period.

If you are buying gold as a hedge against collapsing financial order/society, then getting your money out of an ETF won't be possible anyway and you want physical gold somewhere you can access it. There are some who hold gold for this reason, and an ETF isn't any use in that scenario, but for the rest of us an ETF is probably the way to go.

savingsguy

Thanks all!
@cwep2 That's pretty much my approach too, so an ETF definitely seems like the better option for me as well. I’m not really expecting a collapse of the financial order—I'm an optimist! Though I might pick up a few Royal Mint sovereigns just in case. 

TBC15

The way CGT allowances and rates have gone and will be going I can’t think of why I would hold anything other than coins outside of an ISA. Shame about the buy/sell spread on coins.

gravel_2

ETF probably easier to immediately "day trade" to lock in the price you like. Nothing stopping you then rotating that to physical as and when you like... until the collapse of course.