How do I invest in gold in the UK?

Thinking about investing in gold? You’ve got plenty of options, like gold coins, bars, or even ETCs. By the end of this article, you’ll understand the pros and cons of each option and be able to choose the one that best suits you.

Why is gold a valuable investment?

Gold is rare, durable, easy to divide, and widely seen as having intrinsic value. Gold was used as a medium of exchange well before the first coins were ever minted. More than 5,000 years ago, ancient Egyptians used gold rings and pieces for trading purposes and to store large amounts of wealth. Evidence suggests that gold was also used in Asia, America, and Europe thousands of years ago.

Investing in gold: The different options available

Today, gold is seen as a safe investment as its value tends to increase during times of economic or political instability (though its price can still fluctuate or even decline). In the past, investing in gold meant wearing heavy gold jewellery on you at all times, or storing gold bars in your home. Fortunately, there are now many more ways to invest in gold, including:

• UK Gold coins
• Gold bullion and bars
• Synthetic ETCs
• Physically backed ETCs

Keep reading to explore these options and find the one that best fits your needs!

Quick disclaimer

A quick disclaimer before we begin: I am not a financial adviser, and I do not know your personal circumstances. Therefore, I cannot tell you whether investing in gold is right for you. If you’re unsure, I recommend consulting a financial adviser.

If you’re still on the fence about whether to save or invest, you can check out my article comparing savings vs. investing. In this article, I assume you have already decided to invest in gold, so I will focus on how to do it.

Investing in physical gold: coins, bullion, or bars

The most straightforward way to invest in gold is to buy coins, bullion, or bars. If you live in the UK, it’s worth noting that Gold Britannia coins and Gold Sovereigns are exempt from Capital Gains Tax (CGT) because they are legal tender (that is, they are official coins, minted by the Royal Mint).

What is Capital Gains Tax (CGT)?

Broadly speaking, CGT is a tax paid to the government when you sell an asset (your family business, shares, or in this case, your gold) and make a profit. The CGT rate depends on your tax status but typically ranges from 10 to 20%, if your gains exceed your CGT allowance. Don’t panic, we’ll go through an example now.

Imagine you earn £35,000 per year and are therefore a basic-rate taxpayer. If you bought £10,000 worth of gold bullion in October 2022 and sold it two years later for £15,000, you made a £5,000 profit. You’ll only be taxed on the difference between your profit and your CGT allowance, equal to £3,000, which leaves £2,000 taxable. Because you’re a basic-rate taxpayer, you will pay 10% tax on that amount, which equals £200. Now, if instead of buying gold bullion, you had invested in Gold Britannia coins, you wouldn’t have to pay CGT at all, saving you £200.

Why do people buy gold bullion and bars?

One key reason is that coins often carry a premium due to the more labour-intensive minting process. The Royal Mint also adds a small markup on each coin. So, even though you may have to pay CGT on gold bullion or bars, they can still be a worthwhile investment.

The challenges of investing in physical gold

If you decide that you want to buy physical gold, you’ll need to think about storage and insurance. While this is beyond the scope of this article, I’ll cover it in a future post. The key point is that you may incur one-off costs (such as a high-quality safe and CCTV system for home storage), recurring fees (like private vault storage), or a combination of both. These expenses will eat into your returns and should be factored into your investment decisions.

Investing in Gold ETCs: synthetic vs physically backed

If you think that buying and storing physical gold is too much hassle, an alternative is investing in Gold ETCs. An ETC, standing for Exchange Traded Commodity, is a financial product that allows you to invest in commodities, like metals or oil, without owning them directly. Like shares, ETCs can be traded on the stock market. A Gold ETC is a specific type of ETC that tracks the price of gold. You can buy them on dedicated investment platforms, such as Interactive Investor or Hargreaves Lansdown.

What are the two types of Gold ETCs?

There are two main types of Gold ETCs: physically backed Gold ETCs, where the issuer holds gold in a vault on behalf of investors, and synthetic Gold ETCs where the issuer uses complex financial instruments to track the price of gold without actually owning any. As you might expect, physically backed gold ETCs are considered safer by many investors. An example of a physically backed gold ETC is WisdomTree Physical Gold (ticker symbol: PHGP) but there are many others that are available on UK investment platforms.

The advantages of Gold ETCs over physical gold

Gold ETCs have many advantages over owning a physical gold coin or bullion. First, they are much more liquid: you can sell them on investment platforms with just a few clicks. In contrast, if you own a gold bullion that you store in a safe at home or in a bank, you’ll need to assess its value (don’t trust the person or entity you’re selling it to), obtain quotes from bullion dealers, gold exchanges, pawnshops, etc., then select the best option and finalise the sale. This process takes time and effort.

Lower costs with Gold ETCs compared to physical gold

Second, you don’t have to worry about storage or the associated costs. To be clear, there are costs associated with Gold ETCs, such as management, brokerage, or currency exchange fees. However, these expenses are typically lower than the costs of owning physical gold directly.

Flexibility in investing with Gold ETCs

Finally, another major advantage of Gold ETCs over physical gold is the ability to invest any amount you choose. As of mid-March 2025, buying a UK Gold Sovereign costs around £570. If that’s too much, you could opt for a Half Sovereign (£300) or a Quarter Sovereign (£175). But if you’ve got exactly £100 or £200, it might be tricky to match that exactly with coins or bars.

The same applies to bullion, though it offers slightly more flexibility, as gold bars come in a wider range of weights, typically starting at 1 gram. However, nothing beats Gold ETCs in terms of flexibility: you can invest any amount, at any time, without being restricted by fixed coin or bar sizes.

Curious how the value of your gold could grow over time? Try our savings and investments growth calculator to get a feel for potential returns based on your investment amount and timeframe.

Why do some investors prefer physical gold over Gold ETCs?

There are a number of reasons why people still invest in physical gold rather than Gold ETCs.

The counterparty risk with synthetic Gold ETCs

First, there’s the issue of counterparty risk: with synthetic ETCs, there’s a risk that the financial institution or entity providing the underlying contracts might default, potentially leaving you with nothing.

Tax benefits of investing in UK gold coins

Second, if you make a profit on your Gold ETC and exceed your CGT allowance, you will be required to pay tax on those profits. However, if you invest in UK gold coins that are considered legal tender (like Gold Britannia coins or Gold Sovereigns) and live in the UK, you won’t have to pay Capital Gains Tax (CGT) when selling those coins, regardless of the profit you make.

The psychological security of owning physical gold

Beyond those practical reasons, there’s also another one that is more speculative in my opinion. It involves some kind of cataclysmic event that disrupts digital infrastructure, such as a huge electromagnetic storm or a massive cyberattack. The idea is that in such a scenario, while your ‘digital gold’ could vanish, your physical gold would remain safe as long as it’s stored at home or in a nearby vault.

While these scenarios aren’t impossible, I believe they are quite unlikely. Arguably less so than, for instance, a safe being looted. But even if such a cataclysmic event happened, I suspect that in such a crisis, gold would be the least of our worries. Ultimately, these arguments highlight a psychological factor. Many people feel more secure owning a physical asset, like a gold coin or bullion, rather than relying on a digital representation of wealth.

Investing in gold: A quick pros & cons breakdown

You now have all the information you need to choose how to invest in gold. For convenience, here’s a table summarising the key pros and cons of each option:

*In this table, flexibility refers to how easily you can invest in custom amounts.

That’s all for today! If you enjoyed this article, why not check out some of my others, like how to negotiate a pay rise or plan for an early retirement?

Happy investing, and may your financial future shine as brightly as your gold, whether it’s physical or digital!