Buying Gold As a Form of Investment
What should you pay attention to when buying gold? Advantages of gold for investment. Possibilities for both storage and resale.
Ever since the end of the prehistoric era, gold has been cherished as an investment because even small amounts can be very valuable, especially if they have a high level of purity. The shiny precious metal has proven itself over millennia, as a crisis-proof form of capital that is easy to store and to transport. Its properties as a sought-after means of exchange and payment have been maintained to this day. For many investors, an investment in gold represents a security reserve.
Those who would like to divest their assets in gold are spoiled for choice because this precious metal is available in many forms. The market offers gold coins, gold granules and reclaimed gold as well as gold bullion in its various forms as classic ingots, coins or combi-bars.
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What to Invest In – Gold Coins or Gold Bars?
Many investors understandably ask themselves which form of gold they should choose when entering their capital into the gold market. Proportionally speaking, larger bullion gold is essentially much more cost-effective than smaller coins. Their numerous weight classes offer more flexibility when buying and selling, too. Gold bars – or ingots – are suitable for both beginners and experienced investors. Indeed, they are usually inexpensive to own in marketable denominations. They can be easily exchanged and are characterised by a low spread (the difference between buying and selling prices). By contrast, gold coinage usually has a better look which is why they are more interesting to collectors when compared to ingots.
Popular Gold Coins for Investors
Many private investors and collectors like gold coins that have a high fineness of 999/1000 or even more. Depending on the product, they are available in denominations of 1/20 of an ounce to 20 ounces or from 1 gram to 10 kilograms. A popular benchmark standard is the troy ounce of gold which weighs 31.1035 grams. Bullion coins are generally appreciated because they usually come with a very detailed designed motif and a high quality of embossing.
Well-Known International Gold Bullion Coins:
| Name of the gold coin | fineness | country |
|---|---|---|
|
American Eagle |
916.7/1000 |
USA |
|
Birds of Paradise |
999.9/1000 |
Australia |
|
Britannia |
999.9/1000 |
United Kingdom |
|
China Panda |
999.0/1000 |
China |
|
Goldmark |
999.0/1000 |
Germany |
|
Helvetia |
900.0/1000 |
Switzerland |
|
Krugerrand |
916.7/1000 |
South Africa |
|
Lunar Series I - III |
999.9/1000 |
Australia |
|
Maple Leaf |
999.9/1000 |
Canada |
|
Nugget Kangaroo |
999.9/1000 |
Australia |
|
Vienna Philharmonic |
999.9/1000 |
Austria |
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Gold Bars for Investors
With gold bars mostly offered in classic gram sizes which range from a single gram to one kilogram, there are gold bars of one-tenth of an ounce through to 400 ounces that are available, too. Attractive investment sizes tend to range from 100 grams to 1 kilogram and 400-ounce ingots. Bullion bars up to a weight of 250 grams are usually made of gold sheet. Larger units are commonly cast, although there are exceptions. For investors, the fine weight of your gold investment will play a crucial role, since the gold content involved should make up at least 99.9 per cent of the bullion.
In addition to classic gold ingots, so-called coin bars are also available. These come furnished with elaborate designs and usually have an imprinted face value on them which is why they are often classified as gold coins. Kinebar gold ingots have another special feature. Although their front shows the face of a common ingot, the back is decorated with a two-dimensional security hologram. Also of interest to investors are table bars, sometimes referred to as combi-bars. Their appearance is similar to a chocolate bar because they consist of several, interconnected single-gram pieces. These have preset breaking points so that they can be separated if necessary, meaning that parts of the block can be sold if wanted.
Well-Known Swiss and International Manufacturers of Gold Bars:
- Argor-Heraeus SA, Switzerland
- C.Hafner GmbH + Co. KG, Germany
- Heimerle + Meule GmbH, Germany
- Heraeus Holding GmbH, Germany
- Johnson Matthey Ltd, Canada
- Austrian Mint, Austria
- PAMP S.A., Switzerland
- The Perth Mint, Australia
- Umicore AG & Co. KG, Belgium
- Valcambi SA, Switzerland
What Should You Look Out For When Buying Gold?
When purchasing gold bars, it is advisable to pay attention to the authenticity and LBMA certification of the London Bullion Market Association. This certification guarantees a purity of at least 995/1000 in so-called ‘good delivery’ bars (around 400 ounces). Indeed, even when it comes to the purchase of gold coins, their authenticity is crucial for a true valuation. Coins with popular motifs are usually offered at higher prices, which makes them more likely to be counterfeited. Again, it is advisable to pay attention to the authenticity of bullion coins. That is why many bullion coins – such as the Canadian Maple Leaf, for example – are supplied with anti-counterfeiting features.
Special collector edition and commemorative coins and bars are only partially suited to a role as an investment. In addition to their financial worth as gold, their value is mainly based on collectability, which is why high prices are demanded despite the fact that they tend to appeal to a limited group of buyers. Even gold jewellery is no alternative to classic investment gold since, as a rule, the cost of jewellery frequently exceeds its pure gold value. When it comes to selling, dramatic value losses must consequently be expected.
Where to Buy Gold?
As a precious metal, gold is safest when bought from reputable dealers, such as our partner Echtgeld AG. Such brokers usually offer a larger selection at cheaper prices than, for example, banks do. Almost all well-known providers now also sell their goods via reputable online outlets.
Purchasing gold anonymously
When required, both gold and silver can be purchased anonymously.
Investors who want to buy gold anonymously can do so via spot transactions, also known as over-the-counter transactions. Gold coins, silver bars or other types of precious metals can all be purchased over-the-counter for cash payments. However, since January 2020, the upper limit for anonymous cash payments in Switzerland has been lowered to 15,000 Swiss francs. This is a general precaution designed to combat money laundering and terrorism.
When buying gold anonymously, investors can buy precious metals in cash up to a value of CHF 14,999.99 without any requirement to record customer data. Once the cash amount exceeds this anonymity limit, retailers are obliged to verify the buyer’s identity and register their personal data. They should also check whether there is any evidence of a criminal background. This obligation has already prompted many precious metal dealers to no longer offer anonymous cash transactions. These providers now prefer to complete purchase transactions using a bank debit or credit card, via a bank transfer, or as an online purchase. Each of these methods allow the customer to buy precious metals in any quantity, while their identity and personal details are stored automatically.
Compared to other European countries, Switzerland is much more generous with its anonymous cash transaction ceiling. In Germany, for example, the threshold is 2,000 euros -which means an anonymous purchase can amount to no more than a Krugerrand gold coin weighing one troy ounce.
Is gold subject to VAT?
Unlike jewellery or investment products made from white metal, the purchase of investment gold in Switzerland, and within the European Union (EU), is not subject to VAT. This regulation applies generally, with a few exceptions, for example, reissues of historical gold coins. Bullion gold must have a fineness of at least 995/1000.
The background here is that investment gold is classified by law as a pure investment product. Find out more about gold and VAT on precious metals in our article about gold and taxation.
What influences the price of gold?
Precious metal price trends essentially depend on the current status of supply and demand. In addition, the price of gold is also influenced by the economic climate and by the impact of global crises. As the largest customer, the jewellery industry also exerts an upward pressure on gold prices.
Advantages of gold over other precious metals
Due to its high value density, many consider gold to be a useful hedge against inflation, so it is often used to protect assets. In addition, gold also has further advantages over the other precious metals. Unlike white precious metals, the purchase of physical gold remains VAT-free. In addition, gold is easier to store than silver. This is because, for an identical investment value, gold has significantly less weight and volume compared to silver. The minting fee for gold is also usually lower, because it has a higher value per kilogram than silver. Personal allowances also permit you to travel across borders with your gold duty-free (but please check the applicable customs regulations for each respective country).
Essentially, the price of gold is determined by the demand from jewellery producers and by the investment market. This makes gold less susceptible to price fluctuation. Unlike silver, platinum or palladium – where the market price is also influenced by the rise and fall of industry demand. The automotive industry in particular is increasingly using white and grey precious metals for their catalytic converters – not to mention their usage in electronic components, as well as for solar technologies, and in water purification.
Where Should You Physically Store Precious Metals?
Gold, in the form of coins or bars, can be stored in your own safe at home. An essential element of this approach would be a good security system and adequate insurance. An alternative to this is a bank deposit box, the contents of which are only known to the user. In the event of a theft of the contents of the box, however, the renter must provide proof of the box’s contents. The same applies following a break-in at home, as well, incidentally. At banks, a third, or master, key also usually remains with the establishment. If there is an expropriation or insolvency of private or corporate capital, then the bankruptcy administrator will often be able to gain access to a deposit box held at a bank.
The situation is different with private storage facilities run in a secure vault that is outside of the banking system. In such vaults and safes, assets can be kept in a secure and discreet environment.
- You can find more information about bank-independent security storage in Switzerland here.
Conclusion: Larger Denominations Are Better Suited For Investments
Gold bullion investment in coins or bars is preferable. As a rule, the larger the investment that is made, the lower the additional costs will be. Investors should be mindful of both the fineness and the authenticity of gold when buying their precious metal so there will be no unwelcome surprises at a future sale. In addition, it is advisable to think about where the physical gold will be held at an early stage: in a private safe, in a bank’s deposit box or in a bank-independent security facility.
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A brief summary of the most important points about buying gold
- Gold is available as a form of investment in coins, bars or granules. Each format has advantages and disadvantages.
- Investors should pay careful attention to authenticity when choosing a product. LBMA-certified manufacturers always guarantee authenticity and quality.
- In Switzerland, gold and other precious metals can be bought anonymously up to a cash limit of CHF 15,000.
- Unlike silver and other white metals, the purchase of gold investment products is not subject to VAT.
- As an investment product, gold has many advantages over silver, platinum or palladium, such as its high value density, price stability, and lower storage costs.
- Investors should consider appropriate storage options at an early stage.
FAQ
The best place to buy gold is in a safe, politically stable, and easily accessible country with an effective legal system. Gold should be sourced from LBMA certified producers. Switzerland can offer all of this.
Switzerland has a cherished tradition of uncompromising support for the protection of personal property rights. Because investment gold is deemed an investment commodity purchased purely as a wealth-building asset, gold coins and bars can be purchased in Switzerland without paying VAT. In addition, the Swiss refineries Argor Heraeus and Valcambi are among the most internationally respected gold refiners.
First you should arrange safe deposit box facilities with us. Then buy your gold from Echtgeld AG, for example, and arrange a handover date. Echtgeld will deliver the gold direct to our vault, then you lock it in your safe deposit box.
First, arrange a storage contract with us. Then, purchase your gold from our business partner Echtgeld AG, who will deliver it direct to our warehouse. You will receive a warehouse receipt listing all your precious metals held in store.
Make sure you only buy gold bars from LBMA-certified refineries. And with gold coins, it is best to purchase classic bullion coins such as the Krugerrand, Maple Leaf, Vienna Philharmonic, etc.
Gold can be bought in Switzerland up to a value of CHF 14,999 without declarations. However, once the purchase amounts to CHF 15,000 or more, precious metal dealers are then obliged to verify the identity of the buyer, and record and store the relevant customer data. Furthermore, there is an obligation to clarify whether the funds used to complete the purchase are of legal or illegal origin. If the transaction arouses reasonable suspicion as to its legality, a report must be passed on to government agencies. Otherwise, customer data will never be forwarded to authorities.
Gold can be bought anonymously in Switzerland via a cash transaction. However, this is subject to an upper limit of CHF 14,999. Gold retailers are only obliged to record customer data if the value of the purchased gold amount to CHF 15,000 or more. Anonymous over-the-counter business transactions can only be conducted on the premises of a precious metal dealer.
Yes, gold must be declared under certain conditions:
1. Customs and border crossings: If you enter Switzerland, there is only an obligation to provide information upon request. So, you are only required to tell Swiss customs how much cash (including gold) you are carrying when asked. In addition, gold investment products remain VAT-free. However, if you are carrying silver, then VAT becomes an issue. For example, silver coins or bars must usually be declared when they form part of a movement of goods.
There may be additional reporting requirements when entering or leaving an EU jurisdiction. Please contact customs authorities in the relevant EU country for more detailed information.
2. Taxes: Some countries levy capital gains tax on the sale of gold products. In other states, liability for profit tax expires after a holding period of twelve months. Furthermore, it is often possible to claim some allowances. In addition, a wealth tax is levied on investment precious metals owned by persons resident in Switzerland, though jewellery is exempt from this. Please ask your accountant or tax advisor for more detailed information about the specific regulations which apply in your country.
Gold can be sold easily in Switzerland. Both precious metal dealers and banks will purchase gold. Coins and bars in common denominations accompanied by appropriate LBMA certification are always an advantage. Tests to establish the origin of the gold are often carried out as a first step. Original purchase receipts, or manufacturer certificates, can help to simplify this process.