How to invest in gold and other precious metals in the UK

Buying and investing in gold can add a strong element of stability to your portfolio, particularly when the economy is turbulent.

Precious metals, particularly gold, are seen as safe havens that can preserve and even increase their value when other assets are struggling.

For this reason, gold has become a growth asset in recent years, although traditionally, it isn’t seen as one.

There is an undeniable attraction to owning gold as an alternative investment, especially as you can (if you wish) own the physical bullion yourself.

Here’s what you need to know about how to invest in gold in the UK.

What affects the price of gold?

As a rule of thumb, the price of gold rises when there is uncertainty or negativity in other areas of the market (such as equities and bonds, or the economy in general) and falls when growth is strong.

This relationship isn’t set in stone by any means, but broadly it is the reason why most gold investors hold this asset – to hedge against losses in other areas.

Other things that can raise gold prices include:

• Consumption demand: Are more people buying it for jewellery, for instance?
• Low interest rates: Gold prices often have a negative correlation to interest rates, meaning the gold price rises when rates fall or are low.
• Weakening US dollar: A weaker dollar can buy more gold than a stronger one, so, at these times, demand rises and the gold price climbs.
• Low supply: If less gold is being mined or recycled, prices go up.
• Geopolitical instability: Investors seek ‘safer’ assets when macroeconomic events make markets more volatile, which can push up the price of gold.
• Natural events: A good monsoon season can raise gold prices as the affected countries invest more wealth and influence global prices. 

The reverse of any of the above will tend to lower gold prices, but there are several factors in play, so it’s not always that simple.

How is gold priced? 

As we’ve seen, the price of gold can rise or fall depending on global events. But who sets the pricing?

The price of gold is agreed upon between several banks, an oversight committee and a panel of board members.  

What is the difference between allocated and unallocated gold?  

In a nutshell, allocated gold is solid bullion that is owned by someone.

Owning allocated gold is the only way to properly own bullion and is independent of the price that banks give it – meaning it is the ultimate safe investment.

You might need to pay a little more in the way of storage costs, but allocated gold is the truest way to invest in this commodity.   

Unallocated gold is not physically set aside for you. Instead you own a claim to a quantity of gold for future delivery.

The gold remains in the property of the bank and is backed by a bank’s reserves, meaning buyers of allocated gold are effectively investors in the bank and receive premiums in return.

This is the most common form of gold investment worldwide.

What are the pros and cons of gold as an investment?

Advantages of investing in gold

Gold, like other precious metals, is seen as resilient to inflation and able to preserve its relative value over time.

Historically, gold has provided an ‘economic lifeboat’ in countries where currencies and/or stock markets have collapsed.

Provided you can physically get the gold out of the country, you can preserve the wealth stored in it. If the gold is held as an offshore investment, you won’t need to physically move it.

Another benefit of precious metals is sometimes they can be held in the form of jewellery, so you get an ongoing benefit. Of course, gold held as jewellery will need more insurance since it is less secure.

Because gold can be uncorrelated or inversely correlated to other asset types, it can be a useful diversifier in a well-balanced investment portfolio.

Disadvantages of investing in gold

Compared to the stock market, gold is not an especially reliable source of growth.

Although its price has trended upward in recent years, it still lags behind equities. For comparison, in 2012, the FTSE and gold prices were high and performing strongly. But gold bought in 2012 would have approximately the same price in 2020 (and would have been less valuable if you sold it at any other time in the previous eight years).

By contrast, a balanced FTSE 100 share portfolio bought in 2012 would have increased its value by some 8.5% in those eight years despite the two crashes caused by the Brexit referendum and the coronavirus pandemic.

That said, the gold price has performed strongly in 2024 against a backdrop of macroeconomic uncertainty and global conflict. Some commentators have tipped the gold price to hit $3,000 per ounce in 2025, but nothing is certain and many variables could move the price.  

In short, you don’t buy gold because you want to gain money. You buy gold because you don’t want to lose it.

Is gold a good investment?

If your goal is to grow your money, this type of investment is unlikely to be the right strategy, especially if you are new to the market.

Unlike other asset classes like property or shares, you won’t be earning any income from rent or dividends.

Although the risk profile of precious metals is low, stock prices are volatile, so you stand to lose out if you buy or sell at the wrong time.

Precious metals, do, however, tend to hold their value in the long term.

For this reason, people tend to use them to diversify their portfolios as a hedge against short-term economic downturns and political uncertainty.

Do you pay VAT and capital gains tax on gold?

While most bullion (such as silver or platinum) in the UK does require you to pay VAT, gold bullion is exempt. If you buy gold bullion in the UK, you won’t incur additional VAT price increases.

Capital gains tax (CGT) is a tax on the profits of all assets, including gold, that have gone up in value, payable when you come to sell them.

There is an annual allowance of £3,000 (for the 2024/25 tax year), but once you accumulate profits above this level, you must start paying CGT.

CGT is charged at a rate of 18% if you are still within the basic rate tax band once your taxable gain is taken into account. This rate rises to 24% if you are in the higher or additional rate tax bracket. 

How can I invest in gold?

There are lots of ways to invest in gold, some of which are relatively accessible with smaller amounts of cash.

Here’s a run through of the most common options.

Physical gold bullion

If you have a considerable amount of money to invest, you could buy physical gold bullion, coins or jewellery.

Dealers, brokers and banks sell precious metals, and it’s vital you go to a reputable source to make sure what you’re buying is genuine.

There are two main coins in the UK: Britannia and Sovereign.

The coin's value depends on its weight, design, and date, so it is well worth seeking advice if you choose this route.

Another key consideration with physical gold is storage.

You’ll need to factor in the costs of the storage facility and insurance. Alternatively, you could pay a dealer to store it for you, but this could cost more.

Trading through The Royal Mint

The Royal Mint will sell you physical gold bullion, which you can either take delivery of yourself (and store however you wish) or store it in the Mint’s own storage facility, called the Vault.

This involves a storage fee, typically 1% or 2% of the gold’s value plus VAT per year, depending on whether you store smaller or larger gold bars and coin tubes.

Using the Mint is a more reliable way to buy gold as you can be sure the gold is legitimate and properly stored.

The downside is that it may be more expensive than other sources.

Exchange-traded commodities (ETCs)

ETCs are essentially the commodity equivalent of exchange-traded funds (ETFs).

They are traded like shares on investment platforms and are generally much cheaper than buying physical gold.

You can hold them in a stocks and shares ISA or general investment account. While there’s no need to pay for storage and insurance, you will need to pay a fee to buy or sell using a platform or investing app.

The ETC tracks the price of gold, either based on gold it stores in a vault or based on buying gold-related products (which can be riskier).

Gold mining and distributing shares

You could also invest in businesses involved in the gold industry, such as those in mining, production, refining and distribution.

It’s a huge industry, so there are lots of options to choose from. Returns can be higher than on physical gold because you’re investing in companies that will pay dividends, but this also involves higher risks.

The price of gold mining shares will be based on aspects like the product’s demand and the company’s costs, as well as the gold price itself.

Self-invested personal pension (SIPP)

You can even keep gold as an investment in your pension if it is a particular kind called a SIPP.

Find out more about keeping gold in your pension.

Digigold

Digital gold is a precious metal purchasing platform owned by The Royal Mint.

When you open an account, you can buy a wide range of metals, such as gold and silver.

Each purchase you make will be backed by a real, physical bar, and you can start buying from £25.

Why invest in gold through a financial adviser?

You can go it alone and invest in gold through an execution-only platform for a small fee.

However, this is only an option if you’re an experienced investor and confident in judging prices on the gold market.

If this is your first foray into investing in precious metals, you might prefer to go through a financial adviser. They can give you access to the market and can manage the whole process for you.

Even more importantly, they can advise you on whether buying gold is the best option for you, explore the alternatives, and help you decide how much to invest if you do choose to go ahead.

If you are interested in ethical investing, a good financial adviser can explain the environmental, social and governance (ESG) pros and cons of each option.

If you found this article interesting, you might also find our articles on pension vs property investments and how to invest in copper informative, too.

Need guidance with investing?

Investing can be daunting, but it doesn’t have to be.

Unbiased can quickly match you with a qualified financial adviser who can look at your unique circumstances and future goals, and help build the right investment portfolio for you.