How to invest in gold in the UK

Keen to invest in gold? Perhaps you see it as a safe investment, or trying to beat inflation (rising prices)? Here’s a run through of how to invest in gold in the UK, and if it’s suited to you.

In a hurry? Here's the best places to invest in gold.

Best places to invest in gold

Best for short term trading

Best for long term investing

Best for buying gold directly

Best ways to invest in gold

Gold is used in a huge range of different things, ranging from medical devices to rocket ships! And when it comes to investing in gold, there’s a range of different options available too.

The most popular ways to invest in gold are:

1. Buy gold directly: such as gold coins and bullion bars
2. Invest in gold mining companies
3. Invest in gold investment funds (ETFs)
4. Invest in gold via a CFD (very popular, and explained below)

1. Buy gold directly

As gold is a real thing (a commodity), you can simply buy it directly and keep it under your bed if you want to (or maybe a safety deposit box). There is of course gold jewellery, which you could buy from any jewellery store, or more commonly, you could buy gold coins or gold bullion bars.

One way of buying gold coins and gold bullion is actually directly from the Royal Mint. They’re the people who make the coins we spend every day, and also make gold bullion bars too. They also sell silver, and platinum sovereign coins and bullion bars.

There are a few issues with this of course, you’ll need to store the gold somewhere, and you’ll have to buy a set amount, the weight of the bar, which can range from 5g to 1kg (the 1kg bars are what you typically see in the movies – and they’re pretty heavy).

That also means you’ll need a minimum investment of a few hundred pounds, with the bigger bars much more expensive – expect around £50,000 for a 1kg bar.

You might be thinking, it could be pretty cool to own a bar of gold, but the practical and safety aspects of owning gold can cause a lot of issues – it’s often simpler to buy gold online via an investment, and much easier when it comes to selling gold later down the line.

2. Invest in gold mining companies

Instead of buying physical gold bullion directly, you could instead invest in the shares of gold mining companies – not only do they mine gold from the ground, but they refine it (make it pure gold), have a load in storage, and actually trade the price of gold too.

The price of large mining companies tend to trend similar to gold itself, and can be a much easier way to invest – you simply buy shares of the company on a stock exchange (the stock market).

Note: a share represents part ownership of a company, all the shares combined equals the total value of the company – and so the share price can go up and down, usually depending on how the company performs.

Gold mining companies can also sometimes pay out dividends to their owners (the shareholders), which is paying out some of the profit they make.

Buying shares in gold mining companies is easy to do, and you could have shares in just a few minutes. We recommend eToro¹ for this, as it’s easy to use, and commission-free (on stocks and shares).

(Your capital is at risk. Other fees apply. For more information on fees, visit eToro.)

To learn more, here's our eToro review.

For more options, check out the best investment platforms.

3. Invest in gold investment funds (ETFs)

Another simple way to buy gold is to invest in gold investment funds – which is easy to do if the fund is an exchange-traded fund (ETF)...

An investment fund is a group of lots of different investments all pooled into a single investment – for instance lots of individual shares, from different companies all packaged together into a single investment, and managed by experts (called fund managers). They can often be called mutual funds.

An ETF (exchange-traded fund) is an investment fund that can be bought and sold on a stock exchange (such as the London Stock Exchange (LSE) in the UK), just like stock and shares, and so can be bought and sold in minutes.

There’s a few options with gold ETFs…

You could buy an ETF that holds a range of shares in gold mining companies. 

Or, you could buy an ETF that holds gold itself, which is called a physically-backed gold ETF (or simply physical gold ETF). These track the gold price of gold, and are very popular, suited to almost all gold investors.

You can even get exchange-traded funds that hold gold solely from the Royal Mint itself. Pretty cool right? (This also means all the gold is responsibly sourced). You can find this on InvestEngine¹ (an excellent fee-free ETF platform), and it’s called ‘The Royal Mint Physical Gold’.

And finally, you could buy an ETF that buys something called gold futures, which are types of contracts about the price of the gold in future. This can get complicated, but sometimes it can represent the opposite of gold (called inverse or short), so if the price of gold goes down, the ETF would go up in value. 

Some futures ETFs can offer leverage, which is using borrowed money to increase the value of the gold represented in the investment. For instance, with a 2x gold futures ETF, if the price of gold increases by 1%, the value of the ETF increases by 2% (2x). This is intended for daily movements in price, and not long term investments, it’s high risk, and not recommended for beginner investors.

4. Invest in gold via a CFD

This option is very popular with traders, people who buy and sell investments frequently (rather than long term investors). If you’re thinking about buying gold with a more short-term view, this might be a great option for you.

Instead of purchasing gold via an ETF, which is very popular with long term investors, traders can trade the price of gold using something called a CFD (Contract For Differences).

A CFD is where you enter into a contract with a CFD broker (an investing platform), about the price of an asset, in this case gold. You would agree to settle the difference in price from when you agreed the contract, to when you decide to sell gold.

And that’s it – it’s just like buying a stock or share, but instead of buying the actual asset directly, you’re simply trading a contract that follows the price.

This is great with commodities (real things like gold, oil, grain, or other precious metals such as silver), as you don’t need to buy the actual asset physically, but can benefit from all the price movements, and buy and sell whenever you like.

Note: these are pretty similar to exchange-traded commodities (ETC), which is a type of asset you can trade on a stock exchange that aims to replicate the price of a commodity (like gold), without actually holding it physically. Except CFDs are simpler, easier to access, and typically lower cost.

Benefits of CFDs

CFDs also allow you to trade both price directions too, so you can trade the price going down (short), as well as the price going up (long). Which opens up lots of new trading strategies for advanced traders. 

And, you can even trade with leverage (borrowed money) if you want to, which means you could trade with more money than you actually have – your account balance acts as a deposit to buy more. This is very high risk, and only suited to advanced traders.

Finally, CFDs can be a low cost option too – there’s often no dealing fees (commission when you buy an asset), simply a small fee hidden in the price of the asset when you buy and sell (called a spread fee). However, there can also be other fees depending on the trading platform.

Where to trade gold CFDs

One of the best places to trade gold CFDs is eToro¹ – it’s easy to use, has low fees, and you can join a community of other like-minded traders. (You can also buy gold ETFs on eToro too.)

If eToro isn’t for you, check out the full range of the best CFD trading platforms.

Which is the best option for me?

That brings us to which is the best option. Well, we recommend either investing in gold with ETFs, or investing in gold via CFDs – they’re both easy ways to buy and sell, and you can be invested within minutes.

And with both, you also don’t need to worry about storing gold, and all the safety issues that come with it (under your bed might not be the best place if you are buying a lot).

If you’re investing for the long term (thinking in years, rather than days), an ETF is likely a better option for you – as you can buy and hold the ETF without accruing fees which could build up over time (CFDs usually have overnight fees, so every night you pay a small fee).

As an added bonus, you can buy the gold ETF within a Stocks and Shares ISA, or a self-invested personal pension, and not have to worry about paying tax on your investments. We’ll cover these accounts in detail just below.

Nuts About Money tip: you can buy gold ETFs fee-free with InvestEngine¹, and within an ISA.

If you’re looking to buy gold in a short time frame, maybe even just hours to days, weeks or sometimes months, then trading a gold CFD is probably a better option – particularly if you want to buy and sell regularly (trade). Again, check out our top recommendation eToro¹ – it’s easy to use, and low cost.

Investing in mining companies can be a good option too – but you aren’t technically buying the gold directly, and they are very large businesses that come with their own operational issues and complexities – so there’s always a small risk they might either go out of business or face significant issues unrelated to gold.

Types of investing accounts

If you’re keen to invest in gold CFDs (to trade gold regularly), rather than buying an asset directly like a share or investment fund. You’ll only be able to invest within a standard trading account, often called a General Investment Account (GIA). (This doesn’t have any tax-free benefits.)

For buying assets directly, you can invest within a Stocks and Shares ISA or a self-invested personal pension, and take advantage of some awesome tax saving benefits – or you can also invest within a General Investment Account too.

General Investment Account (GIA)

This is your standard investing account which doesn’t have any tax-free benefits, so you could pay Capital Gains Tax, Income Tax, and Dividend Tax depending on which investments you have. With gold, you’ll likely only pay Capital Gains Tax.

Tax you might pay

Capital Gains Tax is a tax on any profit you make when you sell investments – although only applies if you make a profit of over £3,000 per tax year (April 6th to April 5th the following year). You’ll likely pay 18% if you earn less than £50,270 from your income (e.g. salary), and 24% if you earn more than £50,270.

Some investments can pay an income, therefore you will have to pay Income Tax (it's the same tax you pay on your salary). And if a profitable company pays out some of its profits to its owners (the shareholders), you might have to pay Dividend Tax.

Stocks and Shares ISA

A Stocks and Shares ISA, also known as an Investment ISA, is where you can save and invest up to £20,000 per tax year (April 6th to April 5th the following year), and everything you make within the ISA is completely tax-free, forever!

You don’t have to worry about Capital Gains Tax, Income Tax, or Dividend Tax – meaning your money can grow much faster over time, thanks to less tax and compound interest – where money being saved from tax, can make money over time (your money making more money).

‍Note: your £20,000 ISA allowance is shared across all types of ISAs, so a Cash ISA (saving cash), and a Lifetime ISA (saving for your first home).

If you’re keen to invest within a Stocks and Shares ISA, check out the best Stocks and Shares ISAs.

Self-invested personal pension (SIPP)

A self-invested personal pension, or SIPP, is where you can buy your own investments within a personal pension – meaning you can benefit from tax-free growth (no tax paid at all as it grows), and you’ll even get a massive 25% bonus on your contributions. We’re not joking!

Better still, if you’re a higher rate taxpayer (earn over £50,270, and pay 40% tax), or additional rate taxpayer (earn over £150,000, and pay 45% tax), you can claim back some of that tax paid too (which you can do on a Self Assessment tax return).

You can open a SIPP alongside your other pensions (for instance a workplace pension, with your employer), or you might have a personal pension that you’ve set up yourself, which is managed by experts (highly recommended) – check out PensionBee¹ if letting the experts manage your pension sounds interesting. PensionBee is low cost, easy to use and has a great track record of growing money over time. Here’s the full range of the best personal pensions.

If managing your own investments via a SIPP sounds like something you might be interested in, here’s the best SIPP providers – AJ Bell¹ tops the list, it’s low cost and has a huge range of investment options, including a range of gold ETFs.

Note: you might have to pay Income Tax when you start withdrawing your pension later in life – the first 25% is completely tax-free, but with the remaining 75% will be liable for tax. The amount you pay depends on your income at the time. You also can’t withdraw your money until you’re at least 55 years old. Learn more with our guide to personal pensions.

Why invest in gold?

Gold is typically seen as a safe way of preserving wealth (your money). It’s a ‘safe-haven’ asset, where it can protect your money from inflation (where prices of things rise over time), and potentially safe from issues affecting the global economy, such as recessions (where an economy shrinks, and businesses can struggle – often because interest rates go up to try and lower inflation) – the gold price doesn’t tend to follow the trends of stocks and shares.

Gold can be universally bought and sold across countries and currencies – and so it protects the investor from any political issues, or a failed currency.

For example, it’s often used as a way of reducing risk against the US Dollar (as many things, including gold, are typically priced in Dollars, and it’s used in a huge range of industries globally – so if the value of the Dollar reduces significantly, it could have a huge impact for businesses and investors worldwide).

The price of gold doesn’t tend to be volatile (dramatic changes in price (up and down)), and historically grows in value over time.

Diversification

Gold is also seen as a good option to increase diversification within an investment portfolio – that means building a range of different investments to reduce overall risk (of losing money). 

That’s because it’s not directly correlated with other types of investments such as stocks and shares and bonds (lending money to governments and large corporations). Therefore if stock markets have a bad period (where prices fall), gold may not be as affected, and therefore retain your wealth better.

Should you invest in gold?

Gold can be a great investment for a lot of people – and typically if you’re looking to invest in something that’s relatively low risk, that could preserve your money over time, gold might be a good investment.

If you’re looking to increase your money significantly in a short-medium time frame (by investing), gold probably isn’t the best investment for you – unless you’re looking to actively trade the price of gold regularly (not a good idea for beginners).

Gold doesn’t typically rise in price over time as much as stocks and shares (as part of a sensible long term investment strategy) – but can form part of an overall, well diversified portfolio (your total investments).

Do you pay VAT on gold?

No, you don’t pay VAT (Value Added Tax) on gold. That’s because gold is seen as an investment rather than something you use, or consume (e.g. food). Gold coins are also legal tender, where VAT doesn’t apply.

However, gold jewellery can have VAT applied – as it’s not seen as an investment.

That doesn’t mean it’s completely tax-free however, you could pay Capital Gains Tax if you are investing in gold outside of an ISA or pension (if you make a lot of profit).

Is it safe to invest in gold?

Yes, it’s safe to invest in gold via any of the methods we’ve suggested – although that doesn’t mean the price of gold can’t go down, and you lose money.

Investment platforms, such as either buying gold through an ETF, or trading gold via CFDs, need to be authorised by the Financial Conduct Authority (FCA). They’re the people who make sure financial services companies are looking after your money.

That also means your money is typically protected by the Financial Services Compensation Scheme (FSCS) – that’s where you could be compensated up to £85,000 if the business holding your money were to go out of business.

Let’s recap

There we have it – how to invest in gold. We hope that made investing in gold a bit simpler to understand too.

If you’re looking to invest for the long term, the best way to buy gold in the UK is typically buying an ETF (investment fund) that holds physical gold. And, you save tax-free with a Stocks and Shares ISA, or self-invested personal pension.

Here’s where to find the best Stocks and Shares ISAs, and the best personal pensions.

Or, if you’re looking to trade gold over a shorter time frame, it can be a good idea to trade gold CFDs – which allow you to simply trade the price of gold, easily and simply, and for a low cost.

These options are much easier than buying physical gold (gold bars) from the Royal Mint – it’s all online. And, you don’t need to worry about selling gold bullion (physical gold) later down the line.

For gold ETFs, check out InvestEngine¹ – it’s fee-free, easy to use, and there’s a great range of options.

For trading gold via CFDs, check out eToro¹, it’s easy to use and has low fees – you can even buy gold ETFs there too (for low cost).

And that’s it – all that’s left to say is good luck investing in gold!