Making A Mint

The New Gold Rush

Gold and silver tumbled as markets had their first trading day of February, as a reversal of a record-breaking rally gathered pace. Gold fell 9% in early trading and it extends a very troubling few weeks for the metal after a stunning recent performance.

Phrases such as ‘the market plunged’ are very overused and rarely justified. They give what can be rather small moves in asset markets, a veneer of drama that is not justified. An ex-editor of mine and long-time business journalist said if I used such phrases for what were significant daily moves but not worthy of the phrase – how would I explain truly dramatic moves, I’d have nothing left in the word cupboard. But I think the recent fall in gold and silver prices genuinely does justify rooting round for the keys to the word cupboard and taking such phrases as “dramatic fall” off the shelves and put to good use.

Q: How much profit have gold speculators made recently?

In January 2025 is was $2,773 and at the start of trading in February it was $4,713. So even with the recent big fall, gold has risen 69% since January last year

• ·      To set that in context the best bank account might have given you 4%

• ·      The FTSE 100 has done much better than a bank account, rising around 20% over the past 12 months but still less than a third of what gold has done. 

  
  

So even given the dramatic fall in value of gold over the past week, it has been on a scorching ride upwards. I

Q: Why has it risen?

There are a number of factors at play here.

1: Donald Trump has something to do with it – which might be apt given his well-known preference for everything gold coloured. Given the turmoil he has caused, there is a perception that gold is a safe investment, in contrast with the new greater risks associated with US foreign and fiscal policies under Trump.

2: Wars in Ukraine and Gaza  and the US seizure of Venezuelan President, added to the US threat to invade the NATO member Greenland, have all added to concerns about global uncertainty and unpredictability. All that has pushed people towards the perceived neutrality of gold as something they can rely on.

3: Central banks buying gold has also been a key factor pushing up its price. Concerns about the US and the US dollar have pushed them towards what they see as an alternative way of storing their wealth.

4. FOMO – Fear Of Missing Out. FOMO has also been a big driver. Even if investors weren’t convinced of the justification of the recent gold price, they just can’t sit on their hands and do nothing while the most profitable asset of recent times – goes through the roof. So they also join in the gold rush and that itself pushes prices even higher.

Q: So why has it fallen in price recently?

A: For a long time, people have got very nervous about the seemingly unstoppable rise up in price – aware that it couldn’t go on forever as this pace. So speculators were getting ready to jump off the bandwagon at the slightest sign that it had hit a bump in the road. They wanted to ensure they could cash in on their profit before it evaporated.

Part of the reason for the fall is the FOMO that pushed its price up. As some investors sold, others didn’t want to miss out on the big sale – and they too sold out of gold – pushing prices down in the same way that the previous rush, pushed prices up.

One of the other triggers may have been Trump’s nomination of Kevin Warsh as Chair of the US Central Bank, who is seen as a relatively safe bet compared with other candidates.

Q: How quickly is it likely to recover the ground it lost over the past week or so?

A: After the price rallied like crazy in 1980, it swiftly collapsed again and then failed to fully recover for almost 30 years. So gold can have a tendency to fall out of fashion and stay there for a long time – so it’s something to be careful about.

Gold Price

Q: Is there a tax loophole for gold investments?

A: Normally you pay capital gains tax on the profit you make on investments, However there might be a tax efficient way of using gold.

This applies only to some Royal Mint gold coins, if the coins are also legal tender. Under certain rules these coins may be exempt from capital gains tax. Even given this possible exemption there are other issues which can complicate the issue, not least because there are other costs to consider.

Coins can sot more than the gold in them would suggest, so they are sold at a premium. Then the condition of the coin also has an influence on the price.

Some of the most well-known UK gold coins are Gold Sovereigns and Gold Britannias.

Before buying any gold coins – check the tax status independently.

The tax reference guide from which may be relevant is here but laws and rules change all the time, so check independently before you buy.

Tax Guide Extract: “Coins are to be regarded as currency only if they are legal tender at the time of their acquisition or disposal. Coins which are currency but not sterling, for example Krugerrands, are chargeable assets.

Sovereigns minted in 1837 and later years and Britannia gold coins are currency but, like all sterling currency, are exempt because of TCGA92/S21 (1)(b).”

Q: How to invest in gold

Remember gold does not pay any income or dividends and if you buy it, you have to consider where on earth are you going to keep it.

But it is rare. All the gold ever mined throughout human history would fit into a cube measuring approximately 21 metres on each side - barely enough to fill three and a half Olympic swimming pools. 

ETFs: You can invest in gold indirectly by investing in gold-backed exchange traded funds otherwise known as ETFs or global ETFs

Miners: You could also buy shares in companies that mine gold and other precious metals, or funds that invest in mining companies. Mining shares often do well when the price of the metals they mine, rise – so that investing in the shares of gold miners, can be a way of exposing your investments to gold indirectly.

Physical Gold: It’s not easy to know where to buy the actual metal itself, and having never done it myself I can’t offer any safe recommendations. But extraordinarily I see you can buy gold bars from Costco - the shop that is better known for selling baked beans and past in bulk. Though whether the deal on gold is as good as their deal on bulk foods, is another question.

The official coin maker, the Royal Mint, also sells precious coins and bars. Coins have the added advantage of being classed as legal tender, so they are exempt from capital gains tax. You can also buy gold bars and sovereign coins from the wholesale retailer Costco. 

Q: Tell me something I never heard before.

Strange Fact 1: In a world in which billions of dollars are moved at the click of a computer key, gold transfers can be very old fashioned – seemingly medieval even.

At the Argor-Heraeus gold refinery in southern Switzerland, they melt and then recast bars that move from London to New York. That’s because In London, most trading is in 400-troy-ounce bars, each weighing about 12.5kg and roughly the size of a brick. New York’s Comex exchange, by contrast, uses smartphone-sized 1kg bars as its benchmark. That means bars heading across the Atlantic must first make a stop in Switzerland to be melted down and recast.

Strange Fact 2:  Because London is built on clay, the soft foundations of the Bank of England building mean that gold can only be stacked to about shoulder height. The staff who go move the gold bars have to be fit as they lift gold bars all day long – perhaps the poshest work out regime of anyone in the world. There can be quite a lot of moving as the Bank of England holds a lot of gold on behalf of lots of banks from around the world, only 6% of the gold in its large vaults belongs to the UK Treasury.

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