Putting it all on Red - I mean Gold

[ZiggySawdust]

 

I’m a lowly stacker who would dearly have liked to have been able to purchase more than I have.

But now selling my house and willing to wait a while before purchasing another.

If you had £500K to put into gold how would you do it?

If you had to liquidate a gold position worht hundreds of thousands of pounds how would you do it?

Is CGT completely unapplicable even at such levels (british subject / resident etc)

Where do you think gold will be 18mos from now?

Do you think it will outpace premium property?

I think asset inflation is going to be a lot higher than RPI, but if property keeps pace with gold I will be no better off unless majorly downsizing.

These are obviously impossible to categorically answer but still curious as to what people think.

Many thanks

 

 

 

 

[Tn21]

£500k in gold would best be served in bullion my opinion. As to how you buy it, a tough call. In normal circumstances I would say cost average out but from the above context you want to be nimble too. 

 

I personally think we will have a higher gold price in 18 months time. 

 

Selling the gold in that quantity would be best done via the main dealers. Tsf is a limited market and buyers seems to appear in patches. 

 

V property I have no idea. 

[dicker]

My advice to you would be to spread your risk.  

[Tn21]

@MancunianStacker

[AaaGee]

Id stick with property with the figure you are quoting.

At most, 100k in gold.

 

[MancunianStacker]

I wouldn’t wait to buy the next property. As soon as we get a rate drop the follow on purchase prices will jump up again.

10-15% in gold 👌 

[Thelonerangershorse]

Probably look at some kind of vaulted gold thingy, like this:

https://www.chards.co.uk/info/digital-gold

or heaven forbid, this :

https://www.bullionbypost.co.uk/allocated-storage/benefits/

or even this:

https://www.royalmint.com/invest/secure-storage/new-vault-storage/

 

[Roy]

"As safe as houses'

'it's money in the bank'

'as good as gold'

'aaaand, it's gone'

 

Choose wisely 🙏

[Chronos]

19 hours ago, Tn21 said:

Selling the gold in that quantity would be best done via the main dealers. Tsf is a limited market and buyers seems to appear in patches.

James32 will buy all for a good price.

[27carrots]

Quote

 

Is CGT completely unapplicable even at such levels

If you plan to sell in one go one day, CGT is a huge deal. Whatever you do, don’t buy 250 krugerrands or 8 kilo bars.

[pricha]

Sounds like a crazy scheme to me. First of all you should have a roof over your head. If you have a few pound left over for a few sovereigns that's very nice. Change of government soon. Who can say what will happen?

[Gruff]

If you're hell bent on CGT gold, then as @Thelonerangershorse says, Chards is probably your best bet. 
If you want the best spot price on gold, then BullionVault, but you'll have CGT to pay on it. But check with them as they do offer the ability to buy, hold and sell Brits, but I'm not sure on the deal, how easy to sell on etc...
Bullion from them is quick to buy and sell.

[dicker]

CGT gold is only CGT free until the government decides otherwise.

[Thelonerangershorse]

43 minutes ago, dicker said:

CGT gold is only CGT free until the government decides otherwise.

Actually legal tender coins are considered to be cash, changing the CGT status is not a simple matter.

[Bratnia]

On 25/05/2024 at 10:27, ZiggySawdust said:

I’m a lowly stacker who would dearly have liked to have been able to purchase more than I have.

But now selling my house and willing to wait a while before purchasing another.

If you had £500K to put into gold how would you do it?

UK Stock (FT All Share) / gold ratio has moved from a high 1999 peak down, UK stocks seem relatively good value at recently levels (US stocks/dollar seems relatively high/expensive, but bear in mind what seems expensive (cheap) today can become even more expensive (cheap) tomorrow. House / gold ratio follows a similar line/motion i.e. stocks and house values are somewhat interchangeable and appear to be marginally better value than gold recently. I'd go with 50/50 stock/gold rather than just stock or just gold alone, as that way you wont be fully wrong (but neither fully right).

Quote

Do you think it [gold] will outpace premium property?

Might, might not. A round trip sell and purchase house cost is relatively high and if whatever you sold to swap for does worse then you've compounded that loss. Real assets such as house/gold etc. tend to do OK across periods of high inflation, but can take a few years to see that iron out. A added benefit of owning a house is that you don't have to find/pay rent to others.

Quote

I think asset inflation is going to be a lot higher than RPI, but if property keeps pace with gold I will be no better off unless majorly downsizing.

A good asset allocation IMO is a third each in a home, stocks, gold, leave the home value as-is, rebalance the stock/gold once yearly back to 50/50 each, and just let that run. At some point the stock (or gold) value might be much more (or less) than the home value, which only then is a indicator of a reasonable time to upsize/downsize to realign the home value back to around a third. If you go all-in on just one of the assets then that's more of a speculation, could work out well, might not.

With £500K and assuming you're relatively young/working/saving then you might opt for leverage, perhaps £220K mortgage to downsize to a £240K house value, along with £240K in a stock index fund and £240K in gold. Or suchlike. One of those will turn out to have been the best, another the worst, neither fully right nor wrong. If the best is the house value then in your case that is the outcome that would likely cause the most pain/discomfort. If stocks or gold were the best then you could pat yourself on the back for having been clever.

[Bratnia]

On 25/05/2024 at 10:27, ZiggySawdust said:

If you had £500K to put into gold how would you do it?

If you had to liquidate a gold position worth hundreds of thousands of pounds how would you do it?

For physical perhaps go with Britannia one ounce coins and phone around dealers for the best bulk purchase (or sale) deal they might offer. Should be able to buy for 2% above spot, sell for spot that way. For convenience however I'm more inclined to go with a gold ETF to buy, and then migrate that to physical as/when good deals are apparent (piecemeal) costs more overall, but frankly after a few years I can't remember what I paid for things anyway, the higher costs at the time are lost from memory and tend to be relatively small in the scale of things.

[HonestMoneyGoldSilver]

I will give you my raw essay first followed by the AI-enhanced version. The AI version is more concise and easy to read:

----------------------------------------------------

This is a complex question. With £500K your first investment should be researching financial advisors and finding one who will act as a fiduciary (putting your interests first/investing your money how they would invest their own money)

In super broad strokes, you shouldn't be investing more than 25% (this is an upper limit) of your investment portfolio in precious metals. If you are investing more than 25% then it has to be on your own understanding. Someone acting in a fiduciary manner won't recommend greater than 25%

Talking about sums over £10K I feel it's essential to only purchase CGT-exempt metals like Britannias, sovereigns, etc

If you are prepared to put that much into gold then you should also be considering gold's brothers and sisters - silver, platinum and palladium. A standard money manager mantra is if you are investing £100 then £67 in gold and £33 in silver is a "defensive investor" (trying to limit volatility/protect your capital with a 2:1 gold:silver ratio). The reciprocal of this is an "aggressive investor" who would put £67 of their £100 into silver and £33 in gold, a 1:2 gold:silver ratio

Whether or not gold will outperform property, stocks and bonds in the investment horizon you have in mind is not a question that can be answered definitively. We can look back over decades and centuries, however, and conclude that over LONG horizons that metals will outperform property and bonds but won't outperform stocks, with gold producing a better return than silver. Both metals will outpace inflation, historically, and house prices tend to appreciate at a small tick above inflation, which makes perfect sense. Stocks > Gold > Property > Bonds, which fits in with risk/reward

One of the worst financial decisions you can make is to pay rent or take out debt at a high rate of interest. If you are deferring your next property investment then you have to consider both the rent you are paying in the meantime AND whether or not property will be more expensive when you go to buy than it is today. Again that's a very difficult question to answer. 

If you had listened to the analysts from the last few years, they were predicting a massive slowdown in the housing market. I strongly suspected the analysts were wrong as I know that historically house prices align very closely with inflation. When inflation was raging well above 5% and even towards 10%, it seemed extremely unlikely to me that there would be a housing crash. The cost of rebuilding current houses from scratch was accelerating at a crazy pace, it cost perhaps double to rebuild a house in 2024 than it did in 2019 due to inflation in wages, raw materials, insurance and finance. If it cost double to rebuild a house compared with 5 years ago, how can there be a large dip in house prices? 

There has actually been a dip in real terms house prices as prices have not kept up with the effective rate of inflation when considering the cost to rebuild your house factoring in finance, wages, raw materials, energy, etc

Regardless of what house prices do, property is an essential like food, water, clothing and energy. If you are wasting money on rent, well, buying a primary residence still makes sense in the absence of a massive correction like 2007-9. Even if house prices were to crater the money you save by not paying rent is a hedge, although you have to factor in opportunity cost (you could have put your house purchase money in bonds, ISAs, savings accounts, etc)

Really you are asking for financial advice that requires the services of a professional. Nobody here can give you effective advice as to do so would require a forensic examination of your personal finances. Even if we had this info it would still be inappropriate to give such advice if we are not registered financial advisors. You are never going to find a skilled advisor willing to give his time and expertise for free. 

(DISCLAIMER: This is not financial advice)

If it was me I would buy a new house first. In the meantime while searching for a property I would keep my money in accounts that accrue interest. There are advantages in being a cash buyer, you can negotiate discounts and could even consider auctions. 

Your primary residence does not constitute part of your investment portfolio therefore IMHO it's unwise to use funds required for a primary residence to speculate on any asset. Keeping your money in precious metals instead of a cash savings vehicle is a viable if advanced strategy. However, without knowing the particulars of the metals market it is less likely you will be able to accurately determine a fair buy and sell point for physical metals. If the price of metals doesn't continue to appreciate then it's possible you could book a not inconsequential loss on your trading activities. Regardless of your choice to invest in metals, without a clear plan of buy and sell targets that you fully own and understand, it would be quite reckless to spend 100% of your prospective investment in metals at a single point in time. 

TSF may be able to facilitate £500K in a month but more realistically you'd be looking at larger dealers for such an investment. If using dealers they exist to make a profit so you will be paying a premium on the way in and a penalty on the way out. The most cost effective way to stack would be to DCA (Dollar/Pound cost average) on TSF by making small but consistent purchases over an extended period of time - many months and years. 

Taking a view on the short-term price action of metals is a risky endeavour. The best technical analysts and traders in the world consistently get it wrong 30-40% of the time, this is just the nature of technical trading and trading in general. Getting it right 60-70% of the time is still immensely lucrative if you can combine that with leverage and varying bet sizes depending on your confidence intervals. 

Having said that, it would be a surprise to seasoned analysts if metals exploded during the summer months (the recent price action has come as a bit of a surprise to many, not that metals have gone up but the timing of the movements). If it was my money just getting into gold for the first time, I would be very cautious about dumping large sums when gold is at or near the ATH (All Time High). I would DCA (cost average) into gold at a respectable but steady rate to begin and look to buy every dip as and when they arrive. 

For example if you had dumped £500K into metals a few weeks ago, you might have bought at £1920. Gold then dipped by roughly 4.2% to the currently level of around £1840. If talking about £500K that may have resulted in an unrealised loss of roughly £20K in a short period of time. If you had spread out your purchases weekly over this same period, yes, you would have still made a loss but your loss wouldn't have been as heavy. The same works in reverse with profits, if you manage to time the markets perfectly (theoretically impossible), then you could make large profits. If you spread your purchases out over that same period you would still make a profit but it wouldn't be as large a profit. Again it's about risk/reward, the more risk you take the greater the potential profit and losses. Spreading out your purchases smooths out the profit and loss curve. 

My personal opinion is that metal prices will stay the same or perhaps even dip in July/August, and then roar from September onwards. Of course that may not happen at all, it might be the opposite, but it seems a reasonable forecast and I'm happy to heavily buy the dips during the summer if and when they come

Regardless of what you choose to do, I wish you every success with your investments and property search

[HonestMoneyGoldSilver]

AI-enhanced version:

Certainly! Here’s a revised version of your response with improved readability, simplified explanations, and clearly highlighted key points:

---

Complex Question and Investment Strategy

Initial Step: Consult a Financial Advisor

• With £500K, your first investment should be in researching and finding a financial advisor who will act as a fiduciary, meaning they will put your interests first and invest your money as they would their own.

Investment Strategy in Precious Metals

Diversification Principle

• Limit Exposure: Generally, you shouldn't invest more than 25% of your portfolio in precious metals. If you decide to go beyond this, ensure it's based on your own thorough understanding, as a fiduciary advisor won't typically recommend exceeding this limit.

Capital Gains Tax (CGT)

• CGT-Exempt Metals: For investments over £10K, it's essential to purchase CGT-exempt metals like Britannias and sovereigns to avoid significant tax liabilities.

Diversification within Precious Metals

• Consider Other Metals: Alongside gold, consider investing in silver, platinum, and palladium.
• Defensive vs. Aggressive Strategy:
  • Defensive Investor: 2:1 ratio (67% gold, 33% silver).
  • Aggressive Investor: 1:2 ratio (33% gold, 67% silver).

Performance Comparison and Market Insights

Historical Performance

• Long-term Trends: Historically, over long periods, metals tend to outperform property and bonds but not stocks. In order of risk/reward: Stocks > Gold > Property > Bonds.

Gold vs. Property

• Inflation Hedge: Gold and silver typically outpace inflation, while house prices usually appreciate slightly above inflation.
• Cost of Renting: One of the worst financial decisions is paying rent or taking on high-interest debt. If deferring property purchase, consider the cost of rent and potential future property prices.

Real Estate Considerations

Market Trends

• Analysts’ Predictions: Analysts have predicted a housing market slowdown, but historically, house prices align closely with inflation.
• Rebuilding Costs: The cost to rebuild homes has surged, suggesting house prices are unlikely to dip significantly.

Primary Residence vs. Investment

• Essential Nature of Property: Owning a primary residence is essential, much like food and energy. Even if prices drop, not paying rent saves money.
• Opportunity Cost: Consider the opportunity cost of not investing funds in other vehicles like bonds or ISAs if delaying a property purchase.

Practical Advice for Investing in Gold

Professional Advice

• Financial Advisor Necessity: Effective financial advice requires a thorough examination of your finances by a professional. It's inappropriate to give specific advice without being a registered financial advisor.

Cash Buyer Advantages

• Negotiate Discounts: As a cash buyer, you can negotiate better prices and consider auction properties.

Investment in Precious Metals

• DCA Strategy: Dollar/Pound cost averaging (DCA) into gold can smooth out market volatility. Spread out purchases over time rather than investing a lump sum all at once.
• Market Timing: Predicting short-term price movements is challenging. Seasoned analysts often get it wrong, highlighting the importance of a steady, long-term investment approach.

Realistic Market Scenarios

• Summer Dips: Metals might dip in summer but could rise again from September. This is speculative, so buying dips cautiously is advised.

Final Thoughts

Summary

• Consult a Professional: Your first step should be to find a fiduciary financial advisor.
• Diversify Investments: Don't invest more than 25% in precious metals. Consider CGT-exempt options and diversify within metals.
• Evaluate Real Estate: Consider the cost of renting vs. buying and the historical performance of house prices.
• Invest Wisely: Use a DCA strategy for metals, be aware of market volatility, and avoid making large lump-sum investments without a solid plan.

Disclaimer: This is not financial advice. Consult with a professional advisor to tailor an investment strategy to your specific needs.

Best Wishes: I wish you success with your investments and property search.

 

[Bratnia]

32 minutes ago, HonestMoneyGoldSilver said:

In super broad strokes, you shouldn't be investing more than 25% (this is an upper limit) of your investment portfolio in precious metals. If you are investing more than 25% then it has to be on your own understanding. Someone acting in a fiduciary manner won't recommend greater than 25%

Neither 100% stock, nor 100% gold is advisable. Benjamin Graham advocated 50/50 splits (stocks and bonds in his case) and no more (or less) than 75% (25%) if you had strong opinion/reason.

Bernstein's "Rebalance Bonus" formula, whilst complex for the average individual, includes a xy multiple factor i.e. percentage in each asset (y = 1-x). That is independently maximised when x = y = 0.5 (50% in each) i.e. 0.5 x 0.5 = 0.25. In contrast 67/33 = 0.67 x 0.33 = 0.2211, i.e. a lower multiple of the rebalance benefit factor value.

Markowitz said something like "I visualised my grief if the stock market went way up and I wasn’t in it–or if it went way down and I was completely in it. My intention was to minimize my future regret. So I split my contributions 50/50"

Quote

If you are prepared to put that much into gold then you should also be considering gold's brothers and sisters - silver, platinum and palladium. A standard money manager mantra is if you are investing £100 then £67 in gold and £33 in silver is a "defensive investor" (trying to limit volatility/protect your capital with a 2:1 gold:silver ratio). The reciprocal of this is an "aggressive investor" who would put £67 of their £100 into silver and £33 in gold, a 1:2 gold:silver ratio

Compare long term blends of silver/gold to just gold alone and that's broadly washed, yields 0% on average benefit, whilst rebalancing involves costs (and perhaps taxes). Same if you measure stocks combined with PM, 50/50 broadly has the same reward expectancy as 50/25/25 stock/gold/silver.

Quote

TSF may be able to facilitate £500K in a month but more realistically you'd be looking at larger dealers for such an investment. If using dealers they exist to make a profit so you will be paying a premium on the way in and a penalty on the way out. The most cost effective way to stack would be to DCA (Dollar/Pound cost average) on TSF by making small but consistent purchases over an extended period of time - many months and years. 

Much of investing is about averaging (broadly the average is 'good', many underperform the average), appropriate diversification and striving to minimise costs/taxes. Most average in over many years (accumulating) and out over many years (retirement/drawdown), you can also average down the average cost of stock via rebalancing (rebalancing back to 50/50 weights is a form of add-low/reduce-high trading). If you lump into a asset allocation that is appropriately diversified there's no need to average-in. Buy and hold after all is no different to the costless selling and repurchase again each and every day, investors don't tend to sell all to average back in again - they just remained lumped-in day after day. Stocks and gold are a pair of such reasonable assets for averaging (rebalancing) purposes.

Again I'm no adviser, just some random individual on the internet. I've heard of some who've been given poor advice that they've paid for, directed towards products that lines the advisers pockets. Seems to me that nowadays finding a good accountant/solicitor/doctor/dentist is best achieved via recommendation and even then may be difficult to get on their books. I imagine finding a good fiduciary might be as equally fraught with difficulties. Some basic advice from across time is from the Talmud who more than a 1000 years ago advocated reducing concentration risk via a third in land, a third in hand, a third in merchandise, which might be considered as owning a home, gold, stocks. If that is further diversified by holding £ in home value, US$ for stocks, both of which are fiat currencies, blended with gold, a non-fiat commodity currency then three assets can be enough diversification/risk reduction in themselves. You can't easily/regularly rebalance a home value however, so leaving that as-is for multiple years, rebalancing perhaps once yearly between 50/50 stock/gold is about all you might do. Your primary home is CGT exempt, as are Britannia gold legal tender coins, as are stocks held in a ISA/SIPP.

[Bratnia]

FT250 stock index (UK midcap) / gold ratio

and note how at the 1999/2000 highs of the dot com bubble it peaked at near 38 ounces of gold being required to buy a FT250 stock index share, or put another way selling a single FT250 share bought near 38 ounces of gold. At the trough of the 2008/9 financial crisis it took less than 10 ounces of gold to buy a FT250 index share. Again more recently (as of end of April 2024) it takes a little less than 11 ounces of gold to buy a FT250 index share.

House prices are more inclined to reflect stock price motions than gold price motions.

On that measure and a high value = expensive stock/cheap gold, a low value = cheap stock/expensive gold. As such selling stocks, or house value, to buy gold is perhaps selling low/buying high. If anything the opposite might be a wiser choice, selling some gold to buy stocks/house.

But as ever, what may look expensive (cheap) today, can become even more expensive (cheaper) tomorrow.

[Bratnia]

https://landregistry.data.gov.uk/app/ukhpi/browse?from=2021-01-01&location=http%3A%2F%2Flandregistry.data.gov.uk%2Fid%2Fregion%2Funited-kingdom&to=2024-04-01&lang=en indicates recent UK average house price of around £280K, Gold is around £1800/oz, so it takes around 155 ounce of gold to buy a average house. In terms of gold houses are relatively cheap recently, for example since 1991 it peaked at around 700 ounces of gold to buy a average house (July 2004 when average house prices stood at around £150K when gold was £214/oz). Someone who bought a average house for £51K in January 1996 when gold was £268/oz needed 190 ounces of gold, and might have sold that house for 700 ounces of gold in July 2004. If instead they'd sat tight to the present day and now sold for 155 ounces of gold they'd have fewer ounces of gold than what they spent in 1996 to buy that house. That is a low to low point-to-point measure and selective extremes case time period, but is somewhat indicative that at recent gold price levels it seems more appropriate to be selling gold to buy either stocks or a house, rather than selling stocks or a house to buy gold.

It always seems easy to look back and pick good/bad times, or what great gains might have been achieved by timing. In practice at the time what seems obvious with hindsight was far from obvious at the time. Accordingly holding some of each of the assets is a reasonable choice rather than looking to be all-in on just one of the assets. For example for 50/50 stock/gold where subsequently stocks do well, gold declines rebalancing back to 50/50 will have you selling some stock shares to buy more ounces of gold. From there and perhaps gold does well, stocks falter and rebalancing back to 50/50 will have you sell some ounces of gold to buy more stock shares. Generally/broadly you end up having averaged down the average price of each stock share and/or ounce of gold, trading in a add-low/reduce-high like manner over time that overall tends to work out OK/well.

[Bratnia]

On 28/05/2024 at 14:30, Gruff said:

If you want the best spot price on gold, then BullionVault, but you'll have CGT to pay on it. But check with them as they do offer the ability to buy, hold and sell Brits, but I'm not sure on the deal, how easy to sell on etc...
Bullion from them is quick to buy and sell.

Haven't seen, nor can I find any reference/guidance as to trading Brits via BullionVault. What/where gave you the impression that they do?

[Spyder]

4 minutes ago, Bratnia said:

Haven't seen, nor can I find any reference/guidance as to trading Brits via BullionVault. What/where gave you the impression that they do?

They stopped that a few years ago. At one point you could by Britannia and hold in the vault or pick up for delivery.  

[Gruff]

1 hour ago, Bratnia said:

Haven't seen, nor can I find any reference/guidance as to trading Brits via BullionVault. What/where gave you the impression that they do?

I can't find that now...
 

1 hour ago, Spyder said:

They stopped that a few years ago. At one point you could by Britannia and hold in the vault or pick up for delivery.  

Phew, suddenly I was doubting myself. 

[ZiggySawdust]

thanks @HonestMoneyGoldSilver and all for the interesting replies.  I am moving towards the idea of permanently downsizing so as to reduce my large mortgage and create a retirement portfolio.  

Edited June 5 by ZiggySawdust
o/c