Why Gold?

Welcome to Minted! We’re excited to have you on this journey with us.

On this page, we’ll be explaining everything you need to know about the history of gold, the advantages of buying the precious metal, how to get started, how much gold to buy and a lot more.

The Minted blog is constantly updated with relevant and important information about gold, so we highly recommend to keep it bookmarked for future reference. You can also follow us on social media to stay updated with our new posts and products.

 

What is gold?

 

Gold is a precious metal that has been around for thousands of years. In fact, it’s been around since the times of the Byzantine, which is over 1,500 years ago! Over the centuries, gold has been treated mostly as a currency and a safe haven to store money. 

Gold was first smelted into gold coins and used to trade. That’s because it was much easier to trade one gold coin instead of one sixth of a chicken! Since the Roman times, gold has been used as a currency in nearly all the countries, and has always been the metal used to represent grandeur, wealth and prosperity.

Only 90 years ago every note and pound in the UK was based on a portion of real, physical gold. In the US, it’s only been 49 years. 

Now that you know more about the history of gold, we can dive into the advantages of buying and investing in gold.

 

What are the advantages of buying gold?

 

It is inherently valuable

 

As we mentioned above, gold has been around for centuries. It plays a large part in many different cultures and it’s a metal that has managed to maintain its value over time. According to some sources, Romans could buy a toga, belt and shoes with one ounce of gold. Today, with one ounce of gold (which equals £1,400), one could buy a very nice suit, shoes and a belt. Not bad for a very old precious metal!

The thing that makes gold so valuable is that you can hold it in your hand. Unlike many other investments, gold is something that you can feel and touch. It can’t be destroyed by fire (a few people have tried), it’s low maintenance and it doesn’t need feeding. You can’t hack gold, and you can’t create gold out of thin air (many people have tried). No matter what is happening in the outside world, your gold will always stay standing.

Gold is also an asset that is finite as well as useful. It’s currently used in electronics, dentistry and jewellery, and because there is a limited amount of gold its value won’t ever go to 0. This is different to paper currencies, which fluctuate with the markets. Everyone from small investors to central banks invest in gold as a safe haven. The fact that central banks have only been increasing their reserves in the precious metals over the past few years is a sign that everyone should be too.

 

It beats inflation

 

Gold can keep your money safe and won’t protect you against inflation. With interest rates at an all time low, the money that sits in your current account is losing 2% of its value every year. Over time, that can make a huge difference.

Ideally, we want our money to be making over 2% year on year, so you don’t lose money to inflation. With gold, you can make over 2% in the long term. For example, if we take the time period of 2010 to 2020, gold increased from $1,113 per ounce in 2010 to $1,520.55 at the beginning of 2020 – that’s an increase of 36.6% (and now in August 2020, gold has increased to over $2,000 per ounce!).

But most people don’t invest in gold in order to turn a profit – that’s because there are years when gold does not increase at this rate and may even decrease in value. However, in the long run, gold is a low risk investment that beats inflation as well as keeps your money safe.

 

It diversifies your portfolio

 

Diversification is an investment strategy that helps keep your portfolio balanced by investing in different assets. When some assets go down, other assets go up – this means your portfolio is less likely to take a hit when there is a recession and therefore you won’t lose as much money.

Gold is a great way to diversify your portfolio. That’s because it’s an asset that increases in value when stocks and bonds plummet. For example, in 2008 stocks decreased by 20%. Gold increased by over 30% all throughout the recovery in 2011. A similar situation happened in 1973, and now once again in 2020.

In the long term, gold has maintained its value. By adding gold to your portfolio, you are protecting your investments and reducing both uncertainty and risk. 

 

How do I buy gold?

 

Now you’re ready to buy gold. Welcome to the club! If you want to buy right away, please click here.

Buying gold used to be incredibly complicated: you would need to sign a contract, commit to a minimum deposit and pay outrageous fees. That’s why we built Minted: to make gold accessible. With Minted, you can start buying gold for as little as £30, and our fees are some of the most competitive on the market!

Before we dive into the purchase of gold, let’s explain the journey of gold production:

 

The journey of gold

 

Gold is first mined in gold mines in various countries including India, South Africa and Russia. These gold mines are usually somewhere deep in the mountains and are managed and maintained by private gold mining companies. Once the gold is mined, it is put into a truck, plane or boat and transported to a refinery, such as the ABC Refinery in Sydney and Nadir Rafineri in Turkey (that’s our refinery!). The refinery then sells the gold to dealers (like Minted!) and dealers sell the gold to investors like you and I.

As you can see, gold needs to take quite a journey to end up in our pockets, and someone needs to pay for that journey. Which brings us onto the next point…

 

What is the spot price and premium?

 

Someone needs to pay the miners, the truck drivers, the air pilots, the accountants, the smelters and all the thousands of people who are involved in the transport of gold. That’s where spot price and premium comes in.

Spot price: This is the price of gold at this current instant. It is the price that a troy ounce of gold can be bought or sold for, without paying the fees for the people involved in gold production. The spot price changes every second, and fluctuates slightly with the market. You will never be able to buy gold for lower than this price (unless you find it in the river next door…)

Premium: This is the extra fee that you pay in order to buy your gold. This fee will be passed on up through the gold chain and will pay for everyone involved in its production. Premiums depend on the dealer – at Minted, we have some of the most competitive premiums, where we charge 8.5% for a one-off purchase of £100.

Premiums vary from dealer to dealer as well as from the type of gold you’re buying. If you’re buying gold coins, for example, the premiums are usually higher than for gold bars. You’ll also need to keep into account any taxes you need to pay – although it’s important to note that gold is VAT exempt and you only start paying capital gains tax if you make a profit of over £12,000 in one year.

 

Types of gold: bullion, ETFs, mining companies

 

Physical gold isn’t the only way to own gold. In fact there are quite a few ways:

Gold bullion: This is the phrase used for real, physical gold bars or coins. Bullion means pure and physical gold. You can usually buy gold coins or gold bars.

Gold ETFs and mutual funds: These are baskets of stocks that invest in the gold index. Someone else is essentially taking your money and buying gold for you.

Gold mining stocks: This involves buying a small share of a gold mining company. You are investing in the company, rather than gold itself.

Gold futures and derivatives: You are betting on the future of the price of gold. Only recommended to pro traders who know what they are doing!

There is quite a large difference between buying and owning gold bullion and buying any of the alternatives above. That’s because with gold bullion, you are the owner of your gold and no one can take it from you (there are laws in place against confiscating gold). However, with all the rest of ways to invest in gold, you are essentially investing in a few numbers on a screen, like some sort of electronic book entry.

We’re not saying that electronic book entries are not a useful way to invest, but they are still quite different to owning real, physical gold. With real gold, you know you have assets outside the international monetary system and you can rest assured there’s always something there for you in case things get ugly.

 

Buying physical gold bullion: what to look out for

 

When buying physical gold bullion, it’s important to understand the different elements involved in buying gold. Here are a few of them:

Cost per gram:

The spot price of gold fluctuates from day to day and month to month. If you look on various websites for the spot price, many will give you the option to see it per gram or per ounce. The cost of gold per gram is exactly what it says: how much it would cost to buy 1 gram of gold, before any premiums.

It’s important to understand the cost per gram, as this will let you know how much gold you can afford. If you have a budget of £50, for example, this could buy you just over one gram of gold in August 2020 before premiums.

Level of quality/purity:

Gold bars and coins have different levels of purity. Gold works with a system of carats: 24 carats is the purest form of gold and works as a percentage of the total quality. If a piece of jewelry has 14 carats out of 24 parts of gold, that means it is 58.33% gold. You’ll also see gold measured according to fineness, which is expressed in parts per thousands. Most gold dealers will sell 999.9 gold, the purest form. That’s because 100% gold bars don’t actually exist (we wish!).

It’s always good to be informed about gold and how gold works. You also want to make sure you’re buying from a reputable dealer and not eBay (although it’s tempting).

How much should I buy?

Now onto you: how much gold should you buy? 

As you can imagine, the answer to this question depends on your own personal needs and goals. Most investment gurus recommend holding 10% of your portfolio in gold, but if you’re still building your emergency fund, for example, this rule of thumb may not be adequate for you.

Are you buying gold to beat inflation? To keep your money somewhere safe? Or to diversify your investments? It could be all three, of course! But having a clear answer to those questions can help you understand how much gold you want to buy.

We believe buying gold goes hand in hand with managing money effectively, that’s why we’ve also published articles to help you take control of your money. Once you understand the ins and outs of your bank account, you are likely to be much more confident with your money choices.

With Minted, you can start buying gold with as little as £30 per month – and there’s no commitment required! You could try it out for £30 and see how it goes. Don’t like it too much? Cancel whenever you want!

 

Buying gold with Minted


At Minted, our mission is to make gold accessible and affordable to everyone. We want to make it easy to buy gold in a few taps, and to help everyday people keep their savings somewhere safe and secure.

A few reasons to buy gold with Minted:

  • Our gold is certified by an LBMA Good Delivery partner
  • We work with secure and renowned partners, including Alliots, Markel International and Nadir Metal Rafineri
  • We are authorised by the Financial Conduct Authority

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