There’s gold in them there... supermarkets

‘Pile-’em-high’ chain sells £24,500 bars – but experts warn of risky investment

IT’S not an item likely to be on the weekly shopping lists of many households – but one supermarket giant has started selling gold bullion alongside its everyday groceries.

Bulk-buy specialist Costco, more normally known for its ‘pile-’em-high, sell-’em-cheap’ philosophy, is now offering bars of the precious metal for up to £24,500 a time.

But experts last night warned shoppers they could be getting a poor deal, particularly after violent swings in the gold market this year.

While the company’s mark-up on gold is up to seven per cent on the market rate, it is also selling silver bars at a whopping 28 per cent premium.

Many investors have been turning to what they see as the security of gold this year, amid huge uncertainties in the world economy caused by Covid-19, international tensions and political discord in America.

But while the price of gold has risen by 28 per cent in the past 12 months to almost $1,900 (£1,469) an ounce, it is a volatile market, declining by more than six per cent in the past two months alone.

Professor Trevor Williams, an economist at St Mary’s University, London, warned: ‘Gold is an investment product and people should be wary about buying it. Some say it holds its value, but that is not true – it can move up and down quite markedly.’

On September 24, Costco’s 100g bar was on sale for £4,939.99, when the market price for that much gold was £4,619.70 – equal to a seven per cent mark-up in store.

It also had a 50g bar of gold that day for £2,442.99 (six per cent higher than market rates) and a 500g bar at £24,549.99 (6.5 per cent).

A 1kg silver bar cost £711.99 at a time when that much of the metal traded at £554.90 – meaning that the mark-up was a hefty 28.3 per cent.

Gold is normally bought direct from the Royal Mint or from bullion traders, rather than loaded into a supermarket trolley with multipacks of toilet rolls.

Other investors might use funds that track the market price, or buy a share of a bullion bar, which is then kept in storage.

Some market-watchers believe the price of gold will resume its upward climb later this year as governments will need to print more money to prop up their economies.

Michael Hewson, chief market analyst at trading firm CMC Markets UK, said: ‘I think that by the end of 2021 the price of gold could well be more than 30 per cent higher than it is today.’

Watchdogs at the Financial Conduct Authority have previously warned of the danger in investing in unregulated assets such as physical gold, as there is very little protection if something goes wrong.

Costco declined to comment last night.

A NEW ‘high-tech’ Britannia gold coin is being launched this month – on the back of a boom in demand for gold and a surge in its price.

The new 24-carat one troy ounce of gold coin has been produced with ‘micro-detail’ so the waves in the background appear to roll as you look at them from different angles.

The illusion of moving waves is a security measure introduced to make it difficult for forgers to copy. There are others, including a disk by the bottom of the regal figure’s dress that also acts like a hologram so you can see either a padlock or trident on it, again depending on what angle you look at it from.

In addition, there is the inscription ‘Decus et Tutamen’ – Latin for ‘an ornament and a safeguard’ – in tiny print repeated around the coin’s inner circle.

Sales of earlier Britannias have more than trebled in the past six months. The price of a Britannia gold coin is about £1,600, compared to £860 five years ago. But investors should be aware that prices can fall.

Key to the current appeal of such coins is gold’s reputation for being a ‘safe haven’ asset. With growing concerns over the state of the world economy, many investors have been seeking the comfort of gold.

In the past year, the price of gold has reached record highs. Peaking at £1,574 per troy ounce on August 6, it has slipped back slightly to £1,481. Despite this, that is still up 23 per cent year in a year.

Adrian Ash, director of research at metal trader BullionVault, says: ‘Though gold has come down from its record high, this does not mean the rally is necessarily over. We have potential economic conflict with China looming, the unpredictable fallout of the US election in November and Brexit in the New Year to contend with – and still no one knows where the Covid crisis will take us. We are living in uncertain times and holding gold in a diversified investment portfolio makes good sense.’

The new gold coin, like all Britannia coins, is deemed legal currency by the Inland Revenue so investors will not have to pay capital gains tax on profits. There is also no value added tax to pay. It has a face value of £100, though it sells for about £1,600, largely because of the value of gold it contains. Ash warns investors looking for resale value rather than novelty value: ‘Do not be tempted by coins that come with fancy packaging, are backed with slick adverts and are special editions.’

The Royal Mint offers other one troy ounce gold bullion coins. Its ‘Queen’s Beast’ portfolio includes coins such as the ‘black bull’, which costs about £2,000. And tomorrow it will be launching a ‘James Bond bullion bar’.

But most experts believe investors should steer clear of such special editions because of the mark-up. Ash says a key consideration is selling the coin further d down the line. Like other tra traders, Royal Mint buys coins for less tha than it sells them for. The difference is known as the trading spread. It means you will be paid about £1,420 for a coin you could buy for close to £1,600.

So when buying or selling bullion coins it is important to shop around for the best price before sealing a deal. Traders to consider in addition to the Royal Mint include Baird & Co, BullionVault and The Gold Bullion Company.

A Royal Mint spokesman says: ‘The Britannia is our most popular bullion range coin, which is why we chose it to embrace our innovative new security features.’

A smaller coin – the Sovereign – has a face value of £1 and sells for about £380. It is made of 22-carat gold – 22 parts gold and two parts copper alloy – and weighs just under a quarter of a troy ounce.