Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to Anonymous,johnhemming,Anonymous,Rhyd6,dredd0, for Donating to support the site

How to hold gold in ISA

webbm00
Posts: 27
Joined: October 4th, 2019, 2:07 pm
Has thanked: 16 times
Been thanked: 9 times

How to hold gold in ISA

#314932

Postby webbm00 » June 3rd, 2020, 10:51 pm

Can someone tell me the best way to hold some gold in my portfolio? So far I've found the following

IGLN - iShares Physical Gold ETC - Priced in dollars
SGLD - Invesco Physical Gold ETC - Priced in dollars
PHAU - WisdomTree Physical Gold - Priced in dollars
GBSP- WisdomTree Physical Gold - GBP Daily Hedged - Priced in Pounds

Do all of these track the physical gold price?
What are the implications of holding dollar priced investments in an ISA?
What are the implications of hedging to GBP?

Urbandreamer
Lemon Slice
Posts: 829
Joined: December 7th, 2016, 9:09 pm
Has thanked: 51 times
Been thanked: 197 times

Re: How to hold gold in ISA

#314976

Postby Urbandreamer » June 4th, 2020, 7:27 am

webbm00 wrote:....
PHAU - WisdomTree Physical Gold - Priced in dollars
GBSP- WisdomTree Physical Gold - GBP Daily Hedged - Priced in Pounds

Do all of these track the physical gold price?
What are the implications of holding dollar priced investments in an ISA?
What are the implications of hedging to GBP?


You have answered your first question yourself. PHYSICAL gold means that they hold physical gold. They will have costs in doing so and other costs so it won't be quite the same as gold in the sock draw, but in theory it's fairly close in financial terms. So yes they "track" the gold price by actually having the stuff. You can also get synthetic gold ETC/ETF's that don't actually hold the stuff but attempt to track it using derivatives.

The implication of holding dollar priced, shall we say treasury bonds, is currency movement. The implication for these ETC/ETF's is any costs that your platform charge for dollar transactions, because the underlying asset has a value that is not based upon the currency it was traded in. When I held such a thing I didn't notice those costs.

Hedging is a constant running cost, I would avoid it unless you fear that there may come a time when £'s and $'s can not be changed. I suspect that GBSP is offered because some people want it, rather than for any merit.

I did a quick search after writing and found this
https://citywire.co.uk/funds-insider/ne ... uy/a449943

GrahamPlatt
2 Lemon pips
Posts: 229
Joined: November 4th, 2016, 9:40 am
Has thanked: 75 times
Been thanked: 63 times

Re: How to hold gold in ISA

#314978

Postby GrahamPlatt » June 4th, 2020, 7:31 am

Novice question, but if you hold gold “in the sock drawer”, does this attract CGT (& conversely, can losses be offset)? Because if not, there’s not a lot of point to putting it in an ISA.

Laughton
2 Lemon pips
Posts: 188
Joined: November 6th, 2016, 2:15 pm
Has thanked: 9 times
Been thanked: 45 times

Re: How to hold gold in ISA

#315055

Postby Laughton » June 4th, 2020, 10:19 am

arguably, holding a large amount of gold in an ISA or SIPP is safer than tucking it into your sock drawer.

fca2019
2 Lemon pips
Posts: 222
Joined: July 18th, 2019, 8:37 am
Has thanked: 180 times
Been thanked: 63 times

Re: How to hold gold in ISA

#315064

Postby fca2019 » June 4th, 2020, 10:40 am

I personally would caution against holding gold as it's return is uncertain and could go down from this point. Although gold has done well in the last 20 years. The previous 20 years it was flat. Whereas stocks index especially with dividends reinvested always go up over the long term because their price is based on the profitability of the company and perception of future growth, which as productive assets will always grow over time.

PinkDalek
Lemon Half
Posts: 5452
Joined: November 4th, 2016, 1:12 pm
Has thanked: 1375 times
Been thanked: 1542 times

Re: How to hold gold in ISA

#315092

Postby PinkDalek » June 4th, 2020, 11:32 am

GrahamPlatt wrote:Novice question, but if you hold gold “in the sock drawer”, does this attract CGT ...


See, for example, https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg78305.

Much more available via Google on the subject.

Because if not, there’s not a lot of point to putting it in an ISA.


I don't think anyone has suggested holding physical gold in such a way and I don't believe it is possible to hold in an ISA. Thus the mention of ETFs as a route.

Someone mentioned holding physical gold in a SIPP. I haven't verified but the indications are it may be possible.

Laughton
2 Lemon pips
Posts: 188
Joined: November 6th, 2016, 2:15 pm
Has thanked: 9 times
Been thanked: 45 times

Re: How to hold gold in ISA

#315102

Postby Laughton » June 4th, 2020, 11:56 am

"Someone mentioned holding physical gold in a SIPP. I haven't verified but the indications are it may be possible."

It's definitely possible in a SSAS so can't see why it wouldn't be OK in a SIPP (although I appreciate that the rules are slightly different).

PinkDalek
Lemon Half
Posts: 5452
Joined: November 4th, 2016, 1:12 pm
Has thanked: 1375 times
Been thanked: 1542 times

Re: How to hold gold in ISA

#315119

Postby PinkDalek » June 4th, 2020, 12:29 pm

Laughton wrote:It's definitely possible in a SSAS so can't see why it wouldn't be OK in a SIPP (although I appreciate that the rules are slightly different).


Yes, apologies, I meant indications outwith TLF, not merely you.

You also mentioned holding physical gold in an ISA, albeit as a sock joke. Surely not possible.

Laughton
2 Lemon pips
Posts: 188
Joined: November 6th, 2016, 2:15 pm
Has thanked: 9 times
Been thanked: 45 times

Re: How to hold gold in ISA

#315212

Postby Laughton » June 4th, 2020, 3:02 pm

Ah, sorry. By "physical gold" I was referring back to the OP and physical gold ETC/ETF/ETPs

1nvest
Lemon Slice
Posts: 309
Joined: May 31st, 2019, 7:55 pm
Has thanked: 23 times
Been thanked: 86 times

Re: How to hold gold in ISA

#315229

Postby 1nvest » June 4th, 2020, 3:44 pm

Legal tender gold coins, most Sovereign's/Britannia's, are CGT exempt, but spreads can be wide. Hold a gold ETF fund and spreads tend to be much lower, but are liable to CGT. However you can tax harvest between them, as you might between stocks held inside (tax exempt) and outside (taxable). Typically where you look to expand taxable holdings when prices are up (reduce non taxable) and vice-versa. Such tax harvesting can add "tax loss" amount such that you have more tax exempt capital gains tax negation if/when assets are being sold.
I personally would caution against holding gold as it's return is uncertain and could go down from this point. Although gold has done well in the last 20 years. The previous 20 years it was flat. Whereas stocks index especially with dividends reinvested always go up over the long term because their price is based on the profitability of the company and perception of future growth, which as productive assets will always grow over time.

Yes 1980's/1990's saw gold prices decline, but 50/50 stock/gold yearly rebalanced would have seen number of ounces of gold being held expand massively, of the order 6 to 8 fold. The benefit of having accumulated more ounces pays back handsomely at other times, since 2000 for instance 4%/year inflation adjusted drawn from all-stock total returns has seen 70% of the inflation adjusted portfolio value being lost, whilst for gold the value has doubled or more (was triple in 2011). https://tinyurl.com/yddg6enb Pretty much the same as occurred during the 1970's.

Buy a house and leave it empty, or buy a farm and leave it idle, and you forego the (imputed or actual) rent benefit, or dividends that a worked farm might provide. A lump of gold held as a doorstop isn't productive use of that asset, its benefits predominately arise out of trading it, which can be as simple as via yearly rebalancing back to target % weightings. When so, its dividend/benefit can be substantial. Most however just look at is from a lump of metal doorstop (in isolation) asset - much the same as they might consider a empty house or idle farm.

Scroll down this link https://tinyurl.com/ydhhzq32 and click the inflation adjusted tickbox in the Portoflio Growth chart and that will reveal how gold can yield dividends, albeit that they are not directly paid/received dividends. Hover your mouse over the Jul 1982 region in that chart and it will show how 10,000 of 1972 start date all-stock value was down to 3800 value in inflation adjusted terms a little over a decade later than that 1972 start date when drawing a 4% inflation adjusted income. And that data is total returns, so similar in some respects to having started off with a 4% dividend having been drawn.

webbm00
Posts: 27
Joined: October 4th, 2019, 2:07 pm
Has thanked: 16 times
Been thanked: 9 times

Re: How to hold gold in ISA

#315346

Postby webbm00 » June 4th, 2020, 9:31 pm

Urbandreamer wrote:
webbm00 wrote:....
PHAU - WisdomTree Physical Gold - Priced in dollars
GBSP- WisdomTree Physical Gold - GBP Daily Hedged - Priced in Pounds

Do all of these track the physical gold price?
What are the implications of holding dollar priced investments in an ISA?
What are the implications of hedging to GBP?


You have answered your first question yourself. PHYSICAL gold means that they hold physical gold. They will have costs in doing so and other costs so it won't be quite the same as gold in the sock draw, but in theory it's fairly close in financial terms. So yes they "track" the gold price by actually having the stuff. You can also get synthetic gold ETC/ETF's that don't actually hold the stuff but attempt to track it using derivatives.

The implication of holding dollar priced, shall we say treasury bonds, is currency movement. The implication for these ETC/ETF's is any costs that your platform charge for dollar transactions, because the underlying asset has a value that is not based upon the currency it was traded in. When I held such a thing I didn't notice those costs.

Hedging is a constant running cost, I would avoid it unless you fear that there may come a time when £'s and $'s can not be changed. I suspect that GBSP is offered because some people want it, rather than for any merit.

I did a quick search after writing and found this
https://citywire.co.uk/funds-insider/ne ... uy/a449943



So if I understand it correctly for all these ETCs
IGLN and SGLD (USD) - Replicates $ gold price
PHAU (USD) - Is backed by bullion to replicate $ gold price
SGLN (GBP) - Replicates $ gold price but is then converted to GPB at iShares exchange rate. Not sure how much this effects the returns as the currency movement could swamp the gold price change?
GBSP (GBP) - is backed by bullion and is hedged daily to the GBP. I assume the aim of this is to replicated the price movement of the $ gold price in GBP

It looks like from a comparison chart that my assumptions above are correct except that the hedged price drifts lower over time. Is this the effect of charges built into the conversion rate reducing the correlation?

Image

As you said it comes down to IGLN and EQis 0.95% international trade fee plus exchange rate or SGLN and iShares exchange rate. Not sure how to evaluate which is best?

webbm00
Posts: 27
Joined: October 4th, 2019, 2:07 pm
Has thanked: 16 times
Been thanked: 9 times

Re: How to hold gold in ISA

#315347

Postby webbm00 » June 4th, 2020, 9:42 pm

1nvest wrote:Legal tender gold coins, most Sovereign's/Britannia's, are CGT exempt, but spreads can be wide. Hold a gold ETF fund and spreads tend to be much lower, but are liable to CGT. However you can tax harvest between them, as you might between stocks held inside (tax exempt) and outside (taxable). Typically where you look to expand taxable holdings when prices are up (reduce non taxable) and vice-versa. Such tax harvesting can add "tax loss" amount such that you have more tax exempt capital gains tax negation if/when assets are being sold.
I personally would caution against holding gold as it's return is uncertain and could go down from this point. Although gold has done well in the last 20 years. The previous 20 years it was flat. Whereas stocks index especially with dividends reinvested always go up over the long term because their price is based on the profitability of the company and perception of future growth, which as productive assets will always grow over time.

Yes 1980's/1990's saw gold prices decline, but 50/50 stock/gold yearly rebalanced would have seen number of ounces of gold being held expand massively, of the order 6 to 8 fold. The benefit of having accumulated more ounces pays back handsomely at other times, since 2000 for instance 4%/year inflation adjusted drawn from all-stock total returns has seen 70% of the inflation adjusted portfolio value being lost, whilst for gold the value has doubled or more (was triple in 2011). https://tinyurl.com/yddg6enb Pretty much the same as occurred during the 1970's.

Buy a house and leave it empty, or buy a farm and leave it idle, and you forego the (imputed or actual) rent benefit, or dividends that a worked farm might provide. A lump of gold held as a doorstop isn't productive use of that asset, its benefits predominately arise out of trading it, which can be as simple as via yearly rebalancing back to target % weightings. When so, its dividend/benefit can be substantial. Most however just look at is from a lump of metal doorstop (in isolation) asset - much the same as they might consider a empty house or idle farm.

Scroll down this link https://tinyurl.com/ydhhzq32 and click the inflation adjusted tickbox in the Portoflio Growth chart and that will reveal how gold can yield dividends, albeit that they are not directly paid/received dividends. Hover your mouse over the Jul 1982 region in that chart and it will show how 10,000 of 1972 start date all-stock value was down to 3800 value in inflation adjusted terms a little over a decade later than that 1972 start date when drawing a 4% inflation adjusted income. And that data is total returns, so similar in some respects to having started off with a 4% dividend having been drawn.


Thanks 1nvest your post on 50/50 gold/stocks got me thinking a bit more about asset allocation as I'm about 10 years from retirement and probably need to de-risk my 100% stock portfolio a bit. What I'm not sure of is the best way to transition from 100% stocks to 50% gold? I could just use dividend payment to buy gold through an ETC but that would just bring the % up slowly and I'm not sure if that would kill the rebalancing strategy

1nvest
Lemon Slice
Posts: 309
Joined: May 31st, 2019, 7:55 pm
Has thanked: 23 times
Been thanked: 86 times

Re: How to hold gold in ISA

#315394

Postby 1nvest » June 5th, 2020, 1:22 am

In your case I wouldn't go for 50/50, but look to 67/33 stock/gold instead.

US stocks have done great over the last decade+ haven't they? Better than the UK! Well here's a look at how 100% US stock with a 4% SWR (withdrawal rate that is increased by inflation) has panned out since 2000. Yes US data, so not a real reflection for UK investors, but close enough.

https://tinyurl.com/y9eg9c5v

Image

100K Jan 2000 investment, down to 29K more recently in inflation adjusted terms! Ouch!

Whilst gold also with a 4% SWR has worked great. A similar pattern to the 1970's. But where gold was a drag factor during the 1980's/90's. A reasonable overall choice is 67/33 IMO, better smooths things over both periods of economic/monetary contraction and expansion.

If you buy stock and gold at around the same time in equal measure then that's somewhat like a barbell of two extremes that converge to a central currency unhedged global bond type holding, similar to how a short and long dated (20 year) gilt barbell converges to being a 10 year bond bullet.

As you're already holding stock however, buying in equal measure until gold is up to 33% isn't really a viable choice. Gold with rebalancing will yield dividends over time (gold just bought and locked away doesn't yield dividends, is more like buying a farm and leaving it idle). The cycles are however long, perhaps 2 decades or more. Whilst the pattern of post 2000 and the 1970's for stock and gold are similar a major difference is that the 1970's had high inflation/interest rates (low prices), that resulted in the 1980's/1990's greatest bull run ever (maybe). This time around there's no 'compensation' for bad outcomes (as suggested above) seemingly likely over the shorter term (decade or so). I suspect there will be cycles - sideways zigzagging between stock and gold doing OK over coming years, that will provide opportunities to reduce stock (or gold) and add to the other. So perhaps just revise your target asset allocation yearly in a progressive manner, whilst rebalancing to those weightings once/year. 93/7 stock/gold year 1, 86/14 year 2, 79/21 year 3, 72/28 year 4, 66/33 year 5 ... or whatever. Which is cost averaging down stock, time cost averaging into gold over range of years without the discomfort of a single big change at just a single point in time.

A difficulty will be persisting with the asset allocation, as many see the likes of the 1980's/90's where you may just repeatedly be reducing some stock to add to gold that is declining in price and capitulate. But if you do get through that then when gold does kick you'll be thankful for its presence within your portfolio. Part saviour is that even in relatively bad decades for gold, it does still shine periodically. Some years will see gold up much more than stocks, in a unpredictable manner.

I've posted this before elsewhere - whilst it shows US stock and gold, in £ and UK inflation adjusted terms, its not that dissimilar to UK stocks and gold.

Image

Rightmost is the average of each decades yearly best and worst asset values, and most right is the average of those two values - i.e. that is a indicator of what the combined 50/50 of the two averaged in real (after inflation) terms.

The bottom chart provides a visual indicator of how ounces of gold being held (and stock shares) expanded and contracted over time from trading (yearly rebalancing) the two. The purple right hand scaled line shows the combined outcome. Look at 2008/9 for example, when stock heavy portfolios saw large declines, and you sailed through those years. Similar for CV-19, a look at the portfolio value would see nothing notable. Generally you either "get-it" or don't, and many don't (and often will vile those that do). One of the rules of holding gold is to say that you don't. Bear in mind that even the most secure home safe can be opened with a pair of pliers.


Return to “Mining & Metals”

Who is online

Users browsing this forum: No registered users and 2 guests