What is investment gold?

The terms ‘gold’ and ‘investment gold’ are often used interchangeably, but there is a difference between the terms. ‘Gold’ always refers to the physical metal, while investment gold is only purchased for investment purposes. The precious metal can also be used in jewelry and in industry. In this article, we explain when gold can be called investment gold.
 

Investment gold explained

Because investment gold is used as an investment, it must meet certain requirements before it can be called investment gold. It must have a high purity and the gold must be easily tradable worldwide. Investment gold generally has a purity of 24 carats. This is in contrast to jewelry, where the purity of the gold is usually between 14 and 22 carats.
 
In addition, investment gold is exempt from VAT, but 21% VAT must be paid on other gold. The European Union introduced the exemption in 1998 to make gold more attractive as an investment vehicle.
 

Gold bars as investment gold

Gold bars are often used as investment gold if they have a purity of at least 99.5%. These bars can come in the form of bars and plates in a weight that is accepted by the gold market. Gold bars can come in a weight of 1 troy ounce, but more often bars are minted in grams, from 1 gram to 1 kilogram.
 

Gold coins as investment gold

Gold coins are also often bought as investment gold. In contrast to gold bars, the purity of the coins may be slightly lower. Some coins are struck as an alloy, so that the coin can retain its shape. As a result, some investment coins have a different color.
 
To be considered investment gold, coins must have a purity of at least 90%, must have been minted after 1800, and when sold, the price may not be more than 80% higher than the market value incorporated into the coin.
 

Gold coins used as a means of payment

Gold coins must meet one more requirement before they can be called investment gold: the coin must be (or have been) legal tender in the country of origin. If the coin has not served as legal tender, it is not considered investment gold and 21% VAT must be paid on it.
 

Securities as investment gold

In addition to physical investment gold, it is possible to buy securities, such as gold certificates and exchange traded funds (ETFs), that track the gold price as an investment. Such securities entail risks because you are dealing with intermediaries and you do not own the gold. Because you do not have physical possession of the gold, gold securities are less effective as a safe haven in times of economic uncertainty.
 
At The Silver Mountain, you can only buy physical investment gold. This way, you always know exactly what you are investing in and your capital is secured.