Why investors hold physical gold

Physical gold sits outside the banking system. It carries no counterparty risk — there is no issuer who can default, no company that can go bankrupt. What you hold is what you own.

Historically, gold has moved differently to equities and bonds, particularly during periods of currency weakness or high inflation. That doesn’t make it a guaranteed hedge in every scenario, but it is one of the few assets with a multi-century track record of holding purchasing power over the long run.

For UK investors, small-denomination gold coins from The Royal Mint (Sovereigns, Britannias) carry a further advantage: they are legal tender, which means gains on them are exempt from Capital Gains Tax. Combined with VAT-exempt status on investment-grade gold, the tax treatment is genuinely favourable.

None of this means gold should be your only holding — most advisors suggest treating it as a modest, deliberate allocation alongside other assets, not a replacement for them.