Gold bullion offer prompts investment warning

Investment analysts have urged investors to be cautious after the Royal Mint launched a new website selling gold and silver coins.

On offer are single gold Sovereigns costing £197, larger gold Britannias at £800 and £19 silver coins.

The Mint is trying to expand the bullion business by selling what it calls "relatively affordable" coins online.

It is also offering to store them for larger investors.

The World Gold Council has estimated that there is a £4bn untapped market for gold among savers in the UK.

However, Surrey-based financial adviser Martin Bamford said that while people might be tempted to add a bit of shine to their savings, they should take extra care.

"Gold can go up but it can plummet as well," he said. "It is risky and there is no income attached."

The price of gold on the financial markets, at $1,214 (£743) an ounce at present, is more than £400 lower than three years ago.

Some have suggested that in pushing internet sales, the Royal Mint could encourage a gold rush by widening the appeal of precious metals.

"We want to help expand the bullion market, particularly as coins offer a relatively affordable introduction," said Shane Bissett, from the Mint.

Customers can have the coins sent to them through an insured postal service or have their coins kept in a vault guarded by the Ministry of Defence at the Mint's Llantrisant site in South Wales.

The idea is to make owning gold and silver as easy as running a savings account.

But the cost of storage is 1% of the value per year, plus VAT, which could prove more expensive than gold funds traded on the stock market.

"This looks like a pricey way to hold gold when an Exchange Traded Fund can give you the same exposure for around a quarter of the annual cost," said Laith Khalaf, an investment expert at Hargreaves Lansdown.

Access to the Royal Mint's vault is restricted to those buying at least 25 Sovereigns, at £4,711, or a tube of ten Britannias, which weigh a full Troy ounce (a slightly larger measure than an imperial ounce).

Investors buying small quantities will have to find other ways of keeping them safe.

The price of the coins depends on how many you buy.

One gold Sovereign, weighing less than a quarter of a Troy ounce, costs £197.28. An investor buying 500 of them would be charged £184.92 each.