A Closer Look at Gold As An Investment Opportunity For Businesses

Entrepreneurs who have structured their businesses as limited companies (LLCs), are sometimes faced with the question of what to do with surplus profits.

Reinvesting profit in the business is a good strategy but maybe not all of it. Investing your money to generate an income that can be reinvested in the business is a smart strategy. Investing in gold won’t make you a fortune, but it is a low-risk strategy as it’s considered a store of wealth.

Other investments that generate income include shares and property or lending it out as a loan at a healthy interest rate. In today’s economic climate, the returns delivered by these investments have become much harder to predict than they once were.

Business owners who invest company money in metals like gold need to know what they’re doing to get the right outcome. While it’s impossible to guarantee future financial payouts, the return on gold investment is often significantly greater than that of interest-bearing bank accounts.

What Makes Gold A Viable Investment Option

At this time, the interest rates on cash deposits are at an all-time low. It would not take much inflation at all to completely wipe out the gains provided by deposit interest, and in such a situation, the value of deposited money would actually decrease over time.

The state of globalization and economic uncertainty has investment markets (e.g., those based on stocks and other financial instruments) going through a stormy patch with extremely uncertain returns. Where businesses invest their cash depends on their appetite for risk.

Even some of the very safest options available for investment, like government bonds, now look less secure than they once were.

Bonds

The odds of national governments defaulting on the debts backed by their bonds have risen significantly in the past decade. Bonds that aren’t tied to significant default risk – those that are safe – deliver frustratingly low returns. Property isn’t looking like a good investment for companies either.

Property

Housing markets everywhere have been through hyperinflation, and now sales are flat. Property markets remain depressed, and no indicators signal recovery’s start. This is the time investors buy property while sales prices are low.

The same is said for stock. Investors like Warren Buffet buy when stocks are below market value.

The value of gold is climbing steadily, though. The rising popularity of the metal is due to several factors, including its perceived stability and the rising likelihood of gold outperforming other investment options in the current economy.

Ways To Invest In Gold

There are many different ways for business owners to convert surplus profits into gold. Many professionals like to purchase and hold gold physically. Gold coins are a popular option for this route, with UK Sovereigns and South African Krugerrands being particularly common. Gold can also be purchased in bullion form in fractions of 1 ounce of gold or greater amounts.

While storing gold in a safe in one’s home or office is simple, a more secure storage solution is to pay for vault space. Storage costs must be accounted for when projecting the potential return of gold investments.

Some business owners prefer to forego buying their own gold and instead buy shares in a gold fund. Exchange-traded funds (ETFs) in gold buy and sell the metal on a number of different markets around the world. Gold investing professionals often refer to shares in a gold ETF as “paper gold” by gold investing professionals.

Finally, entrepreneurs might want to invest in a more derivative fashion by purchasing shares in companies that mine the metal. Generally, higher gold prices equate directly to higher share prices for mining companies producing the metal. Some funds offer investors the ability to invest in multiple mining companies as a hedge against risk.

Getting Started With Gold Investment

Internet buying makes it easy for business owners to buy gold coins or bullion anytime. Coins and bars from reputable sellers can be delivered directly to the buyer. Some entrepreneurs prefer to purchase bullion without taking delivery, letting the seller (or an appropriate third party) handle the storage of the metal. Buyers in this situation generally receive certificates of ownership.

Gold ETFs and mining company stock can be traded through the usual investment apparatus used for stock and fund investments. Brokers can be contacted via phone or online and instructed to place purchases and sales according to the buyer’s instructions.

Gold investments made with company money should always be held in the name of the company, not the individual. All gold transactions need to be made through the company.

Limited Companies Investing In Gold And Tax Issues

Any business that sells off an asset at a higher price than the acquired is subject to capital gains tax. This applies to assets like gold and shares. When the financial year closes, capital gains must be treated as profits. That means the company will need to pay corporation tax on them. Fortunately, capital gains tax charges don’t apply to gold Sovereigns and Britannias issued by the UK government because they are considered legal tender.

Gold investments that appreciate value need to be tracked in the company’s accounts, but there is no tax due until the asset is sold. Investors are strongly encouraged to consult with an accountant to verify that they are meeting all of their tax obligations.

About Financial Health

Gold, like any investment commodity, carries risk along with it. Gold’s value is not regulated by a body like the Financial Services Authority, and there is no guarantee that it will rise in the future. The value of shares in mining corporations and gold funds is subject to volatile fluctuations.

Although gold is hardly a guaranteed investment, it is still an attractive option for businesses that find it matches their risk profile. Investing surplus company money in gold is wise when it’s recommended by expert financial guidance.