The UK Gold Coin Bullion Market Since 1964
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1964 is the date we consider our company to have started, although we had in fact been dealing in coins for a few years prior to that on a part-time basis. It's also the year we started using the name R & L Coins, by which name we are still known, even though we changed it back to "Chard" during the last millennium. Our story starts in 1964.
Prior to 1966
Before 1966, individual UK residents were free to buy and sell any amount of gold coins, and we were able to make a healthy market in gold sovereigns.
Exchange Control Act 1966 to 1971
On 19th April 1966, the Exchange Control Act came into effect.
From this date, it became illegal for UK residents to continue to hold more than four gold coins dated after 1817, or to buy any gold coins unless they applied for and were granted a collectors licence from the Bank of England.
This was implemented by a 1966 amendment to the Exchange Control Act, 1947.
Dealers, ourselves included had to obtain a dealers' licence. It came at a time when interest in collecting all kinds of British coins was blooming in anticipation of decimalisation in 1971. The licensing had the effect of stifling the burgeoning market among new collectors, many of whom started collecting pennies from change. They could no longer graduate to gold coins, as they had to already have a gold coin collection in order to qualify for a licence.
Unrestricted 1971 to 1973
The Exchange Control Act was removed in 1971, and for two years the market started to recover, at the same time as a rocketing gold price, until VAT was applied to gold coins in 1973.
This once again placed a serious obstacle in the way of buying gold coins as an investment, although it remained possible to deal in coins already privately owned in the UK, on a commission basis with VAT being payable only on the commission, but this all but stopped the importation of new bullion coins such as Krugerrands.
Second-hand Exemption 1995 to 1999
In January 1995, the second-hand scheme which previously existed for cars was extended to many other categories including coins. This made it much simpler to buy and sell previously owned gold coins with VAT payable only on the dealers' margin.
Tax Free Since January 2000
In January 2000, almost all gold coins, and also gold bars were reclassified in the UK and EU as VAT free investment gold. Since then we have relaunched and expanded the gold bullion side of our business, adding many different types of bullion coins which have been introduced in the intervening years.
Types of Gold Bullion Coin
In those far-off days when we started dealing in gold coins, Krugerrands had not been invented, arriving years later in 1967.
1967 South African Krugerrand 1oz Gold Coin
The main and most popular bullion coins at the time were gold sovereigns. There were also half sovereigns, but they have never been as popular or numerous as "full" sovereigns, and usually carry a higher premium.
There were also American Double Eagle $20 gold pieces, and other foreign gold coins, but the gold bullion coin which made up over 95% of the UK market at the time was the British gold sovereign.
The only major UK bullion coin dealers at the time were two merchant banks, Johnson Matthey (Bankers) Limited, and Sharps Pixley. These banks were long-standing members of the London gold market and were also members of the London gold pool, the five banks who meet twice daily for the London gold fixings.
Over the years, we came to know the main gold bullion and gold coin dealers of both these companies very well. We were in regular, daily contact with both firms, and transacted large amounts of business. Both of them were excellent to deal with.
In 1973 when VAT was imposed on gold coins, the whole UK market for gold coins was almost killed off overnight, and this brought our dealing with these two banks almost to a stop.
In about 1971, N M Rothschild & Sons Ltd, who are also longstanding members of the London gold fixing, and therefore major gold bullion dealers, opened a gold coin department, selling mainly to the public, but also to other dealers. It only remained open for a few years and closed down within a few years. Samuel Montagu and Mocatta Goldsmid were the other two gold fixing members, but as far as we were concerned they only dealt with fellow other major banks, probably in multiples of 1,000 sovereigns.
Johnson Matthey was an old established business, with a number of related companies. The entity we dealt with was Johnson Matthey Bankers Limited. Our usual abbreviation for them was JM. They were always good to deal with. They used to supply many specialised gold, silver and platinum products to the jewellery industry. As we have said Johnson Matthey was one of the five members of the London gold fixing. In 1984, their bank caused a banking and financial crisis when it became one of the first of the large merchant banks to hit major financial problems, and collapse. This caused a major review of banking supervision. Their banking interests were absorbed by an Australian bank Westpac.
Sharps Pixley, another ancient merchant bank was owned by Kleinwort Benson, but changes, mergers, and takeovers in the merchant banking industry lead to the loss of its former identity, and in 1993 it became part of Deutsche Bank. We usually referred to them simply as "Sharps".
Rothschilds are the oldest, and probably the best known of the London gold fixing members. Our usual abbreviation for them was NMR. Although they were and remain a major international gold dealer, the only time we have known them be active in the gold coin market was for a few years from about 1971 to 1973, but we could be a few years adrift with these dates, as we have relied on our memory.
We only dealt with them on a very few occasions. They seemed interested only in larger deals direct with larger private investors, and they were nowhere near as accommodating to us. We once sold them one of the first mint bags of a new date of gold sovereigns, it must have been 1968 or 1974.
A mint-sealed bag of sovereigns used to contain one thousand coins. We bought the bag from Johnson Matthey at £31 per coin and sold it a minute later to Rothschilds at £31.25 per coin. As I had some other business in London I decided to collect it from JM and deliver it to NMR. JM used to accept our cheques, as did Sharps, and most bullion deals in the London market were and still are for 48 hours settlement, that is delivery and payment are normally due with two working days.
When I delivered the bag to NMR on the value date, they took it away to count and check the coins and made us wait a further two days for payment, after which they posted us a cheque. Neither of the other two banks or any of the other major dealers of that time ever made us wait effectively three days before paying, making Rothschilds the slowest payer we have ever had for a sizeable gold deal.
To add insult to injury, we had bought 50 of the same sovereigns back from them on the day after the original sale, and would not deliver us the 50 back from the bag we delivered. Because of the demand for the newly dated sovereigns, they proceeded to make us wait several weeks after we had paid them to get our own sovereigns back.
After that, I cannot remember bothering to deal with them again. We hope they have broad enough shoulders not to object to being mentioned in our story. They are the only member of the "original" London gold pool who still retain their original name, identity and ownership.
The oldest and longest established member of the London gold market, they would only deal in large quantities, usually in multiples of 1,000 ounces, and they hardly seemed to bother with coins. We never dealt with them in the 1960's or 1970's, but sometime after 1973, they must have become more active, possibly when they became part of the Bank of Nova Scotia, and they only recently stopped any dealing in gold coins. They are now known as Scotia-Mocatta.
The other London gold market member with whom we never dealt was Samuel Montagu, later to became Midland Montagu, and are now part of HSBC.
Trade Development Bank
Not one of the elite members of the London gold pool, this Swiss bank also used to deal in gold coins for a few years during the "gold rush" years.
National Westminster Bank was one of the British clearing banks to join in and offer dealing services for gold coins sometime around 1971 to 1973, although they too stopped about the same time as most of the others.
If we remember NMR as being our slowest payer, we fondly remember Natwest as our fastest ever payer. For some time we had been lobbying their bullion coin department to buy from us. One day they rang us and bought 200 king sovereigns, the price from memory was £24 each. About a minute after we put the telephone down after agreeing to the deal, our bank manager phoned us to say that the funds, £4,800 had arrived in our account. We couldn't believe that a bank could transfer money so fast. Even in these days of "electronic" transfers and instant banking, it doesn't happen at that speed.
We phoned Natwest's bullion dealers straight back and expressed our astonishment at the speed of the payment, they obviously were anticipating our reaction and enjoyed their little joke. Normally we would not expect most banks to part with their money until after we had delivered our coins. We were delighted by the compliment they had implicitly paid us.
During the gold fever days, a number of the UK clearing banks also started to deal in sovereigns and Krugerrands. Although they were never as competitive as we were, they had the single advantage that they had branches all over the country, having not started closing them down in those days, and it was convenient for investors to be able to get their gold coins at their local bank. The branch staff obviously did not know much about gold coins, and their customers did not always get to know the price until the coins arrived from their head office or bullion department.
After 1973, all the banks closed their gold bullion coin departments.
In 1971, we were the first dealers to offer a buy-sell spread to the general public, but there were a number of other dealers who were active and competitive in gold coins.
One of our biggest and best competitors was Geoffrey Young of Harrogate, who used to quote some unbelievably close spreads on sovereigns, Krugerrands, and many other coins. Apparently an ex-casino croupier, he was an amazingly sharp dealer, and I was always impressed by his ability to pluck a price for almost anything off the top of his head. He hardly ever used a calculator, and his prices were always right on the market price. He probably missed his way and could have been earning multi-million pound bonuses in a city bank. Sadly he is no longer around.
There were also a few flashy characters who set up prestigious operations with grandiose names and premises, one in Leeds, and one in Birmingham. It is probably best if we don't go into details about them here. A number of coin dealers used to deal in gold sovereigns and Krugerrands alongside their older collectors coins. Nowadays there are very few coin dealers who bother with bullion coins because it is completely different from the rest of their business.
The two merchant banks we previously mentioned used to also supply gold bullion products to the jewellery industry, and had branches in Birmingham as well as London. Edward Day & Baker was the Birmingham branch of Sharps Pixley. None of these currently offer investment gold bullion bars or coins, and neither do most of the other specialist bullion dealers supplying the jewellery trade.
We're Still Standing!
Although we still do have a few competitors, there are none of the major dealers from before 1973 left in the investment gold coin business. That appears to leave us as the oldest and biggest of the gold coin dealers from that era. Although we have never stopped dealing in gold coins, between 1973 and 1999, a 27 year period, gold bullion coins constituted only a small proportion of our activities.
Strong Home Market Helps Export Market
Since January 2000, we have benefitted from a growing UK market for investment gold. We have also found that we are also getting increased export demand which we have not sought out, and at no extra cost. This is largely due to our websites, which can reach the entire globe. Collectors of rare and unusual items can be matched up with the items they seek using internet search engines.
In 1998, we realised that the internet, although still relatively new for most UK businesses was almost created with our type of business in mind. Since our earliest days, we have dealt in coins by mail order. As it is such a specialist business, most of our customers were very happy to deal by post. Even if they had a good local dealer in their own hometown, the chances were that he would not stock everything they wanted. Mail order is ideal for highly specialised businesses. The internet is even more so.
We started development work on our first website, 24carat.co.uk, in August 1998, and went live in November 1998. We then went on to add more specialised sites. By January 2000, we had five main sites, and over 2,000 pages. This is the equivalent of a colour catalogue of the same size, except that some of our web pages would occupy a whole chapter of a book. We can, in theory, update our catalogue almost instantly, and reach customers worldwide instantly. We still had less than 10% of our products and prices online. In July 2011, we estimated that we had over 12,000 pages - today, we have lost count!
The internet has grown beyond expectations and continues to expand faster than we ever imagined. Our older websites were born in an age when frames and individual pages were added one by one. Whilst rich with products and numismatic facts, they had become rather unwieldy and were on occasion difficult to update and navigate.
In 2016, we decided that it would be much easier for customers if they could order whatever coin, bar, coin set or medallion, from one website. Our 'new' website www.chards.co.uk evolved to collate all our numismatic items and our huge library of information on one website.
What's New And What's Changed?
The Director's View
I may be uniquely qualified as possibly the only UK coin and bullion dealer who was active in the 1960's and is still active now, so I know about many things that some recent startups don't.
There have been many changes, most of which we have already recorded on our other web pages written between 1998 and 2008. I will not go into the details of these here, but will restrict myself to the main changes and differences between then and now.
Around 1965, the only gold bullion coin readily available and traded in the United Kingdom was the British Gold Sovereign. That was it! Nothing else mattered.
Sure, there were other coins, half sovereigns for example, but they usually trade at a higher premium, suffer from greater wear, and have never been as readily available in quantity. It is quite important for any investment commodity to have a liquid market, it enables dealers to trade them at more competitive spreads.
It was not legal for UK citizens to buy gold bullion bars in those days, so they were out. Other relatively common gold bullion coins included Austrian 1 ducats, 4 ducats, 10 coronas, 20 coronas, 100 coronas, 8 florins 20 francs, 4 florins 10 francs, Belgian 20 francs, French 20 francs, Mexican 50 pesos, 20 pesos, 10 pesos, 5 pesos, 2.5 pesos, 2 pesos, Dutch 20 guilders, Swiss 20 francs, USA $20, $10, $5, and a bunch of other less frequently seen ones.
Although many of these were undoubtedly popular in their own countries, the market for them in the UK was very small and illiquid.
Some countries that did not have their own bullion coins, such as India, had thriving markets in other countries' coins, sovereigns being the coin of choice in India, and other British influenced parts of the world.
The modern one ounce bullion coins, led by the Krugerrand in 1967, had not been created in those days. So if you were a British investor in gold, the only sensible choice was to buy gold sovereigns.
This made it relatively easy for UK bullion dealers. We made active markets in gold sovereigns, with keen buy / sell spreads. Between about 1963 and 1966, we used to offer sovereigns for sale at £4 each, £37.50 (actually £37 and 10 shillings) per 10, £365 per hundred, and £3500 per thousand.
Any of the "other" bullion coins, we would only buy with slight reluctance, and at relatively lower prices or premiums than sovereigns. At the time, we were the most active UK "retail" gold bullion dealer, and we could happily support this trade with as few as about 100 sovereigns in stock. If we need larger quantities, we could source them in one or two phone calls, and have them as early as next day. If we had surplus stock, we could also shift our surplus with the same speed and ease. Our counterparties were a couple of merchant banker members of the London Gold Pool. These merchant bankers no longer exist or trade, and there is no replacement or substitute for them.
The result is that we need to carry higher stocks, manage our surplus stock differently,
We are continuously looking for ways to develop and improve our business and are looking forward to seeing what the next 50 years bring to the UK gold market.