Not such a golden opportunity

Offers of 'authentic antique' gold sovereigns are not what they seem, warns John Andrew

The adverts are as ubiquitous as those Innovations catalogues that always seem to drop out of the middle of our weekend papers. "Rising gold price on world markets triggers release of Victorian antique gold bullion ...", reads the enticing prospect to potential punters.

The "article" which follows reveals that less than 400 gold sovereigns have been released by a Swiss bank in Zurich for distribution in Great Britain.

The conclusion reached is that "authentic antique gold from the Victorian era will make a nice addition to the family's golden nest-egg", provided "you are one of the lucky ones whose application has succeeded".

The Gold and Silver Bureau, which places the advertorial, is offering examples at "only pounds 109.50 each" and claims this represents "outstanding value for money".

Tempting though the offer may seem, buyers should beware. Leaving aside the gyrations seen in the bullion market over the past few years, culminating in a further drop in gold prices in the aftermath of the Sumitomo copper scandal last week, there are additional reasons why it makes sense to steer clear of this outstanding opportunity.

To be sure, the advertisers are offering genuine gold sovereigns, but at a considerable premium to the going market rate. Ordinary antique Victorian gold sovereigns, which are bullion coins as opposed to collectors' pieces, are available in abundance at around pounds 68 each.

The advertisers reach their conclusion by claiming that coin dealers charge up to pounds 135 for a run-of-the-mill sovereign and that the Royal Mint sells modern ones for pounds l49. One of the basics of comparative advertising, however, is that like has to be compared to like.

The Royal Mint does indeed sell brand new sovereigns for pounds 149 each. But they are special proof examples, which means that they have been struck from highly polished dies. Unlike the ordinary currency coins, they have a mirror-like surface. Only 7,500, bearing the date 1996, will be issued to collectors.

On the other hand, millions of ordinary currency sovereigns lie in bank vaults throughout the world and they may be purchased for just a small margin over their bullion value.

From 1838 through to 1887, sovereigns all featured the 'Young Head' of Queen Victoria. Bullion dealers, such as Spink, currently sell samples of these for pounds 68 each, less for buyers who purchase in bulk. Later sovereigns of Queen Victoria and those of Edward VII, George V and the currency sovereigns of the present Queen, retail for around pounds 64 each.

Nor is this the first time that the same company has taken a liberty with the comparisons it makes.

Last month, the Advertising Standards Authority (ASA) upheld a complaint against a similar advertorial by the Gold and Silver Bureau in which it offered Edward VII sovereigns for pounds 99.50 each.

These sovereigns had also been found in Switzerland and again it was held that they were a bargain against the Royal Mint's price of pounds 149 for new ones.

The ASA considered that the comparison was misleading and expressed concern "that the advertisers claimed the coins had investment value and noted that they had [previously] been advised against this approach" by the Authority.

The fact that the Gold and Silver Bureau was selling the coins at a substantial premium did not concern the ASA. However, it did feel "their potential monetary value to the consumer had been exaggerated".

Its report concluded: "The advertisers were asked to delete the implication that the coins had value as investments and to use fair pricing comparisons in future." However, the advertorials continue to appear.

Last year the same company advertised Maria Theresa thalers bearing the date 1780. The copy implied that the coins were scarce. The fact is that since 1780, an estimated 800 million thalers bearing the date 1780 have been struck and are still produced today in Austria. UK coin dealers retail them at pounds 4.50-pounds 7 each.

Unless you are an expert collector, buying gold coins in the hope that they will appreciate substantially in value is a difficult task. It makes sense to be guided by a reputable dealer. If you want to buy for sentimental reasons, say because a coin was minted in a particular year dear to you, it still makes sense to go to an expert.

A list of the members of the British Numismatic Trade Association is available on 0181 398 4290. The current price for sovereigns is available from Spink's bullion department on 0171 930 7888.