Fractional Gold Coins: Smart Investment Or Risky Bet?

Fractional gold coins are a category of gold bullion that is divided into smaller, more affordable denominations, typically less than a full ounce in weight. They are a good investment option for those looking to diversify their portfolio or hedge against inflation. In this article, we will discuss the pros and cons of investing in fractional gold coins and whether they are a good investment option.

Affordability and accessibility

Fractional gold coins are an attractive investment option due to their affordability and accessibility. They allow investors to start small and purchase a fraction of an ounce of gold, making it more accessible to those with limited budgets. This lower initial investment requirement opens up gold ownership to a broader range of people.

Fractional gold coins are available in smaller denominations, typically ranging from 1/20 ounce to 1/2 ounce, with some coins as small as 1/1000th ounce. For example, the American Gold Eagle is available in 1/10, ¼, ½, and one-ounce sizes, while the Canadian Gold Maple Leaf can be purchased in sizes as small as 1/20 ounce. These smaller sizes come with a lower price tag, making them more affordable for investors.

The affordability of fractional gold coins allows investors to buy little and often, rather than having to save up for a full 1-ounce gold coin. This flexibility is particularly appealing to those who want to gradually build their gold collection or investment portfolio over time. It also enables investors to diversify their portfolios without committing a large sum of money upfront.

In addition to their affordability, fractional gold coins offer enhanced liquidity. Investors have the option to sell only a portion of their gold holdings, providing flexibility and accessibility. This is especially advantageous if there is an urgent need for liquidity or if investors want to take advantage of favourable market conditions. The divisibility of fractional gold coins also makes them ideal for gifting or passing wealth to the next generation.

Fractional gold coins are also physically more accessible. Their compact size makes them easy to store, requiring less space compared to larger gold bars. They can be safely kept at home or stored in a safety deposit box, potentially reducing storage costs.

Portability and storage

Fractional gold coins are an attractive investment option for those who want to build a gold collection without spending large sums of money at once. They are also a good option for those who want to give gold as a gift without spending too much. However, there are some considerations to keep in mind regarding the portability and storage of fractional gold coins.

Firstly, the smaller size of fractional gold coins makes them more portable and easier to transport than larger gold coins. This can be advantageous if you need to move your gold collection or take it with you on the go. They can be easily stored in a safe deposit box or a home safe, providing flexibility in storage options.

Secondly, due to their small size, fractional gold coins are easier to lose than larger coins. It is recommended to keep them in tubes or bags to prevent misplacement. Additionally, their tiny size makes them more susceptible to wear and tear, so they should be handled with care to maintain their integrity over time.

Another factor to consider is the storage cost. While fractional gold coins may be more affordable to purchase, the cost of storing them can be relatively higher. This is because the storage cost is usually calculated based on the value of the gold, and fractional gold coins have a lower individual value compared to larger coins. As a result, the storage cost per ounce of gold may be higher for fractional gold coins.

Furthermore, for those who intend to store their gold at home, the smaller size of fractional gold coins could pose a security risk. Their compact nature makes them easier to conceal and steal, requiring additional security measures to be put in place.

Lastly, fractional gold coins are more commonly available in smaller units, such as 1/20 oz or 1/10 oz sizes. These smaller denominations provide greater flexibility in terms of buying and selling partial amounts. However, it is important to note that the availability of these smaller units may vary across different mints and dealers.

In conclusion, while fractional gold coins offer advantages in terms of portability and storage options, there are also considerations to keep in mind, such as the risk of loss or wear, storage costs, security concerns, and the availability of specific denominations.

Gifting and inheritance

Fractional gold coins can be an excellent option for those looking to gift or pass on wealth to the next generation. Their smaller denominations make them ideal for dividing among heirs and introducing children to investing.

For example, if you want to give your grandchildren a head start on their financial journey, you can gift them fractional gold coins, which they can then use to begin building their investment portfolios. This not only imparts the value of investing but also ensures they have a tangible asset with real value.

Additionally, fractional gold coins are perfect for inheritance purposes. If you want to divide your assets among multiple heirs, these smaller coins allow for easier distribution. This can help avoid potential conflicts and ensure that each heir receives an equal share of the inheritance.

The portability and compactness of fractional gold coins also make them convenient for storing and passing down through generations. They can be safely kept at home or in a safety deposit box, ensuring that your wealth remains secure and accessible for your heirs.

Moreover, fractional gold coins can serve as a valuable learning tool for younger generations. By understanding the value and significance of these coins, children can develop an early interest in investing and financial management. This can set them on a path towards financial literacy and security.

In conclusion, fractional gold coins offer a convenient and accessible way to gift or pass on wealth. Their smaller denominations, portability, and potential for long-term value appreciation make them a thoughtful choice for those looking to secure the financial future of their loved ones.

Trading and bartering

Fractional gold coins are a good investment for trading and bartering. They are typically easier to liquidate, and bartering with these coins can also lead to great trading opportunities that may not be possible with larger gold coins.

Fractional gold coins are ideal for those looking to sell a few gold coins for liquidity and cash flow. They are also a good option if you are looking to trade in a bit of your gold for cash without letting go of your more expensive pieces.

The smaller size of fractional gold coins lends itself to more convenient storage, providing convenience and peace of mind for investors. Their portability is also advantageous in a bartering scenario where transportability is essential.

Fractional gold coins are also highly divisible, making them ideal for standard day-to-day purchases. The sheer value of standard-sized gold assets would be too impractical for trading most products or services. The universal recognition and high demand for gold assets would extend to fractional denominations too.

Fractional gold coins are a good investment for those looking to diversify their portfolio or hedge against inflation. Their value is based on the spot price of gold and is considered a more stable asset than many other investments, such as equities.

Higher markup price

Fractional gold coins are a great way to invest in gold on a budget. However, one of the disadvantages of investing in these coins is that they often come with a higher markup price.

Fractional gold coins cost the same to mint as coins containing more gold. This means that fractional gold coins will likely have a higher markup price in relation to their purchase price than bigger coins. A one-ounce gold coin will usually have the lowest markup price of all, which is one reason this option is so appealing.

Mints often charge markups that range between 9% and 15% on fractional gold coins. Many investors see this as undesirable as the markup is not recoverable when trading in the coins. The higher markup price can also dissuade some collectors from investing in fractional gold coins and instead opting for a typical one-ounce coin.

Despite the higher markup price, fractional gold coins are still a good investment option for those looking to spend less money on precious metal bullion coins. They are also a great way to make a more well-rounded collector's portfolio.

Additionally, fractional gold coins are easier to liquidate and provide excellent trading opportunities that may not be possible with larger gold coins. They are also ideal for gifting or passing wealth to the next generation as they are easier to divide among heirs.

Frequently asked questions