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Should I Buy Fractional (Less Than 1 Ounce) Gold Coins?

In today’s tough economy, many investors simply cannot afford to purchase as much gold as they would like. Some turn to silver products instead, which offer very attractive upside potential and should be part of every savings plan. However, gold has historically been less volatile, so it cannot be replaced as the “safe haven” asset in a portfolio.

For those wishing to keep their savings in less than ~$1700 increments, the solution is fractional gold coins. Fractional coins are any coins with a weight below 1 ounce. Common denominations are 1/2 oz, 1/4 oz, and 1/10 oz. At today’s spot prices, those coins would be worth approximately $900, $450, and $200, respectively. With more accessible price points, these coins are popular because they are easier to liquidate and barter.

If all else were equal, we would recommend getting the smallest-sized gold possible because it gives you the most flexibility. However, minting costs tend to be ‘fixed’ regardless of the size of the coin. The mint still has to create the dies, source the metal, pay for marketing, manage distributors, etc. So smaller coins carry a higher markup as a percentage of overall cost. It’s similar to how Costco can sell you 36 rolls of paper towels for $20, but the grocery store sells 4 for $10.

We believe gold’s continuing ascent will render the difference in premiums marginal in time. While 1 oz coins still provide the most bang for the buck, fractional coins might be preferable for those who are willing to pay more now to make it easier to trade or sell later.

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