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Is Fractional Gold a Good Investment?

A Gold Canadian Maple Leaf, Gold American Eagle, and a Gold Austrian Philharmonic.

Fractional gold can be a good investment for those looking to diversify their portfolio or hedge against inflation. Its value is based on the spot price of gold and is considered a more stable asset than many other investments, such as equities. Gold has traditionally been used as a store of wealth and a hedging tool, and its popularity has only grown in recent years. In this article, we’ll take a fresh look at how to invest in fractional gold at premiums like that of a regular one troy ounce bullion coin. When investing, a common strategy is to purchase gold or silver at the lowest possible premium to maximize your potential ROI. We’ll show you how to do that.

While there are many benefits to investing in fractional gold, there are also some risks to consider. The most important thing to remember is that gold is a long-term investment, so it’s important to have a solid plan in place before buying. Gold can be a volatile asset, so it’s important to consult with a financial advisor to ensure it’s a good fit for your investment goals. Remember that a fractional coin is still a gold coin. This means it’s susceptible to changes in the spot price of gold.

When buying fractional gold, be sure to purchase from a reputable dealer and invest in a storage option that will protect your investment. Gold is a valuable asset, so it’s important to take the time to learn about the different types of gold before investing.

What is fractional gold?

Before we get too much further, what exactly is fractional gold? Fractional gold refers to gold that is less than one ounce. If you buy a gold coin, the standard size is one troy ounce. Fractional coins are simply that – a fraction of an ounce of gold.

A common range of fractional gold sizes include:

  • 1/10 oz gold coins
  • 1/4 oz gold coins
  • 1/2 oz gold coins
  • 5-gram gold
  • 10-gram gold

What are the benefits of fractional gold?

While one ounce gold coins are the most popular, fractional gold offers investors a few benefits. Here are a few things to keep in mind if you’re thinking about investing in fractional gold:

Fractional gold is more affordable: One of the main benefits of fractional gold is that it’s more affordable than buying a full ounce of gold. This makes it a great option for investors who are looking to diversify their portfolio or start investing in gold, but don’t have a lot of money to do so.

Fractional gold is easy to trade: Another benefit of fractional gold is that it’s easy to trade. Purchasing fractional coins is easy. Most coin shops or online coin dealers sell coins like American Gold Eagles in fractional sizes. Their relative popularity makes them easy to sell at the same venues.

You don’t have to sell an entire ounce: When liquidating your gold holdings, you may want to liquidate a small amount to meet a financial goal. With fractional gold, you can do this without selling an entire ounce of gold.

Fractional gold is easy to spend: Gold foil products like Goldbacks present an easy way to pay bills with gold if you are in one of the U.S. states that recognize gold and silver as legal tender. Their small sizes range from 1/1000th oz to 1/20th oz, making them a good fit for smaller transactions .

Fractional gold is also a great way to give gold as a gift without overdoing it.

What’s the downside?

Of course, there are also some downsides to fractional gold that you should keep in mind before investing. The main thing is that fractional gold usually has higher premiums.  That’s because the mint or dealer needs to make a profit and the smaller the coin the higher the cost. This drives up the per unit premium. Fractional coins generally tend to be more expensive coins when you compare the premium to a whole unit, but this isn’t always the case. If you want to buy a fractional gold coin, there is a way to do it without breaking the bank.

How do you calculate premiums on gold bullion?

When you’re investing in gold, one of the things you calculate is the premium. The premium is the difference between the spot price of gold and the actual price you pay for the coin.

For example, let’s say the spot price of Gold is $1,200.00 per ounce and you’re looking at a 1/4 ounce gold coin. The actual price of the coin might be $1,250.00, which means the premium is $50.00.

The premium on gold bullion can vary depending on several factors, including the type of coin, the dealer you’re buying from, and market conditions. When demand is high for specific types of coins, the premium on those coins may rise faster than other bullion products.

To find the premium on a gold coin, let’s look at a one troy ounce American Gold Eagle. At the time of writing, the spot price on an ounce of pure gold is $1,722.90. The price of a random year 1 oz. Gold Eagle BU is $1,902.89. This means the premium over spot is $180.08. This premium is less than a 0.3% difference between APMEX and our closest competitors, so we feel confident using this example as a benchmark for our readers. Another way to assess the premium is as a percentage, which comes out to just 10.4%. This is the best way to compare to premiums on fraction gold.

Can you purchase fractional Gold for less than one ounce Gold coins?

Yes, it is possible if you’re willing to be a little creative. Keep in mind that premiums change and it’s possible you will encounter a higher markup price elsewhere, but there is a way to get fractional gold at a premium under 10%. At the time of writing, there are several 20 franc gold coins such as the Gold Helvetia coin and the Gold French Rooster that are priced at $348.66 with a gold content of 0.1867 ounces of pure gold. Running the same exercise as above, the gold content in these coins is worth $321.66, meaning the premium is a measly $26.99. Another way to look at it is the premium is 7.7%. Compare that to the premium of over 10% for one troy ounce. And a third and final way to look at this is if you buy 6 of these coins, you will have more gold than if you bought 1 ounce, yet you will have paid almost $20 less.

These are popular gold coins with beautiful designs, but they technically aren’t bullion coins. They have numismatic value as well. They tend to be easy to sell and purchase due to their popularity, so you get many of the benefits of easy liquidity that bullion carries. In addition, there is an added benefit from the numismatic value. While a collectible item normally carries a higher premium due to its collectibility, that doesn’t seem to be the case with these coins. However, the benefit of these coins is there are no more coins being produced in these designs. The rarity can only increase, making this coin popular among many investors. 

Are there other options to get fractional gold at lower premiums?

Absolutely, yes. Valcambi bars are a popular investment option for those looking for modern production of fractional gold bars at the lowest possible price. The 5 gram Valcambi bar, for example, has a premium of just 8.99%, making it another affordable option for the fractional investor. PAMP Suisse has similar premiums and Credit Suisse is another popular option for fractional bullion.

It’s important to note there are other one ounce gold coins with a lower premium than our Gold Eagle example. If you compare the lowest premium on all quarter ounce coins to the lowest premium available on all one ounce coins, the one ounce will win on premium.  

If you are looking for amazing deals on Gold and Silver for Black Friday 2022, we will have new deals minted hourly so you can cash in on the lowest premiums of the year all day.

So, is fractional gold a good investment?

Well, it depends. If the concern is the premium, we’ve proven there are ways to get around the higher markup price and taught you how to shop for the lowest markup price. The past performance of physical gold as a store of wealth makes an investment portfolio with a percentage of gold holdings an attractive prospect for many investors.

Whether that gold is in 1/10 ounce, 1/4 ounce, 1/2 ounce or 1 ounce varieties may not matter as much for the investor with a thirty-year time horizon. We believe in buying fractional gold coins as an investment strategy for many people, but it’s up to you (and perhaps your financial advisor) to determine whether investing in popular fractional gold coins or bars is the right approach for your investment portfolio.

Keep track of the live gold price with the APMEX mobile app, available for Android and Apple devices.

Quick Guides to Investing

Step 1:

Why Buy Physical Gold and Silver?

If you are concerned about the volatility of the stock market, you’re not alone. The extreme highs and lows of the stock market often lead investors towards safe-haven assets, like bullion. Historically, the Precious Metals market has an inverse relationship with the stock market, meaning that when stocks are up, bullion is down and vice versa.

Step 2:

How Much Gold and Silver Should You Have?

This question is one of the most important for investors to answer. After all, experts suggest limits on how much of any types of investments should go into a portfolio. After deciding to purchase and own Precious Metals and considering how much money to allocate, one can then think about how much and what to buy at any point in time.

Step 3:

Which Precious Metals Should I Buy?

With the frequent changes in the market and countless Precious Metal products available, choosing investments can be difficult. Some want Gold or Silver coins, rounds or bars while others want products that are valuable because of their design, mintage or other collectible qualities. Also, collectors may shop for unique sets and individual pieces for their collections.

Step 4:

When to Buy Gold & Silver

After considering why, how much, and what Precious Metals products to buy, an investor’s next step is when to buy them. This decision requires an understanding of market trends and the impact of economic factors on precious metal prices.

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