Gold Post #1: The Pros and Cons of Fractional Gold
Gold Post #1: The Pros and Cons of Fractional Gold
What is Fractional Gold?
Fractional gold is considered to be any amount of gold, in the form of a coin, bar or round, that is less than one troy ounce of gold. Fractional gold comes in denominations that typically contain 1/2, 1/4, 1/10, 1/20 troy ounce of gold.
The photo below shows my collection of Perth Mint Australia fractional 1/10 troy ounce coins. As you can see from the photo, although the fractional coins may be small, they still have great designs that are very detailed.
Perth Mint 1/10 troy ounce collection of fractional gold coins
Pros of Fractional Gold
1. Cost
The dollar cost for me to purchase a fractional gold coin is a lot lower than if I was trying to buy a larger gold coin like a one ounce (>$1,000) or two ounce coin (>$2,000). The lower cost is beneficial if I only want to make a modest investment in physical gold or even if I just wanted to collect gold coins as a hobby.
2. Collection Variety
As you can see from my photos, by buying gold coins in smaller sizes I have been able to purchase a collection of coins that have very interesting designs. I am a collector at heart, so I like a variety of coin designs, while still investing my money in an asset that is a great store of value.
3. Flexibility
Trading a one ounce or two ounce gold coin can be difficult to do on the secondary market due to the higher dollar cost of the coin. If I ever needed to trade a couple of my fractional gold coins for a bit of cash or some cryptocurrency, I can do so a lot easier. This allows me to secure my larger gold coins in a vault as a store of value and have my fractional gold coins available for more frequent trades when required.
Perth Mint 1/10 troy ounce 2002 Lunar Series I Year of the Horse
Cons of Fractional Gold
1. Premium and Markup
There is one major drawback when buying fractional gold coins which can be broken up into two parts. Firstly, fractional gold coins generally cost the same to mint as larger gold coins, which means fractional gold coins tend to have a higher markup price compared to larger coins. Secondly, an additional sales premium tends to get added to fractional gold coins as well. This is largely due to the lower dollar price of fractional coins so buyers often overlook additional premiums and buy the fractional gold coins even if they cost more per ounce of gold than larger gold coins.
Perth Mint 1/10 troy ounce 2010 Lunar Series II Year of the Tiger
Size Comparisons of Fractional Gold
One of my early concerns with fractional gold coins was just how small they are. I started off as a silver stacker, so I was used to the size of a one troy ounce silver coin, then I bought my first one troy ounce gold coin and realised that it is smaller than the silver coin, due to the density of gold. When bought my first 1/10 troy ounce gold coin, I was amazed at just how small it was.
In the first photo below you can see the comparison of a one troy ounce gold coin vs a 1/10 troy ounce gold coin vs a 1/20 troy ounce gold coin. In the second photo below you can see the size comparison of a 1/10 troy ounce gold coin vs an Asahi Beer Cap. The 1/10 troy ounce gold coin is a fair bit smaller than the Asahi Beer Cap.
As I have acquired more fractional gold coins, I have begun to like their size more and more. The coins are large enough to still appreciate the coin design, but are small enough to be easily stored and secured.
Size of 1oz gold coin vs 1/10oz gold coin vs 1/20oz gold coin
Size of 1/10oz gold coin vs Asahi Beer Cap
@strenue I really like the 1/10 Gold Size for putting or stacking Gold away.....
Yes I agree, it is a great size. I am still mainly into stacking silver, but 1/10oz gold is a really good size for getting into gold stacking as the price barrier to entry is not so high. The trick with stacking fractional gold is trying to source it from trusted dealers, forums and coin shops that offer the coins at a reasonable premium over the spot price. I definitely do not like paying a high premium if I can avoid it, if I come across a very rare or collectable fractional gold coin, then I make an exception to the rule and pay the premium.
Love fractional gold as they're all I can afford right now anyway!
And you're so right about how small they are, makes it kind of hard to believe they're worth so much!
Gold is amazing that way, how it has been such a reliable store of value throughout the ages. Starting out in gold stacking is kind of like starting out in Steemit. You seem to get so little initially, but with patience and perseverance, you value builds up over time until one day you look back and say wow all that patience and effort was worthwhile because you have generate some real value.
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