Should I Buy Fractional Gold Coins?

Posted - December 30, 2020
Should I buy fractional gold coins

Many-a stackers, preppers and seasoned gold bullion investors have asked themselves “Should I buy fractional gold coins?” It should come as no surprise that gold remains one of the most consistently valuable precious metals in the world. Historically, gold has been used in currencies for thousands of years. Its spot price in United States markets continues to climb each year, making it an exceptional asset for investors looking to hedge against inflation of the U.S. Dollar. 

Although the high value of gold makes it a great asset to hold, its hefty spot price also discourages some investors who might not be willing to spend thousands of dollars at a time on gold bars or large coins. And not all buyers of gold are purchasing the commodity as an investment, either. Some survivalists buy fractional gold coins to use as currency if our financial system were to ever go up in smoke. And a growing number of bullion consumers are beginning to see how fantastic gold, silver, and other precious metals can be as gifts. 

If you’re looking to give your friends or family an unforgettable gift, gold coins have the backing of centuries of tradition. And the best part? There’s no need to break the bank in order to give an exceptional gift in the form of gold coins. Fractional gold coins allow people to tap into the high value and long-term collectability of gold without spending thousands of dollars at a time. 

buy fractional gold coins - 1-10 oz Krugerrand

Should you buy fractional gold coins? Our answer is a definitive “yes.” There are many reasons why the average consumer would want to buy fractional gold coins  or smaller denominations of popular bullion pieces. From gift-givers to investors and everything in-between, it’s hard to beat the high liquidity and long-term value of these coins. 

We’ll cover some of the main reasons to buy fractional gold coins in today’s guide. Whether you’re buying for yourself as an investment, or for others as a gift, there are many reasons why fractional gold coins are an unbeatable option for purchasing and holding gold. 

What is a Fractional Gold Coin? 

The term “fractional gold coin” just refers to any gold coin that’s smaller than an ounce in weight. Gold is generally measured in ounces. The spot price for gold is just the price in fiat currency per ounce of this shiny precious metal. The price for collectable gold coins is determined by taking the spot price for the metal of a given piece and adding a premium to it, which can vary based on the distributor and the specific coin. 

Full ounce gold coins can be extremely expensive. Many one ounce gold coins cost around $2,000, and some can run you even more. The upside is that many collectable coins retain (or even gain!) their value over time. This is especially true for old gold coins kept in relatively mint condition. But for the average consumer, spending $2,000 on a single coin just isn’t feasible. 

buy fractional gold coins - 1-10 oz Gold US Mint Lady Liberty

Many mints now produce fractional versions of popular one ounce gold coins. This allows investors to buy the same beautiful designs without dropping several thousand dollars on each piece. 

There are multiple different types of fractional gold coins. The smallest coin many bullion distributors sell is a 1/20 ounce gold coin. These pieces are especially popular as gifts, as they cost a mere fraction of their one ounce counterparts.  But keep in mind there are also a lot of decent options for fractional gold bars as well.  

There’s no reason to worry about the purity of fractional coins, as they typically contain the same gold purity as full one ounce versions. Their designs are also generally the same, meaning that the only real differences lay in the weight and price of these collectible gold bullion coins. 

Fractional gold coins are often offered in half-ounce, 1/4 ounce, 1/10 ounce, and even 1/20 ounce variants. Remember: the high price of gold means that even these low fractional denominations can retain significant value. This is one of the big benefits we see with folks who buy fractional gold coins; they are simultaneously valuable and easier to liquidate than larger versions. 

How Much do Fractional Gold Coins Cost? 

The answer to this question depends on a few different factors. The most important thing to consider when wondering about the price of a fractional gold coin is the current spot price of gold. As we mentioned in the above section, gold pieces are priced by adding a small premium to the price of the coin’s price in pure gold. 

The spot price for gold is being updated continuously. There’s no shortage of sites on the internet that can keep you updated on the precise value of an ounce of gold. As the spot price for gold by the ounce adjusts up or down, the cost of fractional coins will shift as well. 

As an example, 1/10 oz gold coins often cost around $200 each. This remains an exceedingly popular option for people shopping for gifts. Compared to a $1,800+ one ounce coin, these fractional coins make it possible for consumers to buy fractional gold coins and multiple gifts at once. Instead of dropping your entire holiday budget on a single expensive gold piece, many people are opting to buy cheaper high-quality fractional denomination coins. 

Some fractional gold coins may be additionally discounted because of their lower gold purity. Many gold pieces are struck using .9999 pure gold, meaning that their value should align closely with the spot price of the gold they contain. However, certain fractional coins might use lower purity, which can lower their total cost.

Advantages to Buying Fractional Gold Coins 

There are a number of reasons why you should consider investing in fractional gold coins. As we explained above, the classic advantage to smaller precious metal denominations is that it allows you to expand your asset collection without spending too much fiat cash. But there are also a few other advantages to preferring fractional ounce coins over their one ounce counterparts. 

First, these coins are the preferred method of giving gifts, especially during the holiday season. Whether you’re gearing up for an exciting Christmas with the family or the birthday of a friend, the gift of gold has been given by thoughtful consumers for generations. Let’s face it: most people aren’t prepared to spend multiple thousands of dollars on expensive bullion gifts. 

Imagine: you need to buy fractional gold coins or a bullion present for each of your three children. It’s not very likely that you’re ready to gift each one of them a $2,000 one ounce gold coin. Instead, purchasing three 1/10 ounce coins can cut your cost down to around $200 per coin. Like we said above, the exact costs can vary– but you get the point. Gold bullion is a fantastic gift, but it doesn’t need to be expensive. On this front, fractional coins have tremendous value. 

But gold bullion coins in fractional denominations aren’t just functional as gifts. Many people choose to buy fractional gold coins in order to maximize the liquidity of their investment portfolio. For people with faith in the long-term value of gold as a commodity, having a high quantity of gold pieces is certainty important. 

However, consider the case of an emergency that necessitates spendable fiat currency. You can’t quite pay for a trip to the hospital in one ounce gold coins! This is why it’s so important to try to maintain liquidity in your gold and silver bullion collection. Being able to quickly liquidate your bullion into spendable United States Dollars is a must. 

Fractional gold coins make it possible for investors to quickly turn smaller amounts of gold into capital without wasting large pieces. Simply put, you don’t want to have to sell off a $2,000 coin in order to pay a $200 medical bill. Physical gold is valuable, regardless of the weight of each individual piece. But building an investment portfolio filled with a large number of fractional gold bullion coins allows you greater control in case you need to liquidate quickly for cash. 

Disadvantages to Buying Fractional Gold Coins

While we’re a big fan of purchasing fractional coins as a way to boost the value of your collection without compromising on liquidity, there are also a few undeniable disadvantages to making this kind of purchase. To begin, you should consider how variable sales taxes may impact the overall cost of your investment. 

Some states have instituted an additional sales tax on bullion purchases of less than $1,000, which can make it even more difficult to get a truly solid deal on gold via bullion coins. However, this problem is relatively easy to get around. If you’re looking to expand your bullion collection with fractional coins, consider buying multiple at one time. With a total purchase of over $1,000, you might be able to avoid some pesky extra sales taxes. 

Be sure to educate yourself on the sales tax laws of your specific part of the country. Some states charge extra taxes on purchases of less than one ounce of gold, while others adhere to a stricter dollar amount. Getting a good grip on how taxation laws influence bullion purchases is never a bad idea. 

Fractional coins can also be more expensive than larger pieces of bullion. As a general rule of thumb, gold purchases of an ounce or more should be pretty close to the spot price of the precious metal. The larger the amount, the smaller premium distributors add onto the cost of the metal itself. 

Shopping around for the best deal is the best way to mitigate this disadvantage. Some bullion companies are able to charge a smaller premium on fractional denominations than others. Your goal should be to pay as close to the spot price of your gold as you can. 

Frequently Asked Questions About Fractional Gold Coins 

It’s understandable that many new bullion buyers have questions about how to buy fractional gold coins, as well as when, and why to purchase frac gold bullion coins. We’ve got you covered with answers to some of the most commonly asked questions we hear about this trending topic in the bullion community. 

Q: Which coins are available in fractional denominations? 

A: If you want to buy fractional gold coins, most popular coins can be purchased in fractional quantities. Canadian Gold Maple Leaf Coins, Gold American Eagle Coins, Austrian Gold Philharmonics, Australian 1/10 oz Gold Ox and other yearly releases are highly valued in their fractional denominations. The relatively low cost of these smaller pieces also makes it easier to start an annual collection. 

Q: What is the most popular fractional gold coin? 

A: When it comes to popular frac gold coin weights, tenth ounce, half ounce, and quarter ounce editions are coveted among many collectors. These coins are excellent alternatives to full one ounce pieces, which are both expensive and hard to liquidate. 

Q: Are fractional coins legal tender? 

A: In many cases, yes. The gold value of fractional gold coins generally exceeds their face value by a large margin. But coins minted in popular facilities like the U.S. and Canadian Mints generally carry an established face value backed by their governments. 

Q: Are fractional gold coins a good investment? 

A: We certainly think so. Stackers that buy fractional gold coins in small frac gold weights and denominations from popular sovereign mints rewarded with stability in it’s buying power. They are also very popular bullion investments, due to their accessible entry price and they also often carry additional value as collector’s items. 

The Bottom Line: Should I Buy Fractional Gold Coins? 

While there are certainly a few disadvantages to smaller denominations of gold coins, there are many reasons why you should buy fractional gold coins. The big upside to small gold coins is that they cost far less total capital than full ounce bullion pieces. If you’re looking for a beautiful and valuable gift during the holiday season, fractional ounce coins can do the trick without going over budget. 

Even the most seasoned investors in gold bullion appreciate the liquidity provided by fractional ounce gold bullion coins. No one wants to be in a position where they need to sell off thousands of dollars of gold in order to pay a much smaller bill or charge. 

If you’re planning to buy fractional gold coins and invest in a new frac gold bullion, consider reading up on your local and state tax laws concerning bullion purchases. In addition, shop around to find out which distributors are offering the best deals on the coins you’re searching for. Doing these things can help to offset two of the biggest disadvantages to buying fractional coins: the increased premium and tax burden. 

When it comes to buying bullion coins, bigger isn’t always better. In fact, most consumers can stand to benefit quite a bit from investing in popular fractional gold coins next time they want to up the ante on their collection.