Gold isn’t cheap. It’s the king of precious metals and commands a hefty price per ounce. Many will recommend you save up to buy a full ounce of gold at a time, so you save money on premiums. That’s great for buying, but what if you need to sell at some point? If you had fractional gold and needed to sell, you could do so without selling it all off at once.
The case many make against buying fractional gold is that the premiums are higher and you’re unlikely to recoup any of the premium when selling. While the first part is true, the latter argument is only true if you are trying to sell quickly to a pawn shop or local coin store. In both of these cases, you will likely get below spot or right at it. If you’re willing to take a little time to sell privately, you can easily recoup the majority of the premium when selling.
The Case for 1/10oz Gold
So which fractional gold is best to buy? That depends on your goals and budget. If you’re on a very small budget, it’s best to stick with buying 1/10oz gold coins and rounds, as these will be in the $200 range. Even if you can only afford to buy one per month, you’ll have 1.2 ounces of gold at the end of a year. Even if you never increased that budget, after 10 years you will have 12 ounces of gold! That is a great accomplishment, and you have the added benefit of being able to sell small portions off whenever you like.
LMU (Latin Monetary Unit) Gold
This is “old world” gold from centuries past. Unlike modern bullion, these are typically made of 90% gold, because they were designed to be circulated as usable currency. Because of this, they will be measured in AGW (Average Gold Weight). A classic example is a 10 Franc coin with the iconic Rooster on it.
These are typically going to be even lower premium than modern bullion. The downside is you are much less likely to be offered spot price if you sell to a pawn shop or coin store. Selling privately will net you the most return when it comes time to sell.
The Case for 1/4oz Gold
The next step up from 1/10oz and LMU gold would be 1/4oz coins and rounds. The premium on these is less than what you’d pay for 1/10oz. These will be in the $500 range, so you’ll want to make sure you budget for them. Using the previous time frame example, if you buy one per month you will have 3 ounces of gold at the end of a year. After 10 years you’d have 30 ounces of gold! When selling, these will retain some of their premium, but not nearly as much as smaller denominations, since the 1/4oz coins and rounds don’t sell as quickly.
The Case Against 1/2oz Gold
By the time you are looking at 1/2oz gold, the premium savings over buying 1/4oz don’t really justify buying them. If you have the budget to purchase 1/2oz of gold every month, you’d be better served buying two 1/4oz coins or rounds, or saving up and buying a full ounce of gold every other month.
The Hybrid Approach
The hybrid approach is the most flexible and probably the most practical when taking into consideration that unexpected expenses happen. If you’re uncertain about whether to focus on stacking 1/10oz, LMU or 1/4oz, then stack all of them. In months where you can afford to buy 1/4oz of gold, buy the larger amount. When unexpected expenses come up and you can’t quite buy 1/4oz then buy 1/10oz or a smaller 10 Franc coin if it’s still within your budget. This way you’re always accumulating gold that will preserve your wealth and be easy to sell later.
Liquidity Is Key
Regardless of your budget, the goal with all of these approaches is liquidity. Having a full ounce gold coin does little good if you have to sell and don’t want to sell it all. If you instead have fractional gold to sell, you can sell off the fractionals just to cover what you need and keep the rest. It’s no different from the reason why we have smaller and larger denomination bills. Whichever method you choose, plan out a budget and stick to it. Happy stacking!