Physical Fractional vs. Full oz. Gold

[Bean]

What are the pros and cons of each route?

For reference: I buy each lagging assets every month back up to 25% as I contribute to my PP.  Cash, Stocks, and Bonds are easy, but physical gold at full ounce is hard to do with this methodology.  Anyone else do this and do you go fractional or just wait till you are a full ounce of gold away from 25% in gold, then buy?

[dualstow]

I think a few things have been said for 1 oz and against anything less:

1- 1 oz is standard
2 - there is more dealer markup for smaller denominations

The only thing I can think of on the side of fractional is what you mentioned: you can buy more often.

[Pointedstick]

Any month you would buy gold because it's the lagging asset but your contribution isn't enough to afford a whole oz, you could instead put it in a separate cash bucket and then make the purchase when you have enough for a full oz.

[Libertarian666]

I like to have a few ounces in fractional gold, just because it is more divisible.
Sometimes you can find it for sale for a reasonable premium, e.g., under 10%, or even under 5%, if you look on ebay.
In the past I sometimes got some excellent deals from a dealer who had a bunch of stuff gathering dust in his safe, but obviously you can't count on that.

[Xan]

I like to have a few ounces in fractional gold, just because it is more divisible.

Is that for a SHTF scenario?  Smaller bits of gold would definitely be handy then, for walking-around money.  Having a few silver coins for that purpose might not be a bad idea either.

[Ad Orientem]

Fractional coins tend to come with a steep mark up. I would stick to 1 oz coins. In the meantime you can always keep a small position in IAU for gold designated cash until you have enough to buy a few coins.

[MediumTex]

British sovereigns are the only fractional coins I would consider.  Nothing else is even close.

[Bean]

British sovereigns are the only fractional coins I would consider.  Nothing else is even close.

Exactly what I was looking at.  My only concern is do they typically have a lot of wear?  Premiums seem low at all the places I shop.

[MediumTex]

British sovereigns are the only fractional coins I would consider.  Nothing else is even close.

Exactly what I was looking at.  My only concern is do they typically have a lot of wear?  Premiums seem low at all the places I shop.

Look for ones without wear.

They've been minting them for over 100 years, so some will have more wear than others.

[WildAboutHarry]

There are quite a few modern "fractionals" out there.  The U.S. is currently issuing a 1/2 ounce gold "First Spouse" series that, occasionally, can be had for reasonable premiums.  The series doesn't appear to be too popular (the Martha Washington coin appears to have been mildly popular, but later releases less so; Martha Washington, at least on the coin, bears a striking resemblance to George).

Canada has issued quite a few modern gold commemorative coins in 1/4 and 1/2 ounce versions.  Again, these can occasionally be had for a reasonable premium over spot.

If you are after instant recognition of a gold coin then stick to American Eagles, Krugerrands, or Maple Leafs.  But if you are just after gold and are not opposed to a bit of numismatics, some of these modern gold commemorative issues are not a bad way to go for fractionals.

[Larshus]

My 2 cents on fractions (from a wholesalers point of view):

Modern:
Modern fractionals are more expensive over their 1 oz counterparts. Then again 1 oz coins are much more expensive than kilo bars. Why would you buy them? Only if you want to buy a fractional ounce because you can't afford the full one ounce size. That's pretty much it. I guess the case could be made that if gold goes insane the buying power of one ounce might be "too much" but I would guess that inflation will ramp also so the buying power will pretty much stay locked.

Coinage:
Fractional coinage breaks down into a few "standards" depending on what part of the world you were in.

Main:
U.S.: Double Eagle ($20) .9675 oz
British: Pound (Sovereign) .2354 oz
Latin (France, Belgium, Italy ect) Latin Monetary Unit (LMU): 0.1867

Lesser:
Russia: 5 Rouble .1244
Austria, Bulgaria, Turkey: 1 Ducat .1106

Pretty much stick to the Sov or LMU. Russian premium is now too high and the ducats are all modern re-strikes that you'll find. U.S. Is VERY high premium wise except for the odd polished coin you'll find here or there with no collector premium.

In the wholesale world its very common to see LMU coinage trade under 1 oz premiums. There is not as much demand for it, and it sells slower. Its also interesting to note that often times when nations trade gold, its traded in LMU form. There is never a question about the authenticity of the bars, or the AGW in LMU form.

There is nothing wrong buying LMU gold or Sovs if you can find the premiums cheaper than 1 oz eagles/Maples/Rands. On that note Rands always trade at a discount to Maples/Eagles here in the US on a wholesale level, so you should expect to pay less for them.

There are significant reporting differences in the U.S. between modern bullion coins and older gold coins that circulated, buts an entirely different thread

[MediumTex]

Larshus,

What about British sovereigns?

Those coins are probably the most recognized gold coins worldwide and can often be hard for at or near spot.

[Larshus]

Re-Read.. Pound = Sovereign =  Sov Sorry for the slang

[Larshus]

If you look around, you can find good deals. You just have to be patient. I'll list a few things that dealers HATE and you should be able to buy cheap:

Post office arts medals. The U.S. in its infinite wisdom made medals (not coins) and sold them through the post office. they were .900 fine. They came in half and 1 oz varieties AGW. You should be able to find these right around melt. they trade back of melt wholesale.

Modern $5 commemorative (commem) gold. 0.2418 oz AGW. Comes in mint state and proof. Proofs will most likely be in plastic caps. They made them to commemorate Olympic games and such. Most nobody cared collector wise except for a few of the rare issues. They trade back or just over melt in the wholesale market depending on availability.

There are lots of other bargains to be had if you nose around. Sometimes you can pick a deal up at a local coin show It takes some work though and might not be worth your time for a few % if you aren't into it. there is nothing wrong with flat out asking a dealer "Do you have any cheap gold close to melt?"

[MediumTex]

Re-Read.. Pound = Sovereign =  Sov Sorry for the slang

Ah, got it.

[dualstow]

Re-Read.. Pound = Sovereign =  Sov Sorry for the slang

Ah, got it.

It was that proximity of "Sov" to "Russian", wasn't it?

[Bean]

Thanks Larshus! That was a great write up.

At the end of the day, I picked up a 1 oz AGE, by just adding enough to the PP to justify it 

However, I do have stack of Sovereigns and plan to add to it as my fractional portion, in case gold does start buying city blocks again.

[WildAboutHarry]

I like sovereigns too, but just remember that since they are probably the longest-duration production of fractional gold, they have also been subject to the longest potential for forgery.  Although some of the early fakes were gold-plated platinum.

[Larshus]

There is actually a few interesting stories about the counterfeit sovs. First off during the first half of the 20th century the Bank of England did a very good job removing the counterfeits from circulation. You find very few of them now a days. The ones you do find are very crude. they look mushy, like melted chocolate. Since real ones are worth very little over melt (except for the rare dated ones), all the counterfeits you do find are light.. they mix gold with a base metal or plate a base metal. They almost always weigh incorrectly. They also "sound" wrong. Drop a real one on your desk and it makes a distinct ring. It sounds like a little bell. The counterfeit ones make a thud. Literally. They clunk.

There was also a guy that for a short period made counterfeit sovs and advertised them as "better than a the real thing". In truth, they were. They had slightly more gold than the mint made ones. The guy was a bit of a nut job, and the Bank filtered most out of circulation. These counterfeits are actually collectible now and worth more than the "real ones".

[annieB]

Larshus:

We hope you'll stick around and share your knowledge.
Gold seems to generate lots of questions.

[Larshus]

I've lurked for years. Just decided to start posting because I see some inaccurate info sometimes. I've started referring people to crawling road and the forums for the PP so I'll try to clear up as much murkiness as I'm able to.

I think the reason gold generates so many questions is because its been around for so long. So many forms, so much history. Things get confused sometimes.

[StdDeviant]

My 2 cents on fractions (from a wholesalers point of view):

Modern:
Modern fractionals are more expensive over their 1 oz counterparts. Then again 1 oz coins are much more expensive than kilo bars. Why would you buy them? Only if you want to buy a fractional ounce because you can't afford the full one ounce size. That's pretty much it. I guess the case could be made that if gold goes insane the buying power of one ounce might be "too much" but I would guess that inflation will ramp also so the buying power will pretty much stay locked.

Coinage:
Fractional coinage breaks down into a few "standards" depending on what part of the world you were in.

Main:
U.S.: Double Eagle ($20) .9675 oz
British: Pound (Sovereign) .2354 oz
Latin (France, Belgium, Italy ect) Latin Monetary Unit (LMU): 0.1867

Lesser:
Russia: 5 Rouble .1244
Austria, Bulgaria, Turkey: 1 Ducat .1106

Pretty much stick to the Sov or LMU. Russian premium is now too high and the ducats are all modern re-strikes that you'll find. U.S. Is VERY high premium wise except for the odd polished coin you'll find here or there with no collector premium.

In the wholesale world its very common to see LMU coinage trade under 1 oz premiums. There is not as much demand for it, and it sells slower. Its also interesting to note that often times when nations trade gold, its traded in LMU form. There is never a question about the authenticity of the bars, or the AGW in LMU form.

There is nothing wrong buying LMU gold or Sovs if you can find the premiums cheaper than 1 oz eagles/Maples/Rands. On that note Rands always trade at a discount to Maples/Eagles here in the US on a wholesale level, so you should expect to pay less for them.

There are significant reporting differences in the U.S. between modern bullion coins and older gold coins that circulated, buts an entirely different thread

I don't understand the love for British sovereigns and the dislike for fractional American Eagles. I'm not sure the detractors are thinking clearly about the biggest reason I can see to own some fractional gold: spending it! I'm not advocating 90% of your gold be in fractional. Hardly. But having at least a few ounces in fractional gold makes sense to me, and it isn't relevant whether they cost 5% above spot or 20%. I'm not planning on a zombie apocalypse, but having a small amount of fractional gold (and some silver) on hand makes sense to me for dealing in a post-collapse society. If it never happens in my lifetime, which is what I hope and expect, then I simply own a few slightly overpriced coins relative to their big brothers. But if I had to actually use the gold, I'm not going to be buying a case of tuna cans or a couple large packages of toilet paper (which really should be a fifth part of the permanent portfolio!) for 1 oz. of gold, at least I hope they're not that expensive. In a post-collapse economy, fractional gold would seem to be a very valuable thing to own. Which gets me to my final point. If Bubba wants to sell me a couple dozen rolls of toilet paper and some cans of food, am I more likely to be able to strike a deal with a fractional American Eagle or a British sovereign, which he's likely never seen, never heard of, and has no reason to trust, nor does he have a reason to expect to ever be able to spend?

[Libertarian666]

I don't understand the love for British sovereigns and the dislike for fractional American Eagles. I'm not sure the detractors are thinking clearly about the biggest reason I can see to own some fractional gold: spending it! I'm not advocating 90% of your gold be in fractional. Hardly. But having at least a few ounces in fractional gold makes sense to me, and it isn't relevant whether they cost 5% above spot or 20%. I'm not planning on a zombie apocalypse, but having a small amount of fractional gold (and some silver) on hand makes sense to me for dealing in a post-collapse society. If it never happens in my lifetime, which is what I hope and expect, then I simply own a few slightly overpriced coins relative to their big brothers. But if I had to actually use the gold, I'm not going to be buying a case of tuna cans or a couple large packages of toilet paper (which really should be a fifth part of the permanent portfolio!) for 1 oz. of gold, at least I hope they're not that expensive. In a post-collapse economy, fractional gold would seem to be a very valuable thing to own. Which gets me to my final point. If Bubba wants to sell me a couple dozen rolls of toilet paper and some cans of food, am I more likely to be able to strike a deal with a fractional American Eagle or a British sovereign, which he's likely never seen, never heard of, and has no reason to trust, nor does he have a reason to expect to ever be able to spend?

For that situation, I would recommend junk silver dimes. Even US fractional gold is completely unfamiliar to 95% of the population (at a minimum), but almost everyone over 50 knows what a silver dime looks like.

[Lonestar]

We have made about 10 purchases of Eagles and Krugs from Texas Precious Metals in Shiner, Texas. I have got to say, they are the best prices I've found and based on my phone conversations with them, I feel they are very trustworthy. They have delivered EXACTLY as promised.

I was recently looking for some junk silver and they were not the cheapest. APMEX beat them by a few dollars.

[ochotona]

We have made about 10 purchases of Eagles and Krugs from Texas Precious Metals in Shiner, Texas. I have got to say, they are the best prices I've found and based on my phone conversations with them, I feel they are very trustworthy. They have delivered EXACTLY as promised.

I was recently looking for some junk silver and they were not the cheapest. APMEX beat them by a few dollars.

Texas Precious Metals is totally trustworthy. I have bought from them for a couple of years, they even took back a slightly dinged Maple Leaf and gave me a fresher one, and they paid round-trip insured shipping.