April 9th, 2020
Having precious metals in your portfolio is important, but we cannot all afford making our gold purchases in one ounce increments. Lets take a look at buying fractional gold as an investment to determine if it's worth it. Currently the Royal Canadian Mint offers gold coins in 1 oz., 1/2 oz., 1/4 oz., 1/10 oz., 1/20 oz. and even 1 gram coins. The most important thing about fractional gold is the premium you pay over the spot price of the coin. Typically the lower the weight in troy ounces the higher the premium.
Formula to calculate premiums:
An example using a half ounce gold coin priced at $924.67 with a spot price of $1697.40:
I have visited a popular online shop to compare how much of a premium each coin comes with. I should note that out of the coins listed below, the 1/4 ounce, 1/10 ounce and 1 gram weights were sold out.
NOTE: The site used for the making of this article was goldstocklive.com. I am not affiliated with them. I chose to use them for this example because at the writing of this article most major online gold retailers are out of stock.
What I found surprising is that a 1/10 ounce coin had a lower premium than a 1/4 ounce coin, which usually is not the case. Furthermore, a 1/20 ounce Canadian Gold Maple Leaf comes with an absolutely insane premium of over 50%. From an investment standpoint, it is always better to save your money and purchase ounces in whole.
You are paying double the premium or more for coins that are a quarter ounce or less. Remember if you walk into a local coin shop and try to sell your gold coins, you will likely get offered 1% over spot. You can obviously get a better price if you make the effort to sell privately through Kijiji or Craigslist, but time and effort must be factored in.