Gold 0.21%
£3,277.03 OZ
Silver -2.37%
£48.92 OZ
Platinum -0.49%
£1,351.41 OZ
The Silver Britannia is capital gains tax free in the UK, making is a very popular choice with UK investors
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Gold has long been considered a stable and reliable asset, particularly during times of economic uncertainty. While many investors are familiar with standard one-ounce gold coins, an increasing number are turning their attention to fractional gold coins – smaller, more accessible options that can offer flexibility and affordability. But are they a smart investment?
In this article, we’ll explore what fractional gold coins are, the types available, and examine the advantages and disadvantages of investing in them.
Fractional gold coins are gold bullion coins that contain less than one troy ounce (31.1 grams) of gold. While a standard gold coin typically weighs one ounce, fractional coins are minted in smaller denominations—commonly 1/2 oz, 1/4 oz, 1/10 oz, and even 1/20 oz. These coins are legal tender in their respective countries and are produced by major government and private mints.
Interestingly, while the term “fractional” usually refers to coins smaller than one ounce, some coins such as the British Sovereign (weighing around 0.23 oz) are not always labelled as fractional due to their historical and iconic status. Nevertheless, in the broader bullion market, any coin containing less than one troy ounce of gold falls into the fractional category.
Fractional gold coins are produced by many global mints and come in diverse designs and formats. Leading mints across the globe regularly release fractional versions of their flagship coins to cater to a wider audience of collectors and investors.
Some popular international examples include:
For UK-based investors, there are several tax-efficient fractional gold options due to their legal tender status, which can exempt them from Capital Gains Tax (CGT):
Perhaps the most obvious benefit of fractional coins is their lower entry cost. For new investors or those on a budget, purchasing a full one-ounce coin can be prohibitively expensive. Fractional coins allow investors to start small and build their portfolios incrementally. This can also be ideal for individuals who wish to Dollar Cost Average their gold purchases over time, smoothing out price fluctuations by investing consistently.
In times of economic distress or currency devaluation, smaller denominations of gold may prove more practical. If paper currencies lose value or there is disruption to digital payment systems, fractional coins could potentially be used for bartering. It would be impractical to exchange a 1oz gold coin (worth well over £1,500) for day-to-day essentials. In contrast, a 1/10 oz or 1/20 oz coin offers more realistic flexibility in a barter economy scenario.
Fractional coins make it easier to diversify your collection with a variety of designs and mintages. Many investors enjoy the process of collecting series such as the Queen’s Beasts, Lunar coins, or Maple Leafs in various sizes. These coins often carry unique designs that appeal to collectors, adding a level of personal satisfaction as well as investment potential.
Another key advantage is liquidity. Smaller denominations can be sold off individually, allowing investors to raise funds without liquidating a larger and more valuable 1oz coin. This is useful for those who may need access to funds quickly, without wanting to part with a large portion of their portfolio.
As gold prices fluctuate, investors may choose to buy fractional gold coins during market dips and sell when prices rise. Because they are cheaper per unit, it can be easier to buy in at opportune moments. They are also more accessible to a broader market, meaning there is often strong demand for fractional coins on the secondary market.
Gold is widely regarded as a reliable store of value during periods of inflation and currency decline. The flexibility of fractional coins enables investors to navigate economic shocks with greater ease. Should the need arise to convert part of a gold holding into cash or goods, smaller coins provide greater adaptability compared to selling a full ounce or more.
Investing in Gold
The most popular Gold bullion coin in the British market is the Gold Sovereign. Auronum is an approved supplier and benchmarks our prices against other top-tier bullion companies each week
Perhaps the most significant downside is the higher premium over the spot price of gold. Producing smaller coins involves similar minting costs to larger coins, but spread across less gold. As a result, the per-gram cost of fractional gold is higher. Premiums on fractional coins can range from 9% to 15%, compared to 4%–6% for a full 1oz coin.
While this premium may be justified by convenience and flexibility, it’s worth noting that these costs are often not recouped when you sell. Buyers on the secondary market may not be willing to pay the same high premium, which can eat into your potential returns.
Due to their smaller size, fractional coins can be easier to lose or misplace. A 1/20 oz gold coin is roughly the size of a small button—easy to drop or misfile. Investors should take extra precautions when storing these coins, such as using dedicated coin tubes or secure storage pouches. Additionally, smaller coins can be more susceptible to wear and tear, especially if handled frequently.
While ideal for small-scale investing, fractional coins may not be the best choice for individuals looking to invest larger sums of money. The cumulative premiums on dozens of small coins can significantly outweigh the cost of buying a few larger coins. For those with substantial capital, sticking with 1oz or larger bullion coins or bars is usually more cost-effective.
Fractional gold coins are best suited for the following types of investors:
