Small gold bars vs. small gold coins

There cannot be any doubt that the variety of gold bullion products is higher now than ever before in the history of mankind. Only a few decades ago, most gold bullion coins existed in only one size which was usually one troy ounce. Nowadays, some gold bullion coins like the Australian Kangaroo gold coins are available in sizes ranging from 1/2 gram all the way up to 1 kg. The same can be said for gold bars. Whereas only a few different gold bar sizes existed in the past, there are now gold bars available from the standard 400 oz ‘good delivery‘ bar all the way down to small gold bars weighing as little as 1 gram.

Most people will have at least seen a brick-shaped 400 oz gold bar in a movie before. Small gold bars are not very well known on the other hand and many people don’t even know that small gold bars exist. In fact, potential gold buyers can nowadays buy small gold bars in a variety of small sizes. Commonly available small sizes for gold bars are 1 gram, 2.5 gram, 5 gram, 10 gram and 20 gram.

Why would anyone buy gold bars of such a small size though? It is true that smaller-sized gold bullion products will cost you a relatively higher premium (what the dealer charges on top of the current market price of gold) than larger ones. That is only natural since the ‘economies of scale’ principle applies to the gold market just like to any other market. Gold dealers commonly add a premium of about 3% for a 1 oz gold bar and about 4% for a 1 oz gold coin (because gold bars are cheaper to produce than gold coins).

When buying small 1 gram gold bars however, premiums can surpass 20%. Small gold coins in sizes of for example 1 gram or 1/20 oz exist as well but it is often difficult to find a dealer that includes them in its catalog. Mintage of such small gold coins is much lower than of more popular sizes like the standard 1 oz or the popular fractional sizes of 1/2 oz or 1/4 oz. Perhaps dealers are having difficulties in obtaining sufficient quantities of such small coins from the mint or they estimate customer demand for them to be too low to merit the inclusion of such coins in their catalog.

Why choose small gold bars over small gold coins?

Whatever the reason is, the result is that most gold dealers have a much larger selection of small gold bars than small gold coins on offer. Furthermore, the higher premiums that you will pay for smaller gold bars (or small fractional coins) taper off rapidly with increasing gold bar size. A 20 gram bar for example is still small for a gold bar and has a lower gold weight than a 1 oz gold coin, yet it will be available for a premium of about 4%. That’s roughly the same premium you would pay for the much heavier 1 oz gold coin.

Some mainstream media try to undermine gold as a viable investment. Especially investing in small gold bars or coins is mocked by these “pundits”. But exactly these small gold bars and coins will come in handy if the financial system ever implodes. Nobody can predict when such a collapse might occur but the fact that our current financial system is based on ever accumulating debt is undeniable.

If or when the collapse comes, people in the affected countries increasingly will lose faith in their fiat currencies. At least to some degree and perhaps even to a large degree, barter will replace money as a means of exchange. Small gold bars or coins will be something that you can barter with then. A single person will most likely be able to exchange a 1 gram gold bar (currently about 50$) for a week’s worth of groceries then. After all, why should the supermarket refuse to accept it then instead of cash?

this 50 gram Valcambi Suisse CombiBar can easily be broken up into 50 small gold bars of 1 gram each
this 50 gram Valcambi Suisse CombiBar can easily be broken up into 50 small gold bars of 1 gram each

Cash will be under heavy inflationary pressure then (hopefully not as bad as in Zimbabwe in 2008/2009). Gold on the other hand can’t be fabricated (but money can be printed) and is a truly scarce commodity (all the world’s gold would fill just two Olympic-size swimming pools). Some mints like Valcambi Suisse even sell divisible gold bars that can easily be separated. That will allow you to use them as cash when the inevitable meltdown of our current unsustainable financial system occurs.

Of course, the financial system will reorganize itself after some time or it will be rebuilt under a completely new paradigm, just like the current fiat currency system once replaced the gold standard. Buy-Gold.Link reckons that such a restructuring of the financial system would take 3 to 6 months in a well-organized country. In a chaotic country it could take much longer of course.

So if you want to be a prepper for such an emergency, Buy-Gold.Link recommends you to buy a sufficient number of small gold bars or divisible gold bars that you can then exchange for a 3-month supply of food, water and other necessities. Silver, platinum and palladium could be used in the same way of course and small bars or divisible bars of these precious metals exist as well.

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