Large Denominations or Small - Which is Better When Buying Gold?

When buying physical gold, investors face a fundamental decision: should they buy large units such as 100-gram bars or ounce coins - or rather smaller units such as tenths of an ounce, 5-gram bars or classic bullion coins? Both have their place. Just as the Federal Reserve issues seven denominations of U.S. currency notes ($1, $2, $5, $10, $20, $50, and $100), gold also comes in various denominations to suit different needs. But which denomination should you choose to best suit your investment strategy?

Large denominations: More gold bullion coins for your money

Large gold bars and bullion coins in standard sizes offer better value for money. This is because the larger the unit, the lower the percentage mark-up on the pure gold value. For example, if you buy an ounce of gold, you often pay significantly less per gram than if you buy a tenth of an ounce. This makes large denominations particularly attractive to cost-conscious investors.

Historically, high-denomination currency in the United States has seen shifts in usage due to the introduction of electronic money systems and regulatory concerns. The Federal Reserve's decision not to change the current denominations in circulation reflects a broader trend towards the diminishing relevance of large bills in modern financial transactions.

Another advantage of large denominations is their familiarity: standard products such as the Krugerrand (1 ounce), Maple Leaf or 100-gram bars are recognised worldwide and easily accepted by banks, bullion dealers and private individuals. These large denominations are often stored securely outside traditional banking systems, providing added liquidity and security for investors. This makes them easier to resell if required and ensures a high level of liquidity. These denominations are actively used in circulation, making them a reliable choice for investors.

However, large denominations also have certain disadvantages - particularly in terms of flexibility. For example, if you need to access part of your reserves at short notice in a crisis, you cannot simply split an ounce of gold. The whole unit would have to be sold, potentially releasing more liquidity than is currently needed. However, the security features of these large denominations ensure that they remain a safe investment.

Small denominations: Flexible and versatile legal tender

This is where smaller denominations come into play. Bars of one gram or smaller gold coins offer much more flexibility. Similar to how smaller bills are easier to use for everyday transactions, smaller gold units provide practical benefits. They can be sold one at a time as needed - whether for an unexpected expense or to build wealth gradually. This flexibility is particularly appealing to customers who prefer to manage their investments incrementally. Small units are also useful for gradually passing on wealth to relatives or for crisis prevention.

The intricate designs of small gold units, much like the design features in U.S. currency, enhance their security and functionality, making them not only practical but also secure investments.

However, this flexibility comes at a price: small denominations are significantly more expensive than larger ones, relative to the gold content they contain. In addition to the material value, there are higher minting costs, packaging costs and margins. If you buy only small bars or coins, you pay significantly more on average per gram. However, the variety of small denominations available allows investors to tailor their purchases to their specific needs.

Not every small unit makes sense

Be careful with small bars too: Not all products are equally tradable. While classic coins such as the Vreneli, 20 mark or 10 franc are known and accepted worldwide, exotic small bars from unknown manufacturers can cause problems when resold. The U.S. Bureau of Engraving and Printing plays a crucial role in maintaining the authenticity of currency, ensuring that high-quality standards are met. Quality and provenance are key. The intricate engraving on these bars and coins helps in recognizing their authenticity.

The ideal solution often lies in the middle: a combination of standard products - such as 1-ounce coins or 100-gram bars - and smaller units offers both a good purchase price and maximum flexibility. These products are often printed with unique features that enhance their value and recognizability. This allows investors to invest larger sums efficiently and still sell in smaller increments when required.

Favour proven classics

When it comes to small denominations, it is best to stick to the tried and tested classics. Historical currency coins such as the French 20-Franc Napoleon or the German 20-Mark piece are not only widely available, they are often reasonably priced. These coins were issued during significant historical periods, adding to their value. Despite their age, these coins still hold the status of legal tender. At the same time, they have a certain collector’s value without losing their character as a pure investment. The design of these historical coins often includes unique features that add to their appeal.

Think of gold investment as a tool

If you are thinking long-term, you should treat your gold investment as a tool: Large denominations are the foundation - stable, valuable and efficient. The U.S. government plays a crucial role in regulating these denominations, ensuring their stability. Smaller denominations complement this foundation to provide flexibility in an emergency. Both elements have their place in a well-considered investment strategy. Investors can learn more about the benefits of each denomination by exploring historical and current trends.

Another argument for broad diversification is that when it comes to selling, the ability to offer different denominations is an advantage. This gives you the flexibility to decide which units to sell first, depending on the market situation - whether through a bullion dealer, at a fair or privately. Whether you are dealing with gold or the United States dollar, having a range of denominations can be advantageous.

Combining standard and flexibility

Choosing between large and small gold fittings does not have to be an either/or proposition. It is important to note that both options have their unique advantages. The smartest solution is usually a combination. This gives you the best of both worlds - a low entry price for large units and the flexibility of smaller units. Similar to how different notes of currency serve various purposes, different gold denominations can cater to diverse investment needs. By considering both, you will be well positioned for many scenarios. The printing of these denominations ensures their authenticity and value. Investors can request specific denominations based on their investment strategy.