Amid geopolitical instability and factors such as inflation driving the markets, many investors are turning to precious metals. While gold prices slowed down at the end of 2024, they have begun climbing in recent weeks, once again breaking the $2,700 per ounce mark.
In the face of rising gold prices, many investors are now looking into “small denomination gold” (scrap gold).
Small denomination gold comes in various sizes and prices, with physical gold available in quantities as small as 0.1 grams. Compared to traditional gold coins or bars weighing an ounce or even a kilogram, scrap gold is noticeably more affordable.
According to reports from media outlets like CBS News, one significant advantage of small denomination gold is its lower investment cost. One gram of gold currently costs around $89 (approximately NT $2900 at current exchange rates), making it more accessible compared to coins or bars that cost thousands of dollars. This lower entry barrier is particularly important for investors on a budget or those with limited capital.
However, the disadvantage of opting for small denomination gold is the higher manufacturing cost. Compared to standard-sized gold bars or coins, the production cost of small denomination gold is typically higher.
For example, the premium on a 1/10 ounce gold coin can be as high as 15% or more, significantly exceeding the average premium on an ounce gold bar. This is because smaller gold products require more intricate manufacturing processes, leading to increased production costs. Over the long term, these premiums may erode investment returns for long-term investors.
Another factor to consider is liquidity. While small denomination gold is popular among retail buyers, gold recycling companies often prefer products from renowned mints over scrap gold. The selling price of scrap gold is often lower compared to products from well-known mints. Additionally, storing and safeguarding scrap gold can be more labor-intensive.
Apart from small denomination gold, small investors interested in precious metals can also consider investing in gold ETFs, which offer advantages such as low cost and strong liquidity.
Furthermore, investing in shares of gold mining companies is another option. Although stock prices are generally more volatile than physical gold, during bull markets, mining companies tend to experience profit growth rates higher than the gold price itself, potentially resulting in higher returns for investors. However, gold mining stocks also face increased risks due to market volatility and operational challenges.
(The content of this article is for general informational purposes only and does not constitute any recommendations. The publisher does not provide investment, tax, legal, financial planning, or any other personal finance advice. For specific investment matters, we recommend consulting your financial advisor. The publisher does not assume any investment responsibility.)