Physical precious metals can be accessed in three primary formats: fractional bars, coins and full bars.
All three provide exposure to the same underlying asset — investment-grade bullion — but differ materially in cost, flexibility, liquidity and tax treatment.
At a high level:
- Coins prioritise collectability, recognisability and CGT advantages (UK)
- Bars prioritise lower premiums at scale
- Fractional bars prioritise accessibility, pricing efficiency and liquidity
The Three Formats
Fractional Bars
Fractional bars represent direct ownership of a portion of a larger investment-grade bullion bar held in a professional vault.
- Ownership is recorded in troy ounces
- Backed by LBMA-approved bars
- Typically traded digitally with near-spot pricing
- No physical handling, delivery or resale friction
This format is designed for efficient, scalable investing rather than physical possession.
Coins
Coins are minted bullion products, often produced by sovereign mints such as The Royal Mint.
- Examples include Britannias and Sovereigns
- Legal tender status in the UK → CGT exempt
- Can be held physically or stored
- Carry higher premiums due to minting, distribution and demand
Coins are often chosen for collectability, gifting or tax reasons rather than cost efficiency.
Bars
Bars are refined bullion products, available in a wide range of sizes.
- Smaller bars (1g–100g) → high premiums
- Larger bars (e.g. 1kg) → much lower premiums
- Fully deliverable and physically ownable
- Typically require secure storage and insurance
Bars are the most traditional format, but practicality depends heavily on size.
Core Comparison
| Feature | Fractional Bars | Coins | Bars |
|---|---|---|---|
| Instrument | Fractional ownership of bullion bars | Bullion coins | Bullion bars |
| Ownership | Direct (allocated fractions) | Direct (whole coin) | Direct (whole bar) |
| Asset Backing | 100% physical | 100% physical | 100% physical |
| Minimum Investment | Very low (e.g. £5 / 0.001 oz t) | Full coin price | High (hundreds–thousands) |
| Buy Pricing | Near spot | High premiums (≈5–12%+) | Low on large bars, high on small |
| Sell Pricing | Tight spreads | Dealer discounts (≈3–8%) | Dealer discounts (≈2–6%) |
| Liquidity | Instant (platform-based) | Slow (physical resale) | Slow (physical resale) |
| Divisibility | Fully flexible | Fixed (whole coin) | Fixed (whole bar) |
| Storage | Vaulted (included) | Home or paid vault | Home or paid vault |
| Insurance | Included | Usually separate | Usually separate |
| Counterfeit Risk | None (institutional custody) | Low–moderate | Moderate–higher |
| VAT (UK – Silver/PGMs) | No VAT (vaulted) | 20% on delivery | 20% on delivery |
| CGT (UK) | Applies | Exempt (UK coins) | Applies |
Key Differences That Matter
1. Pricing Efficiency
- Fractional bars provide institutional-style pricing close to spot
- Coins and small bars embed retail premiums and dealer margins
This creates a meaningful performance drag when buying and selling physical formats.
2. Liquidity & Ease of Selling
- Fractional: instant, platform-based execution
- Coins/Bars: require finding a dealer, shipping or in-person sale
Liquidity is often underestimated — it directly impacts exit price and speed.
3. Investment Size & Flexibility
- Fractional allows precise sizing (e.g. £10, £100, £1,000)
- Coins and bars require fixed ticket sizes
This affects:
- Regular investing
- Rebalancing
- Partial selling
4. Storage & Practicality
- Fractional: handled entirely within institutional vaulting
- Coins/Bars: require storage decisions (home vs vault)
Physical ownership introduces:
- Security considerations
- Insurance costs
- Logistical friction
5. Tax Treatment (UK)
- Coins (e.g. Britannias): CGT-free
- Bars & Fractional: CGT applies
- Silver/PGMs:
- Fractional (vaulted): no VAT
- Coins/Bars (delivered): 20% VAT
This creates a trade-off between tax efficiency and pricing efficiency.
When Each Makes Sense
Fractional Bars
Best for:
- Regular investing (DCA)
- Cost-efficient exposure
- Active management and liquidity
- Multi-metal portfolios
Coins
Best for:
- UK investors seeking CGT exemption
- Collectors or long-term holders
- Physical possession preference
Bars
Best for:
- Large lump-sum buyers
- Those wanting physical ownership at scale
- Long-term storage outside the financial system
