You’ve got to admit, the very thought of gold nuggets stirs a sense of excitement in many people. Nuggets represent gold in its rawest, most elemental form, utterly unshaped by human hands, created by geological processes that took tens of thousands or millions of years.
Better yet, sometimes you can literally find them lying on the ground!
Those facts add a sort of cachet and intrigue to raw gold that can be missing in staid bullion bars, or even the most beautifully struck gold coins. But as is so often true in the investment world, you can’t let your emotions get in the way of profit potential. Nuggets actually represent a very poor form of gold investment.
Don’t get me wrong here. Gold is gold, and it’s going to be valuable no matter what. And if you think that nuggets are cool, then buy a couple just to have and admire. But you should never expect them to be worth the investment effort, and in this article, I’ll tell you why.
They’re Not Pure
Nuggets make poor investments for the simple reason that they’re impure. With bullion from a reliable source, you can rest assured of the gold’s purity. Coin bullion usually even has the purity struck directly on the face of the coin, and it’s extraordinarily high: 92-99.9 percent, depending upon the style of bullion.
Given that the weight and purity is known, the value of the bullion is undeniable. This just isn’t true for raw nuggets. First of all, most nuggets are at least partly plain rock, and may have some dirt mixed in as well. So a good portion of their weight is useless material.
Furthermore, gold readily alloys in nature with other metals, especially silver. The metallic fraction of a nugget may consist of no more than 10% gold by weight, with the balance being “polluting” metals. Even top-quality raw Alaskan gold comes in at about 87% gold, 12% silver, and 1% other metals.
Needless to say, gold nuggets don’t come in standard sizes.
Let’s call a spade a spade here — or at least, let’s call a rock a rock. Raw nuggets, no matter how high their gold content, are irregular in shape. Storing them could require a lot of space, unlike bullion, which tends to be uniform in shape and easy to stack (for exactly this reason).
Then too, their lack of purity makes them inefficient from a storage perspective. Even if nuggets were of uniform shapes and sizes, you can store a lot more gold in the same space if it’s 92-99.9% pure rather 10-87% pure.
They’re Hard to Sell
As an investor, you’re probably going to want to sell your gold eventually. Well, most purchasers aren’t that interested in nuggets because, let’s face it, they’re more a curiosity than anything else, unless you’re a true miner or prospector. Their lack of uniformity makes them unattractive to serious buyers.
The purity issue (or lack thereof) raises its ugly head here, too. While a novice or hobby buyer might not notice or care, a professional gold purchaser isn’t going to want to deal with the lump of rock that comes with the gold; and the metallic part itself is difficult to assay effectively.
With bullion, you can assume that the purity of the gold is uniform throughout the piece, whether bar or coin. That doesn’t follow with nuggets. One end may be 90% gold, the other 5%. Mother Nature doesn’t winnow her metals as effectively as us humans, so nobody in the know seriously invests in gold nuggets.