Gold Price per Ounce History & Overview
As one of the oldest forms of currency, Gold holds significant monetary value and may be the most popular precious metal on earth. Today, gold price per ounce is determined by over-the-counter trading that occurs daily on spot markets around the world – a clear alternative to historically popular gold standard systems.
The London Gold Market Fixing Ltd. provides the most commonly used reference point for gold price per ounce, a measure known as the ‘gold fix’. The ‘gold fix’ is basically a standardized rate that is used to appropriately value gold products and derivatives for international markets. This rate is calculated twice daily by the five members of the London Bullion Market Association: Scotia-Mocatta, Barclays Capital, Deutsche Bank, HSBC, and Societe Generale.
Gold Price per Ounce Terminology – Introducing the Troy Ounce & Pennyweight
Gold price per ounce is conventionally quoted by the Troy Ounce, an imperial unit of measurement equal to about 1.097 avoirdupois ounces (the common English System weight unit). This system was originally adopted by gold market participants in order to easily account for differences in purity when calculating gold price per ounce; however, this pricing system is now thought to be merely a source of confusion.
A Troy Ounce (oz t) can further be divided into 20 Pennyweights or approximately 31.1 metric grams. A Pennyweight is equal to 1.55 metric grams and denoted ‘dwt.’ Commonly practiced among pawn shops and local gold brokers, the pennyweight to troy ounce conversion factor provides a method of pricing gold for products of all weight.
The degree of purity for a given piece of gold is another important factor in gold price per ounce. The price of gold per ounce quoted by the spot market refers to pure gold, also known as 24 karat gold. The value of gold less than 24k is calculated by multiplying the quoted gold price per ounce by a factor that represents the percentage of pure gold in a particular piece. The appropriate factor is calculated by dividing the amount of carats in an alloy by 24. This method of price adjustment is illustrated in the following example.
Gold Price per Troy Ounce in Action – An Example of How to Price Gold
Suppose you want to determine the value of a 14k gold necklace with a weight of 5 metric grams. Given a current spot price of $1,636.73 per Troy Ounce, the appropriate price for this necklace is calculated as follows…
1. Determine the adjusted gold price per ounce for a 14k piece
a) 14k / 24k = 0.583
b) $1,636.73 * 0.583 = $954.76 per Troy Ounce of 14k gold
2. Determine the gold price per Pennyweight (dwt) of 14k gold
a) $954.76 / 20 dwt = $47.74/dwt
3. Determine the weight (in dwt) of the 5g necklace
a) 1 dwt = 1.55g
b) 5g / 1.55g/dwt = 3.226 dwt
4. Determine the appropriate price of the 14k necklace
a) 3.226 dwt * $47.74/dwt = $153.99
This 14k, 5g gold necklace would be appropriately priced at $153.99, given the spot price of $1,636.73.
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