In the US, sellers and buyers measure gold in grams and ounces. If you plan to invest in gold and don’t know what these terms mean, our experts have weighed in on the details below.
What Is A Gram?
The word gram comes from gramma, a Latin term that means “small weight.” When gold weighs less than an ounce, you can find its accurate weight in grams.
One gram is about the same as a pen cap or paper clip.
What Is A Troy Ounce?
The troy ounce measurement system originated in Troyes, France, around the 16th century. Several Western countries, including the US, currently use it as the official gold weighing system. The troy weighting system is the only ancient weighting system still used in modern times, and traders also use it to measure silver, platinum, and other precious metals.
Dealers use a troy ounce (t oz or oz t) when trading gold in significant quantities. Bullion traders and central banks trade with Good Delivery Bars, which are 400-troy-ounce gold bars.
Regular traders and investors that transact with smaller amounts of gold mostly use 100-troy-ounce gold bars because it is more manageable.
According to the U.K. Royal Mint, when converting grams to ounces, 31.1034768 grams equals one troy ounce. A troy ounce is very different from the standard ounce, however. The market uses standard ounces to weigh sugar, grains, and other items.
The Difference Between Standard Ounce And Troy Ounce
When gold traders mention ounces, they are referring to the troy ounce, not the standard measurement. The standard ounce (oz.), also called the avoirdupois ounce, is a metric in the US for measuring foods, but not precious metals.
A troy ounce of gold is equal to 31.1 grams of gold, while a standard ounce weighs less at 28.349 grams. If you think the slight difference between the two units of measurement won’t significantly affect gold calculations, you are wrong.
Using the standard ounce instead of troy ounces for huge amounts of gold can lead to calculations that are up to 10% off the mark—a massive loss when trading on the gold market.
Even when dealing with small amounts of gold, problems arise when you use the wrong unit of measurement. For example, if you use a standard ounce of gold to make a piece of jewellery, it won’t be as thick or as heavy as if you had used the troy system.
Gold Measurements Around The World
Gold traders prefer using troy ounces for consistency, but when dealing with small gold quantities, some North American traders prefer grains and pennyweights.
- A pennyweight is 1.55517384 grams or 1/20 of a troy ounce.
- A grain is the smallest unit of measurement for calculating gold at 0.0648 grams or 0.0020833 troy ounces.
Note that traders use troy ounces only in the US, the UK, and most parts of the EU. If you plan on buying or selling gold outside these regions, you will encounter other measurement systems.
For example, when trading gold in South East Asia, such as in Singapore, Pakistan, or India, tola is the preferred measurement system. One tola equals 11.6638 grams or 3/8 troy ounces of gold.
If you are trading gold in China or Hong Kong, the preferred measurement system is the tael, also called the tahil. The exact measurement of a tael can vary between countries, however. In China, a tael is equal to 50 grams, which is 1.607536 troy ounces, but in Japan, it is 37.5 grams, and Hong Kong, 37.799364167 grams.
In Thailand, the gold measurement system is baht, which equals 15.244 grams of gold.
Knowing the unit of measurement of where you are trading in precious metals is essential to avoiding confusion and losing money.
Measuring Gold Purity
So, how many grams are in an ounce of gold? We have established that an ounce of gold is 31.1 grams of gold, but this statement is only accurate when measuring a .999 fine gold bullion. Less pure gold has a lower gram count.
The term ‘karat’ represents gold’s purity or refinement by indicating the ratio of gold within the item. Any gold item rated as 24 karat counts as ‘pure’ gold. A 23-karat piece is almost pure, containing about 96.5% gold.
The other elements within the item are usually less valuable metals or alloys.
How To Safely Buy Gold?
Understanding how to measure gold is the start of the process, but there’s more to safely investing in gold:
1. Buy Only Physical Gold
You can invest in gold by buying futures, ETFs that track the commodity, and many other financial instruments. While these methods are more convenient, it is not as safe or guaranteed as buying physical gold. When you own gold bullions, you can keep or trade it without encumbrances.
You may buy gold bullions online, or from known retailers in your area. Once you have the gold, secure it in a home safe or safety deposit box at your bank.
2. Buy Pure Gold
Gold’s weight and purity determine its value, and you usually find gold bullion with purity and other information listed on it, including weight and manufacturer. The best investment is a product that is at least 99.5% pure.
If possible, seek a professional’s opinion about a piece of gold’s purity before committing to the transaction.
3. Purchase Workable Sizes
Smaller bars of gold is easier to resell. Finding a buyer for a 10-ounce gold bar can be tricky, but finding several buyers for ten 1-ounce gold bars is much simpler.
Depending on your preference, you can purchase gold as bars or coins. Both forms have significant monetary value, but a gold coin often has a higher demand on the market.
For example, American Eagle gold coins from the US Mint contain 91.67% gold but have a higher value than regular gold bars. Coins are collector pieces, which add significantly to the value it represents to traders.
Selling special gold coins is not always straightforward, though. If you want to invest and trade with gold in the most secure way, stick to plain gold bars.
4. Compare Prices
You may get the best deal by comparing prices from various bullion dealers. Some offer lower prices than their competitors, while others offer discounts on large purchases.
Competitive prices aren’t everything, but you should avoid sellers that overcharge fees for shipping, authentication certificates, payment processing, and other administrative extras. Such fees will increase the cost of your purchase and skew your returns.
5. Buy From Reputable Sellers
Check a seller’s customer reviews before placing any order. You can find independent reviews on platforms like Better Business Bureau and ConsumerAffairs.com, with feedback from other buyers. It will quickly reveal if the seller is reliable and their products are authentic.
6. Operate Within The Law
Failure to comply with the laws governing the buying and selling of gold in your jurisdiction will lead to losing your assets.
For example, if you are buying large amounts of physical gold in the US, there are laws involving tax and transparency. You can legally circumvent these laws by buying gold in smaller amounts or buying and storing your gold in safe havens, such as Switzerland or Liechtenstein.
When Is The Best Time To Buy Gold?
Like any commodity, if you buy gold at higher prices, selling it for a profit may prove difficult. Unless you are an arbitrage specialist, play it safe by only investing in gold when prices are low and selling it when the market rises.
By monitoring when market prices rise and fall, you are better equipped to determine the best moment to trade.
Here are a few signs that indicate when gold prices might shift:
- Central Bank Reserves: When a central bank converts most of its cash reserves to gold, the gold price within that location tends to rise.
- US Dollar Value Drops: When the US dollar is strong and stable, the price of gold tends to follow the trend. When the dollar drops, gold increases in value. A weak dollar drives demand for gold, which increases its price and sends safe-haven seekers in search of a means to protect their wealth by converting paper money to gold.
- Jewelry Demand: An increase in gold demand will cause gold’s value to rise, be it for jewelry or industrial use.
- Decrease in Gold Production: Reduced gold production leads to scarcity, which will increase the value of the gold that is still in circulation. Currently, gold mining is more challenging because miners have to dig deeper to access gold deposits. The higher cost of production has caused gradual increases in the gold price in recent years.
When buying gold, make sure the seller provides you with an accurate quantity and that you are familiar with the unit of measurement. The gold’s purity must be the highest possible. Otherwise, the value of your purchase will be far less than its weight.
For more information on how to purchase pure gold in small or large quantities at the best prices, contact us today.