Understanding Gold Pricing: Insights from Graham Newton

Graham's Thoughts on Gold Prices

We have seen “the price of gold” move from around $2800 a troy oz to almost $3900 a troy oz in a short amount of time. Many people are asking, "What does it mean?"

Gold is tracked in Troy Ounces. There are 20 pennyweights in a troy oz for imperial measurement, and for metric, there are 31.1 grams in a troy oz. The “price of gold” is the current market price for one (1) troy ounce of 24 karat gold.

Understanding Gold Fineness

Fineness refers to the amount of gold in an item. It is measured in karats. You can think of it as a fraction. “Pure” gold is 24/24, although we don’t say 100% gold; we’d say 99.99% gold.

• 18 karat gold is 18/24, or 75% gold. The other 25% consists of various alloys added for strength and durability.

• 14 karat gold is 14/24, or 58.33% gold, with the rest being different alloys.

  
  

Gold is tracked by how much 31.1 grams of 24k gold costs.

Calculating Gold Value

If you have a gold bracelet that weighs 20 grams and is 14 karat gold, you can figure out the purity and calculate how much gold is there.

For example, 20 grams of 14 karat gold contains 11.66 grams of 24 karat gold. The remaining 8.34 grams are various alloys. The current value of that gold content can be measured by breaking down the current market price of gold times the weight of the gold content of the piece. This is often referred to as the “melt” value, which is the theoretical amount of cash that could be obtained for that weight.

“Pure” gold is 24/24 (although we don’t say 100% gold, we’d say 99.99% gold). 18 karat gold is 18/24, or 75% gold.

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The Buying Process

When gold is purchased “over the counter” by brokers, pawnshops, and jewelers, the value of that 11.66 grams of gold is calculated. The buyer then calculates the margin and offers a “buy” price, which is typically a discount off that melt price.

Buyers must account for fluctuations in the price of gold, local laws that may require holding onto the gold for a period before selling, and fees that refiners charge to process the 14-karat gold into 24k.

Why is Gold Pricing High?

So, why is gold pricing so high? I have heard many theories from various “camps.”

Historically, gold has been viewed as a hedge against inflation. A rising gold price could indicate that more people want to buy gold due to perceived economic uncertainty.

Another theory suggests that it is not the price of gold that is changing, but rather the value of the dollar is fluctuating. This makes sense because a weaker dollar requires more dollars to purchase a troy oz of gold.

What makes the dollar stronger or weaker, or the root cause of any inflation, is complex. However, with gold at an all-time high, now is a great time to check your jewelry box for broken chains and jewelry you no longer wear!

It is not the price of gold that is changing, but instead the value of the dollar is rising or falling.

Trading Old Gold for New Jewelry

If you have been considering a custom engagement ring, you can trade your old gold towards the cost of your custom ring! Just head to the website and make an appointment with our designer, Rae, who would be happy to meet with you to discuss what we can do!

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Conclusion

Understanding how gold is priced can empower you to make informed decisions. Whether you are buying, selling, or trading, knowing the value of your gold is crucial. With the current market trends, now is an excellent time to explore your options. Don't hesitate to reach out for assistance or to learn more about how we can help you with your gold needs.