The Price of Gold
- From the Vault Jewelers
- Oct 18
- 3 min read
How is gold priced? What do different types of gold sell for? How is it calculated? These are all questions our President, Lead Designer, and Appraiser, Graham Newton, answers in this month's post on gold!
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. We have a lot of people asking us, '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.
Fineness is the amount of gold in an item, and it is measured in karats. You can think about it as a fraction, where “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, with the other 25% being various alloys which are added for strength and durability. The same goes for 14 karat gold, which 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.
So, 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. So, 20 grams of 14 karat gold has 11.66 grams of 24 karat gold, and it is mixed with 8.33 grams of various other 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, and this will often be called the “melt” value, which is the theoretical amount of cash that could be had 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
When gold is purchased “over the counter” by brokers, pawnshops, and jewelers, the value of that 11.66 grams of gold is calculated, and then the buyer will calculate the margin and offer a “buy” price, which will be a discount off that melt price. The buyer has to account for swings in the price of gold, local laws that might require holding on to the gold for a period of time before selling, and fees that refiners will charge to process the 14-karat gold into 24k.
So, why is gold pricing so high? I have heard a lot of theories about this from many different “camps.”
Historically, gold has been looked at as a hedge against inflation. So a rising gold price could indicate that more people want to buy gold, as they see economic uncertainty ahead. I have also heard the theory that it is not the price of gold that is changing, but instead the value of the dollar is rising or falling (which I admit does make some sense to me, since if you have a weaker dollar, it requires more dollars to buy a troy oz of gold).
What makes the dollar stronger or weaker, or what the root cause of any inflation might be isn’t something I can really speak to… but I can say that with gold being at an all-time high, now is probably a good time to check through your jewelry box for broken chains, and jewelry that 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.
If you have been thinking about a custom engagement ring, you can trade your old gold in 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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