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One of the hidden challenges associated with trading in precious metals is dealing with the different measures associated with calculating the weight of gold. However, it is important to understand how the different methods interact with each other.
Some dealers may only offer gold or buy gold in terms of ounces or pounds. Others might trade in grams or kilograms. Some, like us, offer gold in both English and metric units.
So, this page is your guide to understanding how to deal with the different units associated with buying and selling gold. It may seem like a review of high school science, but it is critical to brush up before you get your money involved.
Before we discuss the transitions between ounces and grams, we have to discuss what an “ounce” means. It’s not as straightforward as you’d think.
Most of the time, we know what an ounce is. Americans use the standard ounce, or avoirdupois ounce, to measure most items.
The lone exceptions to this practice live within precious metals and gemstones. Both use or have used the troy ounce as their measurements, although gemstones have since moved to the carat system.
A troy ounce is a weight measure that is roughly 10% heavier than the avoirdupois ounce. So, an ounce of gold is going to weigh more than an ounce of, say, flour in the United States.
Even more confusingly, however, is the fact that a troy pound actually weighs less than a standard pound. Because a troy pound is 12 troy ounces, and an avoirdupois pound is 16 avoirdupois ounces, a troy pound weighs about 82% as much as a standard pound.
Now that we’ve covered these distinctions, let’s move on to how the metric system relates to troy ounces.
An avoirdupois ounce, which is commonly used in the United States for everyday items, is equivalent to 28.35 grams. However, this measure does not apply to precious metals, which are typically measured in troy ounces.
In this case, there are 31.1035 grams in a troy ounce. So, if you are considering a deal listed in grams, you have to divide the amount by 31.1035 to arrive at the equivalent amount of ounces.
Understandably, you might be wondering why precious metals use the troy ounce, rather than the standard ounce. The history of the troy ounce is a bit varied, but what is clear is that the name derives from the French city of Troyes.
Troyes was a hub of commerce in the Middle Ages, and its merchants began using the troy ounce as a measure equivalent to 480 grains of barley. Since precious metals were one of the more commonly-traded items, their measurement became associated with this standard.
The merchants in Troyes, in turn, likely used measurements held over from Roman times as a backstop for this system. Romans used bronze bars as their currency, and these bars could be split into 12 pieces known as “uncia,” which became the word “ounce.”
Although the Roman system’s mass in grams was closer to the standard system, the uncia format (uncia means “one-twelfth”) stuck as the divisions for troy ounces. Even though our modern system eventually moved to 16 ounces per pound, the troy system retains the 12 ounce-per-pound system.
Now, from a practical standpoint, these two standards don’t often meet within the same products. Gold coins – even those minted outside of the United States – are almost always minted with 1-ounce weights. So, if you are a coin investor, you are almost certain to use ounces.
Gold rounds and gold bars, on the other hand, are less reliable in the measurements they use. Many rounds and some bars are expressed in terms of ounces, just like coins. Others, particularly with respect to bars, are more commonly offered in terms of grams or kilograms.
Here are some examples of different gold products and their measurements:
Now, as important as it is to understand that you’ll encounter different systems of measurements with precious metals, it is perhaps even more important to understand that the gold prices may not be completely consistent or equivalent across the different systems. So, let’s discuss what you might see with grams vs. ounces, and how to consider them and choose properly.
Gold is a critical portion of any investment portfolio. Its status as a store of value has served as a means for safeguarding wealth for thousands of years. In more recent times, the fact that fiat currencies are now floating untethered from the gold standard makes gold a bulwark against inflation and economic downturns.
In terms of how weight affects pricing of precious metals, it is largely a question of bulk pricing. In other words, you can get a better “unit” price if you buy in larger lots, much like you can get better deals at Costco (which, ironically, Costco is a retail seller of gold bars itself).
So, the continuum of pricing that you’ll find with gold is, from lowest price to highest, something like this:
Gram → ounce → kilogram
If you have a limited amount of budget available but you would like to buy gold nonetheless, grams are probably the way to go. A gram bar of gold is available for not much more than $100.
However, were you to buy 31 of those gram bars – almost equivalent to an ounce – you’d end up paying several hundred dollars more than you would if you bought a 1-ounce bar. Where a 1-oz bar can be had for just over $2800, 31 individual grams is going to cost more than $3600.
On a per-unit basis, buying in kilograms is even more cost-effective. Although a kilogram of gold is not cheap – a one kilo gold bar sells for no less than $90,000 – the per-unit cost is far lower than an equivalent number of grams or ounces.
Now, we mentioned three different measurements that are commonly used for gold. However, there are two others to mention. One of them is fractional gold, which is nothing more than a piece of gold measured as a fraction of a gram or ounce.
As you might have guessed, these are the cheapest options available for sale on an absolute dollar amount basis. However, if you can afford to buy in bigger lots, it is much more cost-effective to do so.
The other type of measurement to mention is the pound. Quite honestly, it is less likely that you will encounter options to buy gold in pounds – ounces or kilos are far more common. Nevertheless, understand that a troy pound of gold is roughly 37% of a kilo, and a standard pound is about 45% of a kilo, so adjust your price estimates accordingly. Also, double-check how the seller defines a pound. If you see references to 16 ounces, the pound in question is a standard/avoirdupois pound, rather than a troy one (which has 12 troy ounces).
Related articles of interest:
One last thing to recognize is that the metal content of the gold piece you buy may not be the only determinant of its price. Bars and rounds are reflections of the spot price and the dealer’s premium, but coins are often priced higher for the same amount of metal content for a couple of reasons.
For one thing, coins are the products of sovereign mints. That is, they come with the certification and authenticity of actual countries to possess an established amount of gold, silver, or whatever precious metal.
For instance, an American Gold Eagle is a bullion coin produced by the US Mint, and each one contains exactly 91.67% gold, 3% silver, and 5.33% copper. So long as you buy these coins from an authorized purchaser of the US Mint, they are guaranteed to contain this proportion of metals.
Beyond that, sovereign coins bear a certain degree of cachet to them. Instead of simply owning gold bars or gold rounds, you own a piece of the coin’s country of origin. In some cases, the coins themselves are pieces of history and have importance (and value) due to their stories.
So, if you want to buy gold, understand that the weight matters, but so does the format of the gold you’re buying. Buy in bulk, if possible, but there is also value to be found in the search for rare coins or pieces with historical context.
These same measurements and conversions apply to other precious metals. Silver, platinum, palladium, and copper are all available in ounces, grams, and kilos.
However, some of these metals may favor certain measurements or offer measurement alternatives that gold (and silver) do not. For instance, it is readily possible to buy a standard pound of copper, whereas most bulk gold and silver is in kilograms.
As with any of these measurements, make sure you do your homework and run any conversions you need to understand exactly what you’re buying. Be especially careful if you’re trading one metal for another – imprecise conversions can lead to overpaying or accepting significantly less than you’re supposed to receive.
A troy ounce of gold is equivalent to 31.1 grams of the stuff. If, for some reason, you’re dealing in standard ounces, then the equivalent would be around 28.5 grams, or about 10% less than the troy ounce.
Knowing the difference and knowing the conversions to both is critical to make sure you’re getting a good deal, either buying or selling. However, it is also important to recognize that there are inherent discounts on a per-unit basis if you buy larger quantities of gold.
Much like a bar may get $100 of shots out of a $50 bottle of whiskey, smaller portions of gold are going to be more expensive individually. So, decide what your goals and budget are before you set out to buy, or you may find yourself getting squeezed between the imperial and metric systems.
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