How do I Calculate the Spot Gold Price Per Gram?

This is a legitimate question and one which can potentially be confusing.

One troy ounce equals 31.1034768 grams. One avoirdupois ounce equals 28.3495 grams. As one can see, there is a noticeable difference in the weights. This amount can mean the difference between a savvy gold purchase and a poorly executed one.

Gold prices are quoted on both the London Bullion Exchange and the COMEX in real-time. Pricing is quoted per troy ounce of 99.995% purity gold. A troy ounce measurement is different from the avoirdupois ounce, the ounce people use in everyday measurements.

Let’s assume that the current price per troy ounce of gold is USD $1,200.00. When calculating the price for one gram of gold, one must take the “spot rate” and divide it by 31.1034768, the troy-ounce-to-gram conversion rate. In this example, one would divide $1,200.00 by 31.1034768. The net result should be a price $38.58 per gram. This amount is the spot price of gold per gram.

If one had used the avoirdupois ounce in their calculations, one would have ended up with a gold spot price per gram of $42.33. The result would have been a purchase price of more than 10% over the real spot value.

In the examples described above, an assumption was made. It was assumed that the gold being purchased had a purity of 99.95%. If one is purchasing gold bullion, determining purity is easy. Most gold bullion is either 99.95% or 99.995% pure. However, most gold coins do not meet this requirement. Gold coins can vary in purity from 40% to 99.95%.

When calculating the value of a gold coin, one must take the calculation a step further. The per-gram spot price must then be multiplied by the purity. The net result is the actual spot or “melt” value of the coin.

Let’s continue with the example above. Originally, we arrived at a per gram price of $38.58. Let’s say the one gram coin in question has 90% purity. One must now multiply $38.58 by 90%. The net result is $34.72. This is the real spot value of the coin, not $38.58.

In summary, when figuring out the spot gold price per gram, be sure to verify that troy ounces are used in the calculation. Further, be sure to factor in the coin’s purity before accepting the price offered. Otherwise, the result could be financially disastrous for the new gold investor.

Further reading:

6 Good reasons to own gold coins or gold bars.

Storing gold – at home, in a safety deposit box, or with your dealer.