Understanding Purity and Weight
One distinct difference between precious metals and fiat currency is that precious metals are, well, a thing. The exact composition of precious metals matters when it comes to their value, and their physical weight is both a logistical and security challenge to manage.
Paper money doesn’t have the same problems. Dollars are made of a blend of 75% cotton and 25% linen, but nobody cares if the Crane Paper Company produces some batches at 76%/24% or 74%/26%. It’s still legitimate money.
As burgeoning savvy precious metals investors, we simply don’t have the luxury of ignoring those kinds of inconsistencies. So, here is a short guide about the basics surrounding purity and weight when you begin to trade in gold and silver.
Purity and Precious Metals
Let’s deal with purity first. It’s not enough simply to own a block of material with some gold or silver in it. You need to understand exactly the amount of your preferred metal that your sample contains, because the value of your collection is a direct reflection of how much pure gold or pure silver you actually have.
What does “purity” mean for precious metals?
Gold and silver (and platinum and palladium) are precious metals, but they are also elements. In other words, they cannot be broken down into anything else – they are in their most rudimentary form.
So, the percentage of purity given for a precious metal piece is literally the percentage of the base level material found in the coin. A coin that lists itself as .999 pure means that all but .001 of that coin is the metal in question – chemically or otherwise.
What does “fine” mean?
Of course, keen investors will notice that the word “pure” does not often appear on precious metal objects. Instead, the decimals will usually have the word “fine” printed after them.
Fineness is the actual measurement of the object’s metal purity. Technically, it is a proportion of the mass of the metal compared against the mass of the entire object.
For our purposes, it is a percentage measure of the subject’s purity. However, one thing to note is that it is mostly impossible to find precious metal at 100% purity or fineness.
The truth of the matter is that it is quite difficult to rid a sample of all of its impurities. Even with our modern refining methods, there are still infinitesimal traces of other metals or elements inside the purest of instruments. For that matter, gold’s malleability makes the production of an entirely pure coin, round, or bar a bit unwise, as it would inevitably deform through handling.
As it stands, gold and silver are available with an incredible level of purity. Canadian Gold Maple Leafs are 99.99% fine gold, and the Silver Maple Leafs bear an astounding .9999 fineness. American coins don’t get quite so pure, but there are several domestic options for gold investments that are 24-karat in composition – or no less than 99.95% pure gold.
What is a karat?
A karat is a unit of measure that reflects the overall purity associated with gold. It is a statement of how many parts out of 24 that a sample of gold contains.
In other words, it’s a fraction where 24 is always the denominator. Therefore, 24-karat gold is considered to be – for all intents and purposes – the purest gold available in most cases.
By extension, you can use the listed number of karats to understand the proportion of pure gold in a given piece of gold. 14-karat gold, for instance, is 58.3% pure gold, since 14/24 = 0.583. 18-karat gold would be 75% pure, and so on. So long as you can divide by 24, you can always know how pure the gold is.
Karat vs. carat
One bit of confusion to sort, however, is the use of the homophone carat, as opposed to karat. Although both terms move in the same circles, so to speak, a carat is a strict unit of weight equal to 200 milligrams.
It is most often reserved for expressing the weight of gemstones, rather than any comment about purity. In fact, the word “carat” derives from the Arabic for the carob plant, whose seeds are often remarkably close to 200 milligrams in weight.
Do we use karats for silver?
No. The karat is something of an antiquated term, but has held on as the standard for gold purity. However, the fineness of silver is calculated under the millesimal system of fineness.
This system simply expresses the alloy’s purity in parts per thousand of the same amount of pure metal. Millesimal is more precise than the karat system because it can answer the purity question with greater specificity.
In theory, you could express silver using karats and gold using the millesimal system. We usually just don’t do that.
Is there a way to self-test purity?
Yes, but it isn’t ideal. There are several methods, ranging from scientific to anecdotal, that you can check how pure your metals are.
However, the best thing to do is visit a jeweler or coin dealer that you trust – in person – and have them analyze your metal with their instruments. In this case, it’s better to rely on the people who do this stuff for a living.
How Precious Metals are Weighed and Measured
Measuring purity of your metals is extremely important. However, on a fundamental level, it is also important to understand how they are weighed and measured. So, let’s discuss what you may hear and what it means when you’re talking about weight.
Are precious metals weighed with the metric system?
It’s a bit of a mixture. Precious metals bought and sold in the United States often use the imperial system, as the US remains one of the only countries that has not adopted the metric system widely. However, there are some exceptions in precious metals – notably, Chinese Pandas have held firm to the metric system for their weights worldwide.
The presence of both is due to the collision of scientific precision and tradition that occurs when precious metals are involved. On the one hand, it is a simple statement of mass if you want to buy a gram of gold, a kilo(gram) of silver, or some other metric amount of metal. And, to be fair, it is also possible to buy gold or silver bars in both grams or kilos.
However, the entire system of American currency borrows heavily from the troy weight system, which has its roots firmly planted in England. The Coinage Act of 1792, the first major currency law passed by the new United States, established the value of a dollar as equivalent to 371.25 grains of fine gold or 416 grains of fine silver.
What is a troy ounce?
The troy ounce is one of the primary standards of measure for gold and silver. In terms of a conversion to metric units, the troy ounce is equivalent to just over 31 grams.
The problem, of course, is that the troy ounce is not an equal measure to the standard ounce. A troy ounce is, in fact, equal to 1.097 standard ounces, or heavier than its more common counterpart.
To solve any confusion, the best thing to do is simply to understand that when you are dealing with precious metals, you are dealing in troy ounces, not standard ounces.
