1:52 pm - Saturday May 27, 2017

Gold – Weights & Measures Pricing

The traditional unit of weight for Gold is the Troy Ounce of the Anglo Saxon system of weights and measures.

Despite the gradual conversion to the metric system, the troy ounce remains a traditional fixture of the Gold trade and the most important basis for expressing quotations on a majority of the leading Gold markets.

One Troy Ounce is equivalent to 31.1034807 Grams. However, for conversion purposes, this is normally rounded off to 31.1035 Grams.

The Tola is traditional unit of measure for Gold in the Middle East and in the Indian Sub-Continent. Ten tola bars are the usual trade size.

1 Tola = 11.6638 Grams = 0.375 Troy Ounce.

In the Far East, on the other hand, the areas where the traditional Chinese influence continues to be felt, Gold is traded in Taels. Bars of 5 and 10 Taels are the most common.

1 Tael = 37.4290 Grams = 1.20337 Ounces.

In  bullion business, the finished Gold is available in various purities like 99.5%, 99.9%, 99.99% and these various purities are adjusted in the weight.

However, in jewellery trade, fineness is expressed in terms of Carats.

24 Carats = 999.9/1000

22 Carats = 916.66674/1000

18 Carats = 750/1000

14 Carats = 583.33338/1000

1 Carat = 41.66667/1000

Gold is quoted internationally in US Dollars per Troy Ounce.

Like foreign exchange markets, Gold is quoted two way Bid-Offer worldwide.

For example US$ 1,639.70 – US$1,640.70 per fine Troy Ounce.

The prices quoted in the market are normally for Good London Delivery which is represented by term LOCO London.

Suppose the price of Gold is quoted as US$ 1,639.70 – US$1,640.70 per fine Troy Ounce, it is taken as  LOCO London price.

If the buyer were to insist for delivery, the same will be effected by the seller in London in Good Delivery.

The London Good Delivery must conform to the following specifications

Weight: Minimum Gold content 350 Troy Ounces and Maximum Gold content 430 Troy Ounces. Approximately 10.8 to 13.4 Kilograms and Fineness : Minimum 995 parts per 1000 fine Gold.

Instead of London, if the buyer were to demand for delivery elsewhere, the buyer should agree to pay additional costs, which in Gold trade is known as premium costs.

The premium costs will include – cost of manufacture, transport, insurance and funding cost.

The premium is therefore, the mark up paid to the seller for delivery of Gold bars to the buyer’s preferred location.

For finding out the cost of the bullion bar, the following formula is used

Cost of Gold bar = Weight X Purity X Rate

Of course, the rate will be LOCO London price plus the applicable premium is any as discussed above.

Looks simple?

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