# Gold Price Crash Course

## Introduction: Units of Measurement Used In Gold Pricing

The first step in understanding gold pricing is understanding the units of measurement that are used in weighing and valuing gold. Gold prices are determined by the world’s gold markets, which generally post the current market prices for one Troy Ounce of 24 Karat gold, meaning metal that is 99.9% pure gold. A full ounce of pure gold is not something you usually see behind an ordinary jewelry counter though, so jewelry is typically weighed in smaller units of measurement like Pennyweight (1/20 of a Troy Ounce), which is abbreviated “DWT,” or Grams (1/31 of a Troy Ounce).

## Converting Between Pennyweight (DWT), Grams, and Troy Ounces

If a jeweler tells you the weight of a piece of jewelry in Pennyweight (DWT), and you know that there are 20 Pennyweight (DWT) in a Troy Ounce, you can simply divide the Pennyweight of the item by 20 to find its weight in Troy Ounces, the same unit of measurement used in the markets. Likewise, if you know the exact weight of a piece of jewelry in grams then you can divide the weight in grams by 31 to find its weight in Troy Ounces. If you have the weight in Troy Ounces and need to convert to DWT (Pennyweight), for instance to use the Current Price Chart that is updated daily on the Park Avenue Gold Exchange website in Pennyweight, then you simply need to multiply the weight in Troy Ounces by 20 to get the items DWT weight.

Follow so far? Kind of like being back in science class? Don’t worry, there’s no test at the end here. So, now with what we’ve covered you can find the market value of the item by multiplying the weight by the gold price, right? Unfortunately, it’s not quite that simple, but we’re getting there!

Karat Value (K) % of Gold
24K 99.9% Gold
22K 91.6% Gold
21K 87.5% Gold
20K 83.3% Gold
18K 75% Gold
14K 58.5% Gold
10K 41.7% Gold
Table: Percentage of Gold by Karat

## Most Gold Items Are Not 100% Gold, And That Affects Their Value

Next, you need to account for the fact that most gold items are not pure 24K gold. When jewelry is made, gold is blended together with other metals into an alloy that is no longer pure gold, and therefore less valuable than pure gold, but which has other benefits like being more durable. The Karat (K) value of an item tells us how much actual gold is in an item and how much of the item’s composition is made up of metals other than gold. 1 Karat represents 1/24 of 100% purity, or to visualize it another way picture a pot of melted gold on your stove like you’re making a recipe (I hope it goes without saying that it takes a lot more heat than your stove can muster to melt gold – so don’t try this literally at home – it’s a metaphor.) The Karat value of a piece of gold can be thought of like the recipe of how to make it. This recipe always has 24 parts. If, for instance, we wanted to make 4 Karat (4K) gold, we’d add 4 equal helpings of pure gold and 20 equal helpings that are a mix of other metals. If we wanted to make 18 Karat Gold we’d add 18 equal helpings of gold and 6 helpings made of other metals. Make sense?

## The Karat Value Table And Determining Karat Value Of An Item

The table on the left shows us some common Karat values and the % of actual gold in each. If you’re not sure what the Karat value of an item is, it is usually “stamped” in small lettering on the piece by the jeweler who made the item. Be cautious though, because it is not uncommon for jewelry items to be stamped incorrectly, meaning that the Karat value that shows up on the item may not be the actual Karat value of the metal. Any jeweler can test a gold item for you and verify its Karat value. However, the most accurate way of testing a gold item is a Spectrometer like the one Park Avenue Gold Exchange uses. You can watch this video for a demonstration!

## Stones, Clasps, Pins, Etc., Add Weight But Are Often Not Gold

You also need to account for any part of the item that is not gold but that adds to the item’s measured weight, for instance gemstones, non-gold clasps, etc. When a jeweler calculates the value of an item, they make small weight deductions for these non-gold elements.

## Setting Our Price Expectations

From the information we now have, we can calculate the approximate market value of the gold contained within a piece of gold jewelry, but before we do it will be important to understand why it is almost never possible to sell a piece of jewelry for the actual market value of the gold contained within it, and to set our price expectations accordingly. In order to understand this we must understand the difference between investment grade gold and gold jewelry. An investment grade block of gold, known as an ingot, is worth whatever the going rate in the gold markets is, minus a commission or service fee to a broker or dealer, usually. However, a piece of gold jewelry is different. Yes, it is gold, but it’s not in a form that most investors want to pay market price for. When you go to buy a gift of gold for a loved one, do you look for it new or used? Probably new, right? And, if you do look for it used, why? You probably expect to obtain it at a discount because it’s used, right? There are exceptions, of course. Some gold jewelry accumulates value greater than the mere content of the gold it’s made of due to its history or craftsmanship, but the truth is that most doesn’t. Most second-hand gold chains, for example, are just second hand gold chains that will have to be melted down to regain the value of their weight in gold.