How Is the Gold Price Calculated?

While the value of paper currencies can fall or change significantly over relatively short periods, the value of gold has stayed at a stable level for years and years. As a result, it’s a common tactic for investors to pad their portfolios with gold assets or other precious metals to protect their finances from inflation and currency devaluation. 

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In the past, people valued gold for its beauty and made jewelry from it as a sign of wealth. Its aesthetic appeal hasn’t changed in the modern era. Still, its utility has expanded with manufacturers buying it to use in various technologies, and investors hold gold as a hedge against economic uncertainty.
 
People value the metal so strongly that it tempts many individuals to sell their pieces or look into a gold loan, whether it’s watches, fillings, or just a coin. However, before you’ve handed over all your jewelry or antique coins, it’s essential to familiarize yourself with the current gold price and how it is determined. 
 
Familiarizing yourself with the typical pawn shops markup on buying gold helps you sell yours for the maximum profit and accurately gauge their prices. Below we’ve provided a handy guide that will help you freely determine the metals’ actual price without relying on third-party estimates. 

What Is the Gold Price?

When traders refer to the gold price, they generally mean one of two prices: the spot price or the futures price. 

Gold Spot Price

The gold spot price is the easiest to understand because it refers to the actual value of gold. The gold spot price would be the immediate payment amount of one ounce of gold after immediate physical delivery. Because the gold spot price is tied directly to the current gold value, it fluctuates wildly day by day. Additionally, gold dealers add a premium on top of gold bullion purchases to the market price to cover costs. 

Gold Futures Price

In contrast with the gold spot price, gold futures prices are contracts stating that lenders will purchase gold later, with future market values determining the price. Several varying factors decide the future price, including the spot price of gold bullion, shipping costs, and storage costs. 

As a result, gold futures price contracts work more like predictions of future economic trends and, as a result, are riskier tools to purchase gold with. However, it can reward investors who pay close attention to economic trends with a much cheaper purchase of gold assets. 
 
What Determines Gold Prices?

Several factors determine the worth of gold, some being more volatile than others, but each contributing to the frequent shifts in the price. 

Value of the Dollar

Generally, the market price of pure gold is inversely proportional to the worth of paper currency, as are most other precious metals. To the average investor, it works as a hedge against poor economic times. Having some of your portfolio diversified into bullion-like coins or bars protects it against being completely devalued if the market took a turn for the worst. 

As a result, the stronger the US dollar is, the tighter the control of gold prices. Inversely, the weaker our currency is, the higher the demand for the metal to bolster investors’ assets. 

Regularly High Gold Demand

Several highly profitable industries are regular gold buyers, which drives demand across the world. For example, the jewelry industry alone is responsible for purchasing half the bullion available in any given year for gold jewelry, driven mainly by India, China, and the US.

Another driver of high gold purchases is the central bank. Their precious metal purchases to transfer some of their wealth into physical assets heavily affect the current market price and safeguard the nation’s purchasing power.

Precious Metal Supply

Any increases or decreases in the gold supply will inevitably affect the demand and price of gold as well. Major mining operations worldwide provide several tons of gold a year, keeping the global supply stable, demand low, and price fluctuations to a minimum. However, because mines need to find gold consistently to maintain the gold rate, they need to dig deeper and deeper to find viable veins. 

Mining companies need more money to maintain deep mines, but brittle rocks and other factors risk the miner’s health. Because of these factors, running a mine often costs far more than selling the gold they find a market price would recoup; as a result, the worth increases proportionally to a mine’s operational costs, increasing demand if the mine ever goes dry.

Fortunately, alloys such as white gold bolster the metal’s worth by mixing it with other precious metals.

How To Check the Worth of Gold With the Gold Market

Determining the price of gold bullion is a relatively simple process requiring only a few tools. 
The first step is finding the karat number on each piece. Not only will this help you determine whether or not your gold is real, but it will also make it easier to calculate its worth. The karat type is usually engraved somewhere on the piece; if the number is missing, the gold is likely fake.

However, if the number is scratched out, you can test gold content with nitric acid. The better your gold stands up to the acid, the higher its purity. 14k and up gold won’t be affected; 10k and below gold will turn slightly brown. If the gold disappears completely, then it wasn’t gold at all. 

The next step is to find out the approximate weight of your gold. As mentioned above, the gold spot price is the measure of one ounce of gold, so how much yours weighs will heavily impact the buying price. For the most accurate measurements possible, you’ll need a jewelers scale, which you can purchase online for around $50.

Lastly, you use both the karat and weight of your precious metal to estimate the selling price. There’s an exact formula that allows you to do this, but you must first find out the current price. The gold rate is easy enough to look up online or with a newspaper, but it does tend to fluctuate throughout the day due to central banks’ purchases or other market conditions.

The market measures the gold spot price in troy ounces, so first, convert that number to grams. In other words, if the market value was $4500 per ounce, divide that number by 31.1 to calculate gold’s worth in grams ($4500/31.1 = $114.69).

Next, you multiply the worth per gram by the karat. For this, you must divide the karat number by 24 (14k/24 = .5833) then multiply that number by the gold market value per gram ($114.69 X .5833 = $66.90) to receive a rough estimate of how much you stand to profit per gram sold.

If the piece your measuring is jewelry, you’ll also need to subtract the weight of any diamonds or other gemstones.

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