Finance Tips

How is the Price of gold per gram determined?


Gold can be considered as an investment that can weather the worst storms. This is important now that we have seen how banks and other forms of investments can fail. Gold has its own detractors but it also has a lot more people who believe and advocate for gold. However, there is a lot that is unknown about gold. One of the questions that people often ask is who sets the price of gold. There are a lot of people who don’t know what happens behind the scenes that would be helpful to know if you have gold to sell and you are trying to figure out how much you should be getting for it.

So, who decides the price of gold?

For over a century, the price of gold was decided not by the physical gold market but by the paper gold market. These days the international gold price is set by the London Over the Counter Market (OTC) run by the London Bullion Market Association (LBMA) directive and the US Commodity Exchange. There is an electronic auction system that runs 24/7. supply and demand don’t get factored in at this point. Once these two markets set the price, it is adopted by the physical gold market. But that is not where it ends. Further adjustments are made and the final evaluation is made when the buy-and-sell auction get conducted. The price is then concluded based on the disparities of 20,000 troy ounces on the buy-and-sell pricing. The price is then published in the default currency, the US dollar.

Outside the markets, the price of gold is affected by other factors:

The supply and demand for gold

Just like most commodities, the supply and demand of the precious metal are important in the pricing. If the demand is higher than the supply then the price of gold goes up and when demand is lower than supply, the price goes down. However, gold will never lose its value because it is a rare metal with declining production.

Risky geopolitical conditions

Economic markets are usually affected by economic conditions, political strife, regional conflicts, and social reforms. Brexit and escalation US-China political tensions are some of the more recent examples.

Inflation and Currency Devaluation

Inflation can wreak havoc on a country’s economy and the currency and cause it to lose its purchase power. When this happens, the price of gold will go up. This is why gold is regarded as a sound investment to make because its value grows when other investments are devalued by a weakening currency.

How do you calculate the value of your own gold?

You need to know what its weight and karat is. The price of gold is given in US dollars per troy ounce of 99.99% pure gold or 24 Karats. Some sites publish gold price per gram instead of per troy ounce which makes things easier. However, you can work out what the price of your gold actually is by following a few simple steps.

To get the weight of the gold, you can use a simple kitchen scale and weigh it. A troy ounce is equal to 31.1034 grams.

When calculating your gold for a gram of gold you take the current spot rate of gold and divide it by 31.1034. let’s assume the price of gold is $1,760/troy oz divided by 31.1034 the result is $56.58 per gram. This would be the spot price of a gram of gold.

If one is selling gold bullion, it’s easy to determine the purity. Gold bullion is the purest form of gold so. The price of your gold will be close to the spot price if you have a 1gram piece of gold bullion. However, if you are calculating for a gold piece that is more than one gram, for example, 10g, and is of a lesser purity, say 18k then you need to take your calculations a step further.

  • take the spot rate and divide it by the actual weight of the gold. In our example, this would be 56.68/10 = 5.668
  • 18k gold contains 75% pure gold or 0.75. so to calculate the value or melt price of the gold in the example, multiply the spot price of gold by 0.750 = $42.51.

When figuring out the price of the gold you are selling, make sure the spot price used to make the calculations is made in grams if not, it should be in troy ounces. Using the wrong units of measurement can financially end up costing you money. When in doubt, always try to find an online gold calculator that you can use to work out the price at the current gold price per gram.

Mike McNicholas
Mike McNicholas creates innovative experience solutions for its readers.

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