Gold Purity Guide

November 30, 2018 by Buy-Gold.Link in Gold, Precious Metal Investing

One of the most important concepts that a beginning precious metal investor has to learn is how the gold purity of coins, bars and jewelry is classified. Absolute purity of 100% can only be achieved theoretically under laboratory conditions. What’s more, it is not at all the case that higher gold purity is always better. The optimal purity of a precious metal item depends on how it will be used. Whereas investors generally prefer to buy precious metal coins of the highest available purity, a lower purity is for example much better for jewelry items. The alloying with other metals makes gold and silver jewelry much more resistant to scratches as well as tarnishing/oxidation.

Whereas the term fineness is used to express the purity of silver, platinum and palladium, the gold purity of a coin, bar or jewelry item is usually expressed in karat. The karat scale indicates the number of parts that are gold for each 24 parts of the whole. Since 100% purity is impossible, a coin or bar must be at least 99.9% pure to be considered 24 karat. The vast majority of gold bullion bars these days are even 99.99% pure. The minimum LBMA purity standard for Good Delivery gold bars however is ‘only’ 99.5% but few gold bars of that purity are traded online these days.

99.99% is the gold purity of almost all gold bullion bars these days

99.99% is the gold purity of almost all gold bullion bars these days

The market share of 24 karat gold bullion coins like the Canadian Gold Maple Leafs or the American Gold Buffaloes is about 60%. However, higher purity is not always better, so 24 karat gold coins are not without their disadvantages. Since gold is such a soft metal, these coins are very easily scratched. Just the simple stacking of coins during the production process before they are packaged could be enough to scratch them. Many coin collectors were disappointed when they took their newly ordered Canadian Gold Maple Leaf coin out of its packaging and already found it scratched. The Perth Mint has been known to take better care during the production and packaging process. All of their coins like the Australian Gold Kangaroos are individually packaged in protective plastic covers which does a good job at preventing damage.

So why do 24 karat gold coins still dominate the market despite their vulnerability to being damaged? One reason for that is that investors in Asia strongly prefer the purer 24 karat gold. Asian buyers have a huge influence on the market. Singapore has a thriving retail bullion market for example and demand in other countries like China is rising steadily.

The other reason is the common misconception that a 24 karat gold coin contains more gold than a 22 karat gold coin. The listed weight of any gold bullion coin (the weight that is engraved on the coin) is for its gold content only. So even though a 22 karat 1 oz gold coin contains ‘only’ 22 parts of gold for each 24 parts of the whole (91.67% in gold purity), its gold weight is still 1 oz.

A 1 oz American Gold Eagle is therefore heavier in total weight than a 1 oz Canadian Gold Maple Leaf because it contains silver and copper in addition to its 1 oz gold content. The 22 karat 1 oz Gold Eagle weighs 1.0909 oz (33.931 gram) in total whereas the 24 karat 1 oz Gold Maple Leaf weighs exactly 1 oz (31.103 gram). Since 22 and 24 karat gold coins of the same listed weight contain the same amount of gold, it might actually be better to buy 22 karat coins. The alloying with silver and copper makes them a lot more resistant to scratches and other forms of damage. These can lower the resale value of coins so by buying the harder 22 karat coins, investors can minimize that risk.

Best Gold Purity for Gold Jewelry?

So what about gold jewelry of bullion quality? Such a thing exists indeed though it is not very common. Some shops sell 22 or 24 karat gold bullion jewelry, but don’t expect a very large choice of different designs. Intricate designs cannot be produced out of gold that is so pure. Such jewelry would not really be wearable anyway. For jewelry, 18 karat gold (18 parts gold per 24 parts of the whole = 75% gold purity) has become a kind of quality standard as it offers the best compromise between durability and high value.

Higher purity than 18 karat would make gold jewelry too soft and therefore too susceptible to scratches, dents and bending. On the other hand, lower purity than 18 karat makes the gold more susceptible to oxidation and chemical attack. Gold that is alloyed with copper can develop red spots for example. When producing gold jewelry, 14 karat gold (58.5%) and 10 karat gold (41.7%) is also commonly used. In terms of quality and price, these are suitable alternatives to 18 karat gold.

1 Response

  1. Ariana says:

    Yes love the gold american eagles, thanks for the great article!

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