1 Ounce of Gold: Its Surprising Worth
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Many Investors Monitor the Price of Gold
Many investors constantly monitor the price of gold to see if the asset has reached a new all-time high or, conversely, has fallen into a range that presents a good buying opportunity. But for less experienced investors, it can feel a bit complicated to follow the price of a troy ounce of gold, and more so since that price can vary depending on the type of gold itself.
This Guide Will Walk You Through the Basics
This guide will walk you through some of the basics — including troy ounces, spot prices and bid-ask spreads — and how you can use each to understand the current value of gold.
What is a troy ounce?
A troy ounce is different from a standard ordinary ounce. Troy ounces help gauge a precious metal’s purity standards. It’s also a little heavier than a traditional ounce. While one ounce weighs 28.35 grams, a troy ounce weighs 31.1 grams, or nearly 10% more than a traditional ounce.
Troy Ounces and the Price of Gold
Troy ounces are also the standard you’ll find when comparing the price of gold. If you look at the current price for an ounce of gold, it displays the price for a troy ounce of gold. You can also find the price per gram or kilogram of gold. If you multiply the price per gram by 31.1, you’ll end up with a price that’s nearly identical to the current price per troy ounce of gold.
Spot prices represent current market prices of commodities, including gold and other precious metals. If gold is currently available for $2,650 per troy ounce in the marketplace, then gold’s spot price is $2,650.
How the Bid-Ask Spread Affects the Price per Ounce
Although the spot price showcases how much you can pay for gold in order to immediately secure it, you actually won’t get it for that price. That’s because of something called the bid-ask spread.
Commission Fees Can Also Impact the Price You Pay
Some brokerages and gold dealers charge visible commission fees for each trade on top of the bid-ask spread. This typically takes one of two forms: either a flat fee for each transaction or a percentage of the total value.
How Capital Gains Affect Your Total Returns
One final detail investors should keep in mind is how capital gains taxes will affect their total returns. The IRS treats precious metals — such as gold and silver — as collectibles. That means a long-term capital gains tax rate of up to 28%. The amount you pay in long-term capital gains taxes depends on your taxable income.
