One of the most important factors you should always consider when buying gold is how pure it is. The purity of a gold bar or coin is directly related to how much it’s worth. To be an informed buyer, you have to understand the measures of gold purity and the language sellers use to describe it.
How Gold Purity is Expressed
There are two different measures of gold purity you’re likely to encounter:
Millesimal fineness (often just called “fineness”)
Gold is frequently measured in karats, which expresses fineness in fractions of 24. In product descriptions, you’ll often see karats shortened to just a k after the number. For example, gold in its purest form is described as 24k.
24k gold is at least 99.9% pure. Gold bars fashioned primarily for investment purposes are generally 24 karats, and some coins are as well. If your main goal in buying gold is its investment value, buying gold that’s 24 karats is a smart choice.
Gold is a relatively soft metal, which means that when fashioned into jewelry and coins, it can be more easily scratched than some other types for metal. For that reason, some of the collector coins you’ll see are mixed with metals like silver, zinc, and nickel to make them stronger.
For that reason, many coins are 22-karat gold, which is still very pure – 91.6% – but less so than 24-karat gold. 22-karat gold usually costs less than pure gold and still makes a good investment, particularly if you have less to spend when starting your gold collection.
If you do choose to buy 22k gold, it’s important to understand how much gold you’re really getting. Gold sellers will sometimes clarify in their product descriptions how much pure gold is in the coin.
For example, the Gold American Buffalo coin is 1 Troy oz. of .9999 fine gold or what is commonly called 24 karat gold. The coin is one of the few 24 karat gold coins and is a total of 1 Troy oz. Contrast the Gold American Buffalo with the Gold American Eagle which is another gold coin minted by the U.S. Mint. The Gold American Eagle contains 1 Troy oz. of 24 karat gold but the total weight of the coin is 1.091 Troy oz. The coin is 22 karat because the gold is mixed with other metals like silver to make the coin more durable. This increases the total weight of the coin while maintaining the 1 Troy oz. of 24 karat gold.
The third common type of gold you’ll see is 18 karats, which is less useful for investment purposes, but common in gold that’s used to make jewelry. It’s only 75% gold, which makes it less expensive than both 22k and 24k gold, but it’s a better choice for gold that will be regularly worn and exposed to the elements.
For gold investors, sticking with gold that’s at least 22k is recommended. Lower levels of purity should be considered primarily for more ornamental purposes.
Understanding Millesimal Fineness
Just like Fahrenheit and Celsius are two ways of measuring the same thing, millesimal fineness is another measurement scale for expressing the purity of gold. It’s arguably more intuitive than the karat scale since it measures purity in parts per 1000 and is easy to mentally translate into percentages.
For example, 22k gold, which is right at 91.6% purity, is 916 on the millesimal fineness scale.
Another benefit of the fineness scale is that it allows for more precision. Gold that’s labeled 24k could be 999 on the fineness scale, or 999.999. A lot of the common certified coins fall somewhere between those measures, all while being rightfully labeled 24k.
The Perth Mint came the closest to achieving fully pure gold at 999.999 on the scale in 1957, which was referred to as “six nines fine” gold, but gold at that level of purity isn’t available for regular commercial purposes. For investors today, the purest gold you’ll come across is four or five nines fine, so 999.9 or 999.99. Coins and bars from the Canadian and American mints frequently fall into these categories.
For most investors, whether gold is four nines or five isn’t likely to make much of a difference in the value of your investment. Focusing on karats should be good enough, but looking to the millesimal fineness scale can put the measurement into easier to understand terms for you.
Can You Trust How Gold is Labeled?
As in most industries, there are gold dealers who are unscrupulous and dishonest. If you want to avoid being scammed into buying gold coins or bullion that are less pure than the sellers claim, do your research.
Look at the company before buying to check that they’re legitimate and have been in business for a while. The BBB is a good starting point. They offer ratings based on reviews and input provided by customers (here’s our BBB rating). Avoid making any quick decisions based on a seller’s cold call. The most reputable sellers will be established enough for you to do some research first.
Many of the bars and coins sold by gold dealers originate at a specific mint, so you can research where they’re coming from as well as who you’re buying them from. To give one example, if you’re considering American Buffalo coins and want to be sure they’re as pure as the company selling them says, you can look at the US Mint website for confirmation.
What If I Already Have Gold?
If you already have gold that you’re not sure about the purity of, you can take it to a local jeweler that has the supplies to test its purity. While it’s technically possible to buy the supplies to test the gold yourself, most methods for testing gold purity either require expensive equipment or acids that can be dangerous, so finding a professional to help is the easier route.
But you can save yourself that trouble with any gold you buy moving forward by doing a little bit of basic research into the type of gold you’re buying and the company you’re buying it from.
Understanding how gold purity works is an important step in becoming an informed investor. Make sure you pay attention to what you’re actually buying each time you purchase gold so you know you’ll be satisfied with the quality of the investment you’ve made.