The term “troy ounce” is one to become familiar with as you research precious metal investing. The traditional system of weights and measures, such as pounds and standard ounces is foregone in favor of weighing gold and other metals in troy ounces.

The Concept of a Troy Ounce

The primary unit of the troy weight system is the troy ounce. This system is the international standard for weighing precious metals. Visit – Troy Ounce – Meaning, Conversion (Grams, Pounds, Kgs) – for the definition and details on the troy ounce.

The troy pound is 12 ounces instead of the traditional 16-ounce pound. Troy weight has been in use dating back to the Middle Ages at the proliferation of gold investing when international trade demanded a standard system of measurement.

The troy ounce equates to 31.1034768 grams, roughly ten percent heavier than a traditional ounce. The abbreviated term most commonly used for troy ounce is oz t or t oz.

The reason “troy” is used to delineate this measurement system is because it refers to an international trading hub from the Middle Ages, Troyes, which was a small town in France. Traders around the globe eventually adopted the weight system which was developed by merchants from this small town.

The British Empire adopted it in the 1500s and the US followed suit in the early 1800s. Today, this is the established system for weighing and valuing precious metals; it is exclusive to the precious metal market.

Before buying metals, such as bullion bars and coins, it’s essential to gain an understanding of the weight system to more confidently navigate the market. Common bullion bar sizes include:

1/10 oz
1 oz
10 oz
1 kilo or 32.15 oz

Many bullion coins are manufactured with a precise weight of 1 t oz, although there are ½ t oz and ¼ t oz variations.

Determining The Value of Gold Assets

Gold spot prices are valued based on one troy ounce of 99 percent pure gold This means gold’s live spot price represents the amount a single troy ounce would cost along with the dealer’s premiums. If you sell gold, you will expect to receive an amount slightly below spot due to fees.

To gauge gold’s bullion value, simply multiply the current spot price by the coin or bar’s weight in troy ounces. A rare coin will require a more in-dept research and assessment to determine the value based on demand, scarcity, and additional variables that impact the overall value.

The Fundamentals of Spot Price

The average daily volume for gold transactions is estimated and roughly $200 + billion.

These trades are priced based on the current gold spot price, which is a value that is constantly assessed by traders and holders of gold online, including gold investors who buy instruments, including coins and ETFs. Go here for definition and examples of spot pricing.

Despite its integral role, many investors lack a clear understanding of what spot price is and how it’s used in determining gold’s price. In fact, small businesses investing or trading gold believe the spot price to be the amount of the last physical trade or the physical bullion’s current price.

This is not accurate. The spot price has two primary components; it’s set each day based on gold future trade prices. Gold futures are contracts for gold’s physical delivery some specified point in the future.

As trading moves worldwide, the spot price is adjusted to equate to the gold futures trading price on COMEX from the London exchange.

Most trades are future contract trade made electronically without the need for immediate physical delivery. These play a significant role in determining the current and quoted spot price.

Speaking technically, essentially the spot price is an average net current value of gold’s estimated future price based on traded futures contracts and the closest month, referred to as the front month.

If you decide to invest in gold bullion or coins for your portfolio, you will buy these against the calculated spot price estimated from the electronic/paper market and independent of the current physical supply.

In that same vein, when selling these bullion or coins, the gold price will be calculated, again, based on the current gold spot price.

Final Thought

A troy ounce is the unit of measure that helps determine gold’s value when multiplied by the current spot price. Many investors become confused with the calculations, particularly when there are fluctuations in troy ounce pricing , but also with the terms.

A quality and qualified metals exchange like Money Metals Exchange offers educational literature and representative with extensive knowledge and experience to address questions and concerns before you start your investment journey.

With this guidance, you can move forward making informed decisions and with an understanding of precisely how much value you’ll get from each investment.