If you’ve never bought gold and silver before, the idea of buying precious metals can probably seem pretty daunting. The terminology used, the options available, and the prices you pay can combine to make the entire process seem way beyond your abilities. But don’t worry, you’re not alone.
Many of us have been in your shoes, and we’ve found out that the learning process when it comes to precious metals isn’t steep. But it requires going about learning about gold and silver in the right order.
Even if you have an inkling that buying gold and silver can help protect your wealth, discussion of a gold IRA, a silver IRA, or various other precious metals investments can sometimes seem over your head. First-time precious metals buyers often have lots of questions, don’t necessarily know anything about precious metals markets, and want to make sure that they’re well versed in gold and silver so that they don’t get taken for a ride.
With all that in mind, Goldco is putting together a series of articles for beginners in order to help you get your feet wet when it comes to gold and silver. Imagine it as Gold and Silver 101, a kind of prequel to more advanced material such as our Gold IRA Guide.
So we’ll start off with one of the very basic elements of gold and silver: weight.
Avoirdupois vs. Troy
If you look at the gold price or silver price, you’ll notice that precious metals are always denominated in the US in terms of dollars per ounce. In the case of gold, for instance, the gold price is the price per ounce of a 400-ounce Good Delivery gold bar. But that ounce that’s being quoted isn’t the ounce with which most people are familiar.
Contemporary units of the ounce and pound that are used in everyday commerce are based on the avoirdupois system, a system that developed in the late Middle Ages. It eventually supplanted other units of measure throughout most of Europe, and hitched a ride from the UK to the United States and other overseas British colonies. But the ounces in which precious metals are weighed are from the troy system, a competing weight system that also developed during the medieval era.
Both the avoirdupois and troy systems have the grain as one of their primary units, with the avoirdupois system featuring 7,000 grains to the pound, or 437.5 grains per ounce. In contrast, the troy system features 480 grains per ounce and 12 ounces to the pound, for 5,760 grains per pound.
If you’re familiar with firearms, particularly bullet and gunpowder weights, you’ve probably heard the term grains, as bullets and gunpowder are weighed in grains. And US coinage was first denominated in grains, with the silver dollar being required to contain 371.25 grains of pure silver, weighing a total of 416 grains. The gold eagle was to weigh 270 grains and contain 247.5 grains of pure gold.
While grains may no longer be a common measurement system today, the troy system has stuck around in the precious metals industry, with metals being weighed in troy ounces rather than avoirdupois ounces. Converted to grams, the avoirdupois ounce weighs 28.35 grams, versus 31.103 grams for the troy ounce. Being 9.7% heavier, a troy ounce of gold or silver actually gives you more gold or silver than the avoirdupois ounce that you use on a daily basis.
Where things could get tricky is if you’re weighing gold and silver in grams, or purchasing gram-denominated gold and silver products, and trying to convert into ounces. That’s when you’ll have to remember that you’re converting to troy ounces, not avoirdupois ounces, so that you don’t accidentally overstate the number of ounces you actually own.
Weights of Gold and Silver Coins and Bars
Probably most gold and silver products that are produced today for investment purposes are denominated in ounces. And the one ounce coin is one of the most popular sizes available, both in gold and silver.
Silver coins are most commonly produced in one ounce sizes, but due to burgeoning demand from consumers, different sizes are starting to become available, including half-ounce, 2-ounce, and 5-ounce coins.
Silver bars often come in weights like 10 ounces, 100 ounces, or 1000 ounces. And bars can also sometimes be purchased in metric sizes such as 100 grams, ¼ kilogram, ½ kilogram, 1 kilogram, or 5 kilograms. When purchasing these you’ll want to make sure to divide the weight in grams by 31.103 to determine how many ounces of silver you’re purchasing.
Gold coins are most commonly offered in one-ounce, half-ounce, quarter-ounce, and tenth-ounce sizes. Some coins may occasionally be available in smaller weights, but those can be smaller than a fingernail and very easy to misplace.
Gold bars are often available in those same ounce weights, with some offerings of bars up to 10 ounces. Metric gold bars can normally be found in weights ranging from 1 gram up to 1 kilogram.
The Right Weight For Your Needs
When you’re looking to buy gold and silver, you need to ensure that the weight of the products you’re buying suits your needs. If you have tens of thousands of dollars to spend on silver, for instance, you may think that buying a couple of 1000-ounce silver bars might be a good idea. Or if you want to invest $100,000 in gold, how about a 1-kilo gold bar? But how easy will those be to sell when you decide to sell, or, if you have a gold IRA or silver IRA, decide to take a distribution?
Yes, precious metals markets are incredibly liquid, but you have to remember that the pool of buyers that could purchase a 1000-ounce bar will necessarily be smaller than the pool of buyers able to buy one-ounce bars or coins. And if you’re investing in a gold IRA or silver IRA, you probably don’t want to liquidate all of your gold or silver holdings all at once.
That’s why many gold and silver buyers prefer to stick to what’s tried, true, and popular. For many people that means buying silver coins or bars that weigh 1-2 ounces at most, and buying gold coins or bars between ¼ ounce and one ounce. It may mean having to buy more coins or bars, but it can make splitting up your holdings easier once you decide to sell or reorganize your investments.
The other important thing to remember is that the spot price you see quoted in financial media differs from the market price you’ll pay for retail coins and bars. Coins and bars are priced at a premium to spot, meaning that you’ll pay more per ounce than institutional investors who are trading gold and silver bars through official exchanges.
In general, smaller coins end up with larger premiums than bigger coins. These premiums will fluctuate over time due to market demand, but they can be significant, especially once you get down to coins 1/10 ounce and below.
Yes, you can gain extra flexibility with really small coins, but is it worth the extra upfront cost? That’s a decision you’ll have to make for yourself based on your expected needs, and in consultation with your financial advisor.
Hopefully this little primer on the weights of gold, silver, and precious metals has been helpful. If you have any additional questions, you can contact Goldco’s precious metals experts, who are always ready to help answer your questions about gold and silver.