Posted on February 15, 2021
The value of a bar of gold depends on objective factors like the gold's weight and purity as well as the current market for gold. Understanding the factors that contribute to gold's worth can guide your investment decisions. In the content below, you will learn about the various aspects that determine the value of a bar of gold as well as how a gold bar's weight is calculated.
When it comes to buying and investing in gold, gold bars rank among the top choices for investors. Gold is a rare precious metal, but it is also a volatile commodity, and the value of gold changes daily.
A gold bar, also called a gold ingot, is a non-monetized bar of refined metallic gold. Typically, a gold bar is stamped with information such as:
Various factors determine the value of a gold bar. These factors include:
Gold has historically commanded significant value. Different reasons play into gold's endurance as a valuable metal, including its:
When people moved away from a barter system and began using coins and currency, gold was the logical choice over other elements on the periodic table . Gold has a number of qualities that make it a good choice for currency:
In addition to its inherent beauty, these attributes of gold as an element made it work well in terms of monetary use.
Various players come together to set the price of gold today. These include:
Based on supply and demand in gold futures derivative markets, figures are determined and averages established for the fixed price and spot price of gold. COMEX, or CME (United States), and the London bullion market trade group (United Kingdom), operate the major derivative markets.
Commodities like gold, crude oil, corn, silver, etc. have futures contracts on various exchanges worldwide. Futures contracts offer price speculators, end users and commodity producers a method to:
The futures price is based on price discovery contracts for the future delivery of a particular commodity, such as gold.
The spot, or intrinsic, price of gold is the amount one troy ounce of gold costs, which the market determines. The forward month's futures contract that has the most volume determines gold's spot price.
You can calculate a gold bar's spot value using the current price of gold on a given day. The gold spot price is a live price. In other words, when a market is open, the price of gold constantly changes.
Gold's spot price comes from commodity exchanges based in:
In addition to spot value, sometimes gold bars are assessed an extra premium based on their refiner. A bar of gold manufactured or refined from a well-known company can sell for more than a bar from a lesser-known refinery.
Size also plays a role in the cost of a given gold bar. The smaller a bar is, the higher its premium relative to intrinsic value.
Accuracy is essential when measuring gold, as slight changes to a gold bar's overall fineness and heft can translate to hundreds of dollars or more in the recognized value of a given bar. Some refineries have gained a reputation for being especially accurate and therefore have earned the trust of collectors and investors. Examples of popular refineries include:
Gold bars can come in a range of physical sizes and weights, with weight ranging from as small as a single gram to as big as a kilogram. Gold bullion weight is measured in troy ounces; one troy ounce weighs 31.10 grams. This differs from a 'regular' or avoirdupois ounce, which is 28.35 grams. A troy ounce is equivalent to 1.09714 standard ounces.
If you are wondering about the weight of a bar of gold, you are likely picturing the standard 'Good Delivery' bar. This is the bar you have seen in movies or on television. A Good Delivery bar comes in at 400 ounces, or 27.4 pounds. One Good Delivery bar commands a value of around $500,000. The gold bars are not typically sold to the general public; instead, bullion dealers and central banks hold and trade these bars internationally.
Gold bars actually come in a wide range of sizes and weights beyond that heavy bar you are imagining. This means that you can find a denomination of gold for an investment that works within your budget.
London Good Delivery gold bars are investment-grade gold bullion bars that weigh close to 400 troy ounces (12.4 kilograms). These bars are the preferred format for large institutional investors and central banks.
Characteristics of London Good Delivery gold bars include:
Though various government mints and refineries can manufacture gold bars, the London bullion market trade group sets Good Delivery bar standards. They proactively monitor refiners to ensure quality. All Good Delivery bars must be assayed, and the bars are guaranteed to be at least 99.5% fine gold.
A bar of gold delivers value based on a number of factors.
1. NPR. 'A Chemist Explains Why Gold Beat Out Lithium, Osmium, Einsteinium...' https://www.npr.org/sections/money/2011/02/15/131430755/a-chemist-explains-why-gold-beat-out-lithium-osmium-einsteinium. Accessed August 28, 2020.