Gold. What a beautiful precious metal. Own a piece at home? Most likely, the answer is yes. It may be fashioned into jewelry or exist to the unseen eye inside of your computer or electronic device. It has so many uses, a purpose for a variety of trades.
How about a gold bar? What comes to mind? An enormous, flawless piece of gold molded like a popsicle? Or just a small sd-card size that could fit in your pocket? Believe it or not, it’s not an investment made solely for the wealthy.
Continue with us here as we explore the power of gold and reveal its definition of worth.
About a Gold Bar - What Is It?
How does one define a gold bar? You’ve heard people say “standard,” but what does that mean? It’s a great question to which we have an answer.
According to the United States Mint, a standard gold bar, or “good delivery” bar, is defined as measuring 7 inches X 3 ⅝ inches X 1 ¾ inches. It weighs in at 400 troy ounces, equivalent to 27.5 lbs. These are the bars you typically see in the movies. Imagine housing that in your home? Where would you store it?
The good news is that not all gold is molded as a standard gold bar. Some take the form of a coin. Others are in smaller, more affordable, and more space-saving sizes ranging from the size of a paper clip to that of an iPhone. Much more reasonable to house, right?
What Are “Good Delivery” Bars?
If a gold bar is labeled as a “good delivery” bar, it means it has met all of the standards and requirements set forth by the London Bullion Market Association (LBMA). There is a list, known as the Good Delivery List, published by the LBMA announcing the accredited refiners. What does this mean?
Refiners on this list:
Have a reputable history in the gold market
Are financially strong
Produce gold bars in conjunction with the standards set by the LBMA
Meet the minimum levels of production set by the LBMA
In order to be considered a “good delivery” bar, the gold must be between 350 and 430 troy ounces and carry a minimum purity of 99.5% gold. Curious to know the going rate for the standard bar? How does approximately $750,000 sound?
How Is a Gold Bar Made?
Ever heard of gold refining? If not, it is a process of extraction and the removal of impurities. Without gold refining, we wouldn’t have the jewelry, coins, bars, etc., that we have today.
When gold is first mined, it is in the form of a rock or ore. Refining processes include:
Smelting and Cupellation - Heating gold with silica, soda ash, and borax. This causes the impurities to rise to the surface and be drawn out of the ore. Since gold has a high density, it sinks versus floats, making it easy to collect.
Chemical treatment - treating gold with chemicals such as sulphuric, hydrochloric, and nitric acids to remove impurities.
Electrolyte process - This process is time-consuming. It uses an electric current to separate the impurities from the gold. It’s used by end consumers who require the purest form of gold.
Once all the impurities are removed from the golden ore, it is heated and melted down. Then, it’s poured into a mold resulting in 99% pure gold in the form of a bar or a coin.
How Do You Weigh a Gold Bar?
The unit of measurement used to weigh a gold bar is known as troy ounces. You’ll often see it reported omitting the term “troy,” so it’s important to note that troy ounces and ounces are different.
One troy ounce equals 31.035 grams, whereas one ounce equals 28.35 grams. There is a slight difference and a bit of history behind why gold has its measurement.
What Is the History Behind a Troy Ounce?
In the Middle Ages, there was a French town known as Troyes. This town is where it is said that the troy ounce originated, as merchants from across the globe would travel to buy and sell goods.
In the 1400s, King Henry II of England adopted the troy ounce into Britain’s coinage system, which would later be accepted as the standard unit of measurement for precious metals. The United States followed suit in 1828.
How Is the Value of a Gold Bar Determined?
Several factors go into determining the value of a gold bar. It’s not difficult to calculate; you just need to know what to look for.
Color Helps Determine the Value of a Gold Bar
Historically, gold is considered a remnant of the sun carrying a beautiful shade of yellow. Today mixing it with other alloys is popular, changing its shade.
Gold mixed with palladium or silver creates white gold. Mixing it with copper changes it to rose gold. And with cobalt oxide, you’ll get black gold.
Overall, the color of gold doesn’t determine its worth. The more orange-yellow it is may mean it is pure. It’s the purity and fineness that dictate its worth.
Gold’s Value Is Also Determined By Its Fineness and Purity
Gold is measured in carats, or karats. The purest form of gold resides in 24 carats.
Fineness measures the ratio between gold-to-metal additives and is another way to express purity, aside from carats. 24k gold would translate to a millesimal fineness of 999.
Since gold is a soft metal, the higher the karat, the softer it is. A higher fineness and purity also make gold more resistant to tarnishing. It also makes it more valuable.
Size and Weight Help to Determine Gold’s Value
The smallest gold bar weighs in at a gram, but it still holds value. Then, there’s a 2.5-gram bar that’s about the size of a penny. How about a 5-gram bar that’s about the size of a grape? The list goes on up to the largest gold bar, which weighs in at 250,000 grams, equivalent to that of a lion!
Does size and weight matter to the worth of gold? Of course. The more you have, the more it’ll cost to invest in, but the more you’ll get as a return on your investment.
Finding the size and weight of a gold bar is simple. Take a look at the bar itself. A numbered stamp or a mark should be displayed, indicating the number of carats, fineness, or weight of the gold. This mark is known as a hallmark.
Spot Price Assists In Determining Gold’s Value
As a physical asset, gold comes with a spot price. This is the price it is eligible to be bought or sold for in the market at a given date in time.
There is no exact mathematical formula to use to calculate a spot price. It is partially based on the economy and also on the price of futures contracts.
What does the supply look like? How about the demand? The London Bullion Market Association (LBMA) sets the benchmark for the trading spot price.
The spot price is continuously on the move and is an international price. Since it’s international, the market remains open nearly all hours of the day throughout the week.
Gold Bars - A Hedge Asset Against Inflation
What is a hedge asset? It is an asset that mitigates the risk of loss, serving as a layer of protection to your financial health.
Inflation results in rising prices. This includes energy costs, food prices, gas, etc. It’s unavoidable, but some investments can keep you above water. This is where hedge assets are in the spotlight.
Take gold as an example. Gold has earned the reputation of being a hedge against inflation. Why? Because when inflation rolls in, gold isn’t affected.
Inflation rises when the government prints money, decreasing the dollar's value. The dollar does not back gold.
It’s backed by Mother Earth herself. 2020 and the Covid-19 pandemic is a strong example of this. Stimulus checks helped thousands of Americans get by as the stay-at-home-order was in play, meaning dollars were hot off the press.
Meanwhile, the value of precious metals (gold and silver) was appreciated as strong demand for gold futures arose.
Gold Holds Its Value, Regardless of Its Size
Gold is a passive investment that adds diversity to your investment portfolio. Gold maintains its value even during harsh economic times where other financial markets may suffer as a popular precious metal.
Its worth depends on its purity and fineness, and the spot price denotes its final purchase or sale value.
Diversify your investment portfolio today by having your own weight of gold delivered to your doorstep. Monthly subscription-based plans are now available, making gold more affordable than ever. Round up your pocket change and use it to bring home high-quality gold for less than what you may spend for a cup of coffee!
Visit AcreGold to learn more about the options available to you and begin mapping out your future goals today!