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What’s in the Price of Gold?

Friday, September 24, 2021



Gold comes in many shapes and sizes, and its high value relative to the small amounts you can buy on the open markets reflect a generations-old notion that gold is a preserver of wealth. There are many ways to measure gold prices in the UK and beyond, and it can get confusing sometimes, so the Gold Bullion Company is here to break some of the commonly-used terms down for you.

For example, how does a troy ounce of gold differ from a regular ounce? What is gold price fixing and how does it help you get a fair value for your gold? And just how does switching from one currency to another fundamentally alter the price movements of one single bullion bar or gold coin?

Troy vs. Imperial ounces

If you are UK-based, there’s a chance you grew up measuring things in what are termed imperial or regular ounces. You can’t help but notice that gold is often referred to as being measured in price by troy ounce. While this sounds similar, the term troy ounce (or T/Oz as it is often displayed) is a very different way of measuring weight. Believed to refer back to the French merchant town of Troyes, which has been a popular place for people to exchange gold since the early 9th Century, the name stuck when it came to gold buying.

Since at least the 1400s, British merchants started referring to units of measurements related to gold known as troy ounces, but these are not the same as imperial ounces. For starters, a troy ounce (31.1035 grams) is over 2.75 grams heavier than a standard or Imperial ounce. Imperial ounces are simply not used to measure the weight of gold, and troy ounces have persisted as something of a benchmark for weighing gold over the centuries.

As of September 2021, a troy ounce of gold has a market value of approximately £1,300, and often comes in the form of a solid gold bullion bar which could fit into the palm of your hand. Such size and considerable value hammers home just how great gold’s intrinsic value truly is. There’s an old saying about gold, suggesting that an ounce is all you need to buy a good suit. In the 1960s, you could buy some of the cheaper-yet-high-end suits for almost £17 in nominal terms, at a time when UK gold prices sat at roughly £12.50 by comparison. Just a bit off, but not too far off.

By 2021, a bespoke high-end suit from the likes of Savile Row could set you back over £1,000 pounds, and this old saying about gold appears to still ring true, as gold prices are already in excess of £1,300 at present. What this suggests is that gold is able to maintain wealth over time, despite the decades worth of inflation in the ensuing 50-60 years. At the Gold Bullion Company, we have a number of gold bars weighing a single troy ounce ready to purchase, sourced from a range of providers such as PAMP Suisse, The Royal Mint, Umicore, Valcambi and Metalor.

Our bars are VAT-free, and ideal for gold buyers both old and new. As troy ounces are the commonly-cited price benchmark for gold on the markets, you’ll understand why such bars experience such high demand and a decent share of the gold market. It’s a real case of catching them while you can, while stocks last.

Fixing the right price

When you hear the word fixing when it comes to prices, there’s a chance you have negative connotations in mind. Prices being distorted for the gain of a select few at the expense of the many perhaps. The Gold Price Fixing might sound like that, but actually it’s the way the gold price is typically set as a form of benchmark. London Gold Fixing involves twice-daily phone conferences between over a dozen financial institutions from all over the world, helping fix gold prices in US dollars to settle contracts between traders in the London bullion market.

Once the price is fixed at 10.30am and 3pm, it can be converted into currencies including the British pound, Canadian dollar, Japanese yen, Chinese renminbi and the Euro, to name a few. The London Gold Fix ensures that there’s a benchmark from which buyers and sellers alike can find a price to agree on in the first place. The Gold Bullion Company has a Live Gold Price Chart which is updated every five seconds, sourced from data provided from actual transactions around the world. This means you can have virtually the latest prices of gold and see how they change during a trading day, as people buy and sell as they please.

When flicking through gold priced in pounds, US dollars and Euros, you might notice how prices in each respective currency follow a broadly similar price pattern, but with unique movements in places. How could a single troy ounce of gold fluctuate so wildly in value depending on where you happen to live in the world? As we noted, the London Gold Fix prices gold in US dollars, and from there, prices have to be converted into other currencies depending on their exchange rate with the US dollar. If your currency had parity to the US dollar, gold prices between both places would be more or less identical.

In the UK, there were two dollars for every pound in 2007 but this has since fallen to 1.38 US dollars per pound in 2021. As a result, due to sheer devaluation alone, imagining the US gold price had held steady at current levels during the last 14 years, the UK gold price would have risen by 40 per cent purely due to currency exchange movements. Add in the appreciation in value due to the Great Recession and the COVID-19 pandemic, and gold prices have enjoyed great gains in value, but not in an equal sense.

The fall in the value of sterling due to the financial crisis, Brexit and the COVID-19 pandemic make buying gold priced in British pounds that bit more valuable. The Gold Bullion Company is in a position to help you preserve your wealth by buying gold, so see what a troy ounce of this precious metal could do for you today.

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