For millennia, gold has captivated the human imagination. Its purity and enduring value have positioned its place not just as a piece of adornment, but also as an option for investment portfolios. Furthermore, its elegance and historical value help highlight its worth and suitability for different investment goals. Understanding the significance of gold purity and fineness is crucial for navigating this glittering landscape.
The Karat: Understanding its intrinsic value
Gold’s purity is measured in karats, with 24 karats (24K) representing pure gold that is unadulterated by any other metal. As the karat count decreases, so does its value. For instance, 22K settles at 91.6 per cent, while 18K gold indicates 75 per cent gold. This difference translates into a significant price variation. Higher karat gold fetches higher value, reflecting its rarity and pristine beauty.
Conversely, lower-karat gold, fortified with metals such as copper or silver, gains a touch of toughness. It’s more resistant to scratches, making it ideal for everyday jewellery or even industrial applications. However, this enhanced durability comes at a cost – a lower price tag and a less lustrous appearance, compared to its purest peers. This can potentially impact its resale value.
Investing with clarity: Tailoring purity to portfolio goals
For investors seeking long-term value, higher-karat gold is the best option. But, did you know, 24 karat gold is not the purest form of gold. Depending on the end product – ranging from minted gold coin or bar to jewellery – 24 karat gold will undergo some refinement. Thus, along with the highest karat, purity of the gold but also be factored before investing.
In the market, some minted gold coins and bar at 24K can be at 99.99 per cent+ (999.9) purity level, which is the purest form of gold. Other gold products in the same karat range can also have 99.9 per cent or 99.5 per cent purity and so on with 18K gold retaining 75 per cent gold and the remaining part being balance metals such as silver or some alloy.
For gold jewellery, the highest is at 22K, with variations as gold needs balance metals such as silver and copper to retain structure and strength. Consumers must also be mindful of losing 10-25 per cent of the value due to the making charges.
It must be noted, some sellers offer 99.99 per cent+ purest gold products at 24 karat made with the finest Swiss craftsmanship, enhancing the investment value. Thus, for minted products such as bars and coins, it is advisable to choose the highest purity with a positive weight balance.
Purity with positive weight tolerance
Some elaboration is necessary regarding positive weight balance. For minted gold (and even silver) coins and bars, positive weight tolerance indicates that the product weighs more than the stated weight imprinted on the product and its packaging. When considered with the highest karat and purity factor of a gold product with positive weight tolerance, it provides maximum value for an investor as more gold is received compared to the amount invested in the purchase.
Given these key facts, gold products must only be bought from accredited entities to make sure one receives full value for money.
Investor confidence via quality assurance
Alongside its purity, gold’s tangibility provides investors with a sense of security.
Gold products purchased from an accredited company always come with a unique number along with an Assayer certified certicard. Additionally, some sellers promote their London Bullion Market Association (LBMA) accreditation, which is the globally recognised hallmark of purity standards. LBMA’s “Good Delivery” norms cover requisites such as purity levels, weight, physical characteristics.
In periods of reduced economic opportunities, gold’s purity acts as a beacon, assuring investors of its inherent value and reinforcing their trust in this precious metal as a stable investment avenue. Therefore, keeping these salient points in mind can assist consumers and investors to make an informed choice.
The fineness point: Making sense of purity count
While the karat system offers a broad understanding of the percentage of gold in a product, within each category lies a further analysis of purity. Fineness, measured in parts per thousand, delves deeper, revealing the exact percentage of pure gold present. For instance, “999.9+” signifies 99.99%+ pure gold, “999” signifies 99.9 per cent pure gold, and “916” represents 91.6 per cent purity. Furthermore, investors can bolster their investment by purchasing 999.9+ purity gold with a balance metal of pure silver.
This level of detail matters. Higher fineness translates to greater value per unit weight, maximising one’s return on investment. The fineness level ensures the longevity and potential resale value of the gold. Additionally, higher fineness simplifies verification, minimizing the risk of buying counterfeit or adulterated gold.
Informed choices for a golden return
Educating investors about understanding and valuing gold purity is vital. Buying from trustworthy dealers, asking for a certificate of authenticity and periodic testing are all important steps in protecting the value and integrity of gold investments. Knowing about purity levels and the impact of impurities, while ensuring gold products are in secure packaging that assures there’s no damage to the product, helps empower investors to make informed decisions.
The importance of LBMA (London Bullion Market Association) accreditation in minted gold products is crucial as it provides global certification for gold and silver. LBMA-accredited gold products promote global traceability. As a result, gold ETFs (exchange-traded funds) and central banks only purchase LBMA-accredited gold. LBMA also owns and manages the Good Delivery Lists for gold and silver, with stringent standards covering purity, physical appearance and fine-ounce weight. Good Delivery ascertains all bars have the same specifications.
Finally, one must also pay attention to responsible sourcing of gold. With responsible sourcing, buyers are assured that the supply chain spanning mining, production, distribution and sale of any precious metal is free from unscrupulous means or elements.
Remember, gold’s brilliance lies not just in its physical form, but also in its adaptability to diverse investment strategies. By appreciating the nuances of purity and fineness, investors can unlock the full potential of this precious metal, ensuring its radiant glow illuminates their financial journey.
(The author is Managing Director & CEO at MMTC-PAMP)
