Quoting and Units
Read gold quotes in troy ounces and XAU/USD and convert them into euro per gram.
What you will learn
- What a troy ounce is and how it relates to grams
- How to read the quote XAU/USD
- How to convert a dollar price per ounce into euros per gram
- How to check whether a dealer price is reasonable
Explanation
Gold prices on world markets are usually quoted in US dollars per troy ounce. A troy ounce is a unit for precious metals and equals 31.1035 grams. It is heavier than the ordinary ounce used for food (about 28.35 grams), so do not mix them up.
The trading symbol XAU/USD means the price of one troy ounce of gold in US dollars. "XAU" is the international code for gold, in the same format as currency codes. Silver is XAG. Platinum is XPT and palladium XPD.
The spot price is the price for immediate delivery in the wholesale market. Prices for coins and bars from a dealer are based on the spot price plus a premium.
German dealers often quote in euros per gram or per bar. To compare, you need the EUR/USD exchange rate. A quote such as EUR/USD 1.20 means that 1 euro costs 1.20 US dollars. To turn dollars into euros, you divide by this rate.
Useful conversions
| Unit | Value |
|---|---|
| 1 troy ounce | 31.1035 grams |
| 1 kilogram | about 32.15 troy ounces |
| Euro per ounce to euro per gram | divide by 31.1035 |
| Dollar price to euro price | divide by EUR/USD rate |
Bar weights are given in grams or troy ounces. Coins are often sold as "1 oz", which means one troy ounce of fine gold. Some coins contain other metals as well, so check the fine weight (the weight of pure gold) and not only the total weight.
Worked example
Hypothetical example: XAU/USD = $2,400 per troy ounce; EUR/USD = 1.20. These are invented round numbers, not current prices. Spreads and fees are excluded.
- Euro price per ounce: $2,400 ÷ 1.20 = €2,000 per troy ounce.
- Euro price per gram: €2,000 ÷ 31.1035 ≈ €64.30 per gram.
- Value of a 250-gram bar at spot: 250 × €64.30 ≈ €16,075 (more exactly €16,075.37).
- Value of a 1-kilogram bar at spot: 1,000 × €64.30 ≈ €64,301.
If a dealer then offers the 250-gram bar for €16,400, the premium is €16,400 − €16,075 = €325, or about 2.0% above spot. You can now compare offers from different dealers on a fair basis.
Common mistake
Practice activity
Hypothetical: XAU/USD = $2,100 and EUR/USD = 1.05. (a) Calculate the euro price per troy ounce. (b) Calculate the euro price per gram. (c) A dealer sells a 1 oz coin for €2,080. What is the premium in euros and percent?
Show solution
(a) $2,100 ÷ 1.05 = €2,000 per ounce. (b) €2,000 ÷ 31.1035 ≈ €64.30 per gram. (c) Premium: €2,080 − €2,000 = €80; €80 ÷ €2,000 = 4%.
Limitations: Live prices change by the second, and dealer quotes are based on their own reference price.
Key takeaways
- Gold is quoted in US dollars per troy ounce; 1 troy ounce = 31.1035 grams.
- XAU/USD is the price of one troy ounce of gold in dollars.
- To convert dollars to euros, divide by the EUR/USD rate.
- Comparing dealer prices with the spot value shows the premium you pay.
Next step
Next, you will look at what history shows, and what it does not show, about gold and inflation.
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