Clarifying Gold and Silver purity
A recent subscriber asked me some questions about my last blog post. After he asked his question, I realized how many times we tend to take for granted what "We Know", and automatically assume others understand the same way. This simply isn't true. As such, I thought that it would be important for me to explain how gold and silver's purity and value are rated.
For those of you who already know all this, bear with me. Not everyone knows as much about everything as everyone else. It's places like my blog and certain websites where people can go to learn; and not be embarrassed by asking questions in front of others. Or worse yet, displaying their lack of knowledge to a coin or precious metals retailer who will use that to take advantage of them. In the beginning, we were ALL ignorant about something; until we learned.
In my last post, I don't believe too many people had a difficult time understanding the amount of gold in jewelry when I spoke of Karats. 24 Karats means the jewelry is 100% pure gold. (I'll say 100% even though nothing is 100% pure). And 22 Karat means the jewelry is 91.67% pure gold. 14 Karat is 50% pure gold. That's easy enough to understand.
Where some people get a little confused is when the see or hear that an American Gold Eagle or South African Krugerrand is .9167 fine gold vs a Canadian Maple Leaf or Austrian Phiharmonic which is .999 fine gold. Some believe that the Maple Leaf or Phiharmonic is "BETTER" because it has MORE GOLD in it. This is where people misunderstand. ALL 4 of these coins; American Eagle, Krugerrand, Maple Leaf, and Philharmonic EACH have the same amount of pure gold in them. The difference and easiest way to understand, is to know that a Maple Leaf or Philharmonic with .999 fine gold (99.9%) weighs 1 Troy Ounce. The COIN weighs 1 Troy Ounce and there is 1 Troy Ounce of Fine Gold in it. The American Eagle and Krugerrand ALSO have 1 Troy Ounce of fine gold in it, BUT.... the coin doesn't weigh 1 Troy Ounce. It weighs 1.09 troy ounces. 1 ounce is gold, and the other .09 ounces consists of 3 percent silver, and 5.33 percent copper. If you take the 91.67% gold, add 3% silver, and 5.33% copper, you get 100%. But 100% isn't the SAME as 1 Troy ounce. That's why an American Eagle or Krugerrand weigh 1.09 troy ounces.
Think of it this way. If you are baking cookies and use 1 CUP of sugar; it doesn't matter if you make 12 cookies, or 24 cookies, or 36 cookies. You still just use 1 CUP of sugar. The PERCENTAGE of sugar in the cookies will change, but you still used 1 CUP of sugar. The same with gold coins. An American Eagle has 1 TROY OUNCE of gold in it. In theory, you could make a coin that weighed 2 Troy Ounces and it still had 1 Troy Ounce of gold in it. The Percentage of the gold would be 50%. Basically, the coin would be .500. Also the same as 14 Karat Jewelry. You could take a 14 Karat necklace that weighed 4 ounces, (That's heavy), and melt it down for the gold, and you'd get 2 ounces of gold out of it. Because the 4 ounce necklace is 14 Karat, which means it's 50% gold.
Well, if you melt down an American Gold Eagle, you'd get 1 Troy Ounce of gold. You'd also get 0.032 ounces of silver. And you'd get 0.058 ounces of copper. Just like the cookie recipe. You have 1 CUP of sugar. You can have a lot of other ingredients, but you still have 1 CUP of sugar. The Maple Leaf and the Phiharmonic don't have any other ingredients. Just the 1 ounce of gold.
So do the American Gold Eagle and Krugerrand have silver and copper in it in addition to the gold? Simple. It makes the coin more durable. Makes it a little harder. It's not as soft. A Maple Leaf will scratch and scuff much easier than an Eagle or Krugerrand. And because both countries actually used gold coins to spend and purchase with, they made coins that were a bit more durable.
I think most of you now understand the percentage and the ounce are two different things. It's ok if one coin is .9167 gold and another is .9999. They BOTH have the SAME AMOUNT of gold in them. The difference is that the TOTAL WEIGHT might be different because of extra metals like silver and or copper to make it more durable.
The same with American Silver Coins, also referred to as "Junk Silver". All the quarters, dimes, half dollars, and dollar coins made prior to 1965 were made of 90% Silver. That doesn't mean that a silver dollar is 0.90 Troy Ounces of silver. All of the pre-1965 American dimes, quarters, halves, and dollars are 90%. A dime is 90% silver, as is a quarter and the others are 90% silver. Technically, the amount of silver in a a dollar's worth of pre-1965 coins, is .773 ounces. It doesn't matter the combination. There is the same amount of silver in a single silver morgan or peace dollar, as there is in 2 Half dollars; or in 4 quarters; or in 10 dimes; or in 2 quarters with 1 half dollar, etc... Now; because American Silver Coins were the common currency used, they wore down a lot. They were in people's pockets, cash registers, etc. Because of this, most people and coin shops won't pay for .773 ounces of silver. Everyone accepts the fact that some of the silver has worn out. So the accepted amount of silver in a dollar's worth of silver American coins is .715 troy ounces per dollar.
So remember, 90% silver doesn't mean that there's .90 ounces of silver in the silver dollar. A silver dollar doesn't weigh one ounce. If it did, then yes, there would be .90 ounces in a silver dollar. But because it weighs less, it has .773 (.715) ounces of silver per dollar.
The one exception to this is the American Silver Eagle. Even though it is LEGAL TENDER, it's obvious that no one would every exchange a Silver Eagle for the 1 Dollar that is minted on it. The silver eagle is .999 (100%) silver. It is 1 Troy Ounce of silver. Same with the Canadian Silver Maple Leaf and Austrian Silver Phiharmonic. But the Silver Eagle wasn't minted until 1986. And no one ever used it as actual Money. The silver was worth more than the denomination. But as far as the "REAL" money that was minted and used; e.g. silver dollars, halves, quarters, and dimes, they are all 90% silver which isn't the same thing as .90 ounces of silver. Any combination of $1.00 either in dimes, quarters, halves, or dollars, will have .773 (.715) troy ounces of silver in it. That's why if you have $10 worth of silver American Coins that are 90%, you have to take the price of silver and take 71.5% of it, and multiply it by how many dollars you have. This is how you determine the "Melt Value". Example: Silver spot price is $20 an ounce. Multiply $20 * 0.715 = $14.30. That is how much each DOLLAR'S worth of Silver American Coins is worth. If you have a $10 roll of American Pre-1965 quarters, if the spot price of silver is $20, then the roll would be worth $143.00.
Hope this clarifies the confusion some had about gold purity and 90% american silver coins. Feel free to ask more questions if you have them. I simply want you to become more aware of silver and gold. This way, when you decide to purchase some, you won't feel intimidated or embarrassed when you walk into that coin shop or pawn shop trying to purchase. Take care.
CYA: SE:
For those of you who already know all this, bear with me. Not everyone knows as much about everything as everyone else. It's places like my blog and certain websites where people can go to learn; and not be embarrassed by asking questions in front of others. Or worse yet, displaying their lack of knowledge to a coin or precious metals retailer who will use that to take advantage of them. In the beginning, we were ALL ignorant about something; until we learned.
In my last post, I don't believe too many people had a difficult time understanding the amount of gold in jewelry when I spoke of Karats. 24 Karats means the jewelry is 100% pure gold. (I'll say 100% even though nothing is 100% pure). And 22 Karat means the jewelry is 91.67% pure gold. 14 Karat is 50% pure gold. That's easy enough to understand.
Where some people get a little confused is when the see or hear that an American Gold Eagle or South African Krugerrand is .9167 fine gold vs a Canadian Maple Leaf or Austrian Phiharmonic which is .999 fine gold. Some believe that the Maple Leaf or Phiharmonic is "BETTER" because it has MORE GOLD in it. This is where people misunderstand. ALL 4 of these coins; American Eagle, Krugerrand, Maple Leaf, and Philharmonic EACH have the same amount of pure gold in them. The difference and easiest way to understand, is to know that a Maple Leaf or Philharmonic with .999 fine gold (99.9%) weighs 1 Troy Ounce. The COIN weighs 1 Troy Ounce and there is 1 Troy Ounce of Fine Gold in it. The American Eagle and Krugerrand ALSO have 1 Troy Ounce of fine gold in it, BUT.... the coin doesn't weigh 1 Troy Ounce. It weighs 1.09 troy ounces. 1 ounce is gold, and the other .09 ounces consists of 3 percent silver, and 5.33 percent copper. If you take the 91.67% gold, add 3% silver, and 5.33% copper, you get 100%. But 100% isn't the SAME as 1 Troy ounce. That's why an American Eagle or Krugerrand weigh 1.09 troy ounces.
Think of it this way. If you are baking cookies and use 1 CUP of sugar; it doesn't matter if you make 12 cookies, or 24 cookies, or 36 cookies. You still just use 1 CUP of sugar. The PERCENTAGE of sugar in the cookies will change, but you still used 1 CUP of sugar. The same with gold coins. An American Eagle has 1 TROY OUNCE of gold in it. In theory, you could make a coin that weighed 2 Troy Ounces and it still had 1 Troy Ounce of gold in it. The Percentage of the gold would be 50%. Basically, the coin would be .500. Also the same as 14 Karat Jewelry. You could take a 14 Karat necklace that weighed 4 ounces, (That's heavy), and melt it down for the gold, and you'd get 2 ounces of gold out of it. Because the 4 ounce necklace is 14 Karat, which means it's 50% gold.
Well, if you melt down an American Gold Eagle, you'd get 1 Troy Ounce of gold. You'd also get 0.032 ounces of silver. And you'd get 0.058 ounces of copper. Just like the cookie recipe. You have 1 CUP of sugar. You can have a lot of other ingredients, but you still have 1 CUP of sugar. The Maple Leaf and the Phiharmonic don't have any other ingredients. Just the 1 ounce of gold.
So do the American Gold Eagle and Krugerrand have silver and copper in it in addition to the gold? Simple. It makes the coin more durable. Makes it a little harder. It's not as soft. A Maple Leaf will scratch and scuff much easier than an Eagle or Krugerrand. And because both countries actually used gold coins to spend and purchase with, they made coins that were a bit more durable.
I think most of you now understand the percentage and the ounce are two different things. It's ok if one coin is .9167 gold and another is .9999. They BOTH have the SAME AMOUNT of gold in them. The difference is that the TOTAL WEIGHT might be different because of extra metals like silver and or copper to make it more durable.
The same with American Silver Coins, also referred to as "Junk Silver". All the quarters, dimes, half dollars, and dollar coins made prior to 1965 were made of 90% Silver. That doesn't mean that a silver dollar is 0.90 Troy Ounces of silver. All of the pre-1965 American dimes, quarters, halves, and dollars are 90%. A dime is 90% silver, as is a quarter and the others are 90% silver. Technically, the amount of silver in a a dollar's worth of pre-1965 coins, is .773 ounces. It doesn't matter the combination. There is the same amount of silver in a single silver morgan or peace dollar, as there is in 2 Half dollars; or in 4 quarters; or in 10 dimes; or in 2 quarters with 1 half dollar, etc... Now; because American Silver Coins were the common currency used, they wore down a lot. They were in people's pockets, cash registers, etc. Because of this, most people and coin shops won't pay for .773 ounces of silver. Everyone accepts the fact that some of the silver has worn out. So the accepted amount of silver in a dollar's worth of silver American coins is .715 troy ounces per dollar.
So remember, 90% silver doesn't mean that there's .90 ounces of silver in the silver dollar. A silver dollar doesn't weigh one ounce. If it did, then yes, there would be .90 ounces in a silver dollar. But because it weighs less, it has .773 (.715) ounces of silver per dollar.
The one exception to this is the American Silver Eagle. Even though it is LEGAL TENDER, it's obvious that no one would every exchange a Silver Eagle for the 1 Dollar that is minted on it. The silver eagle is .999 (100%) silver. It is 1 Troy Ounce of silver. Same with the Canadian Silver Maple Leaf and Austrian Silver Phiharmonic. But the Silver Eagle wasn't minted until 1986. And no one ever used it as actual Money. The silver was worth more than the denomination. But as far as the "REAL" money that was minted and used; e.g. silver dollars, halves, quarters, and dimes, they are all 90% silver which isn't the same thing as .90 ounces of silver. Any combination of $1.00 either in dimes, quarters, halves, or dollars, will have .773 (.715) troy ounces of silver in it. That's why if you have $10 worth of silver American Coins that are 90%, you have to take the price of silver and take 71.5% of it, and multiply it by how many dollars you have. This is how you determine the "Melt Value". Example: Silver spot price is $20 an ounce. Multiply $20 * 0.715 = $14.30. That is how much each DOLLAR'S worth of Silver American Coins is worth. If you have a $10 roll of American Pre-1965 quarters, if the spot price of silver is $20, then the roll would be worth $143.00.
Hope this clarifies the confusion some had about gold purity and 90% american silver coins. Feel free to ask more questions if you have them. I simply want you to become more aware of silver and gold. This way, when you decide to purchase some, you won't feel intimidated or embarrassed when you walk into that coin shop or pawn shop trying to purchase. Take care.
CYA: SE:
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