Gold Karats & Diamond Carats; Ounces & Troy Ounces: What's The Difference?

March 22, 2011

You have no doubt read countless articles on the price of gold costing "x dollars per ounce", own a gold ring or some other piece of gold jewellery and/or wear or have bought/plan to buy a diamond ring but do you really understand what exactly what you are buying? What's the difference between 1 troy ounce of gold and 1 (regular) ounce? What's the difference between 18 and 10 karat gold? What's the difference between a 0.75 and a 1.0 carat diamond? Let me explain.

Definition of "Karat"

The term used to describe the unit of measurement for the proportion of gold (i.e. % purity of the gold content) in a piece of jewellery, coin, ingot or bar as per the above table.

Gold will often be mixed with "filler metals" such as silver, palladium, platinum, nickel and even copper to combat the softness of pure 24 karat. Gold which contains a degree of silver, platinum or palladium is referred to as "white gold" and will classify with a higher amount of karats while the presence of nickel leads to a slightly lower designation of karats. Copper is used to give gold durability and give it a golden rosy tone. Below is a table outlining the karat designations at various gold purity levels plus the extent of "fineness" as is used in some countries such as Italy.

(In some countries "karat" and "carat" are used almost interchangeably although, strictly speaking, the words' correct meanings are as defined in this article where "carat" refers to the weight of a gemstone (see below). The correct word to use when referring to the weight of an object of gold, silver or other precious metals is to speak in terms of troy ounces as below, kilos or metric tonnes.)

100% pure gold is defined as having a purity of 24 karats so if something is 24 karat gold then it's made of gold and nothing else - regardless of sizeā€¦ Gold is a relatively soft metal and high-karat gold tends to be easily damaged and, as such, a 24 karat item is usually reserved for display or ceremonial use as the picture of me with "my" 100kg. Canadian Maple Leaf 99.99999% pure gold coin which is now worth in excess of $4,500,000 USD! (100kg. x 32.1507466 troy oz. x $1,400/ozt. USD)

All jewellery is required by law to be stamped so consumers will know the quality of gold used. Jewellery made in North America is typically marked with the karat grade (10K, 14K, etc.), and jewellery made in Italy is typically marked with the "fineness" such as (417, 583, etc.). Most retail gold items have a karat rating in the range 9 to 18. In the U.S. the minimum karat value for an item to be sold as gold jewellery is 10. In the UK 9 karat is more common.

The number 24 may have originally been chosen to represent pure gold because it divides evenly by 2,3,4,6 8 and 12. Thus it's easy to talk about a gold item being half pure (12 kt), two thirds pure (16kt) etc. Nine karat would thus be three eighths gold, 18 karat would be six eighths (three quarters).

Definition of a "Troy" Ounce

The troy ounce (Toz) is a unit of imperial measure most commonly used to gauge the weight and therefore the price of precious metals. One troy ounce is equivalent to 1.09714 avoirdupois (our conventional every day measurement) ounces i.e. 9.714% greater in weight and 1 kg. consists of 32.1507466 troy oz. Please keep the distinction between ounces and troy ounces in mind when buying small quantities of gold and/or silver.

Definition of "Carat"

The term used to describe the unit of weight of a gemstone, including diamonds, where 1 carat = 200 milligrams or one-fifth of a gram. Smaller diamonds are often expressed aspoints, not carats where 100 points = 1 carat (i.e. each point equals 0.01, or one-hundredth, of a carat).

Origin of the Word "Carat"

The word "carat" is derived from the Greek "keration," meaning fruit of the "carob" tree. Because the seeds of the carob were uniform in size, they became a unit of measure of fine gemstones. Since an average carob seed weighs 200 milligrams, the weight of 1 carat was set at 200 milligrams.

"Carat" Abbreviations

The abbreviation ct is a shortened way to write carat, and refers to the weight of a single diamond. The abbreviation ct TW means carat total weight, and is used to express the total weight of multiple diamonds used in a piece of jewellery.

"Carat" Weight vs. Size

Carat weight is used as a measure for other gemstones as well but different gems of the same weight aren't necessarily the same size, because some gemstones are more dense than others-meaning that they pack more weight into a smaller space.

Two diamonds of equal carat weight can have very different costs based on other factors (such as cut, color, and clarity). In understanding the importance of carat weight it is important to know who you are dealing with.

As the carat size of a diamond increases, the diamond's price increases at an increasing rate. Why? Because the larger the diamond, the more increasingly rare it is. Fewer than one in one million mined rough stones are large enough to produce a finished 1 carat diamond so, as carat weight increases, you will typically pay more not only in total, but on a price-per-carat basis as well.

Conclusion

You now have a better understanding of the meanings of the words "karat" and "carat" (I can only assume that you already knew the meaning of the more familiar word "carrot"!) and the difference between a "troy ounce' and just an "ounce" which should ensure that you are never misled when reading about or considering the purchase of any item in which such terms are (often loosely) used.

Lorimer Wilson is Editor-in-Chief of both www.FinancialArticleSummariesToday.com and www.munKNEE.com. He is in the process of developing a weekly "Top 100 Stock Market, Asset Ratio & Economic Indicators in Review" report which will be FREE to early subscribers so send an email to editor@munKNEE.com requesting that your name be added to the mailing list. The original version of the above article was posted at www.munknee.com/2011/01/18434/

Nearly 40 percent of all gold ever mined was recovered from South African rocks.