In order to be successful in any investment you make, it’s important to understand the prices and the market of whatever it is you’re investing in. Gold is no exception.

1. UNDERSTANDING GOLD PRICES

2. INTRODUCTION
 In order to be successful in any investment you
make, it’s important to understand the prices and
the market of whatever it is you’re investing in. Gold
is no exception. Without an understanding of gold
prices, you’re at risk of buying and selling gold at
the wrong times, whether it’s because of
misinformation from the media or bad advice from
any other source.

3. PRICES MOVE VIOLENTLY
A lot of people are taken aback by how
volatile gold can appear to be after a long
period of stability. Prices will move violently
up or down following a long stretch of time
that saw nothing but consolidation.
However, this is nothing to be alarmed by
and it certainly doesn’t require a knee-jerk
reaction on your part. There’s no need to
unload your gold assets just because prices
suddenly dive swiftly down.

4. PRICES MOVE VIOLENTLY
 Similarly,don’t be shocked just because
extremely rapid rises seem to be reversed
back downward again at a moment’s notice.
What’s really happening is that the sudden
soar in price is being corrected in the short-
term by day traders taking profits or
members of the banking community taking
action in the paper markets.

5. A TROY OUNCE IS A UNIT OF MEASUREMENT
 Don’tpanic when you hear someone
discussing gold prices in terms of troy
ounces. Far from being anything too
complex for you to understand, a troy ounce
is simply a unit of imperial measurement
used for all precious metals, including gold.
Gold is both measured and priced in troy
ounces. According to official definition, one
troy ounce is the equivalent of just over 31
grams.

6. A TROY OUNCE IS A UNIT OF MEASUREMENT
 Therefore, when you buy one kilo of
gold, you’re buying just over 32 troy ounces
of the metal. In terms of the metric
system, a ton is equivalent to around 32,151
troy ounces. Other units of measurement
within the troy system are the troy
pound, pennyweight and troy grain. There
are 12 troy ounces in a troy
pound, otherwise known simply as a troy.
There are 20 pennyweights in one troy
ounce. There are 24 grains in one
pennyweight.

7. YOU ONLY PAY FOR THE FINE GOLD
CONTENT
 Gold is sold not by its actual weight, but by
its fine weight. In this context, fineness is
the purity of the precious metal in an alloy.
The fineness of a gold bar is determined by
assaying it and is expressed in parts per
thousand. Gold must meet a minimum
standard of purity set by the market.

8. YOU ONLY PAY FOR THE FINE GOLD
CONTENT
 In
the wholesale London bullion
market, London good-delivery bars must
consist of at least 99.5% pure
gold, otherwise known as 995 fine. Each of
these bars weighs around 400 troy ounces.
When we refer to the fine gold content of the
bar, we’re talking about the fineness of the
bar multiplied by its gross weight.

9. SUPPLY AND DEMAND DETERMINES PRICES
 The market price of gold is determined by
supply and demand. Supply and demand is
reflected in bids and offers, as well as daily
transactions. There are thousands of these
transactions each day. The prices of all
forms of gold are based on the prices of the
London bullion market and New York’s
Comex exchange futures market.

10. SUPPLY AND DEMAND DETERMINES PRICES
 These two markets are the most liquid gold
trading forums and keep closely in line with
one another through dealer arbitrage, which
is the simultaneous buying and selling of an
asset with the purpose of profiting from the
difference in price.

11. DEALERS INFLUENCES PRICES
 Speaking of dealing, bullion dealers actually have
an influence on the price of forms of gold such as
bullion coins and small bars, thanks in no small part
to the advent of the internet. Along with
banks, these dealers trade gold throughout the day
in Singapore, Hong Kong, Dubai and other major
financial hubs such as London, New
York, Zurich, Paris, Sydney and Toronto. Their bid
and asked prices for spot gold are published on the
web, thus allowing coin dealers to base their prices
on the bullion dealers.

12. DEALERS INFLUENCES PRICES
 Once you have a deeper understanding of
gold price behavior and the conventions of
pricing gold, you’ll know when to stay
patient and you’ll appreciate the importance
of carefully watching the market and not just
the news. Soon you’ll be using gold to
preserve and multiply your wealth just like
an old pro.