How much would it cost to buy a pound of gold?
It actually depends on what you mean by "pound."
Yes. There is more than one kind of pound.
We typically talk about the price of gold in terms of ounces. As I write this, the spot price for gold stands at $2,046 per ounce.
But there's a catch.
There's also more than one kind of ounce!
When we quote about the price of gold, we're not talking about the same kind of ounce that we would use to discuss an ounce of cereal or an ounce of flour. Gold and silver are generally priced in "troy ounces."
One troy ounce is a little heavier than a standard ounce, equaling 31.1 grams. A standard ounce comes in at 28.35 grams.
Here's another little catch.
You probably know that a standard pound equals 16 ounces. But a troy pound is only 12 troy ounces.
Doing the math, we find that a troy pound of gold at the current spot price would cost $24,553. (12 x 2,046).
And what about a standard pound?
That math is a little trickier.
I'll start by calculating the price of gold per gram. This comes to $65.79. (2,046/31.1)
When we multiply the price per gram by 28.35 (the number of grams in a standard ounce), we find that a standard ounce of gold currently costs $1,865.16.
Multiply that by 16 and we find that a standard pound of gold would cost $29,842.56.
If we do the same math using the current spot price of silver ($23.43 per troy ounce), we find that a standard pound of silver would cost $340.16.
Of course, that's not the actual price you would pay on the retail market. Whenever you purchase precious metals, you pay a premium along with applicable taxes.
In simplest terms, a premium is the amount you over the spot price for an ounce of gold or silver. The premium covers the seller's overhead and profit and the underlying minting costs. The premium also reflects shortages or surpluses that may exist in the marketplace for that item at any given time.
You might balk at paying a premium, but the fact is every investment comes with costs above the value of the asset. For instance, if you buy a stock or a bond, you will pay transaction and brokerage fees.
We don't generally include fees, premiums, and taxes when we talk about the price of an investment asset. We focus on changes in the market price over time.
Fees and premiums go up and down over time based on market conditions.