Purity

When purchasing precious metals, one of the most important things to consider is the purity of the bar or coin. It may seem like splitting hairs, but a slight difference in purity can equate to a big difference in value.

Gold Purity

How the precious metal industry defines purity is different to how the jewelry industry defines it. When purchasing a gold bullion coin or bar, you will often be told the “fineness” of the gold as opposed to how many karats it is. This is because 24 karat gold is classed as “pure gold”, but it only needs to have a fineness of 990 to be given this classification, and the gold content of bullion coins and bars is often much finer than this.

All of the following measurements of fineness are classed as “24 karat gold”:

  •         995: Occasionally used in large bars, this fineness is the minimum allowed by the LBMA for their “Good Delivery” bars.
  •         999: The popular Chinese Panda bullion coins are produced to this fineness.
  •         999.9: Perhaps the most common fineness for bullion, this is used in the Maple Leaf coins produced by the Royal Canadian Mint.
  •         999.99: Currently the purest gold still in production. It is produced by the Royal Canadian Mint and used in commemorative coins.
  •         999.999: Although no longer produced, this fineness was once achieved by the Perth Mint.

The differences between one grade and the next are very slight, as is the difference between 995 and 999.999 gold. As a typical investor, these differences will mean nothing, but if you are buying in large quantities, and if you insist on only the very best, then it’s worth paying attention to.

You may also see the purity referred to as a percentage amount, although this is usually only the case with gold that has a low purity. In such cases, you just need to remember that 0% equals 0 karats and 100% equals 24 karats. So, this means that gold listed as 50% pure, is only 12 karats.

Metals Added To Gold

There are several metals often added to gold to give it a different color or to make it stronger. This is not as common in the bullion industry as it is in the jewelry industry, but it is used. Popular gold coins such as the Krugerrand and the Sovereign both have metals added to them.

  •         Nickel/Zinc: Along with tin, manganese and other metals, these are added to gold to make it white, which is where the term “white gold” comes from.
  •         Copper: This metal is usually added to gold to give it a pinkish hue, and copper/gold mixtures are often referred to as “rose gold”.
  •         Palladium: This is added to gold in order to produce something known as “gray gold”.
  •         Cadmium: Along with silver, this metal can be added to gold in small quantities, producing a greenish-yellow gold that is still relatively pure.

Silver Purity

The most common purity of silver in the bullion industry is “fine silver”, but there is a misconception with many first-time investors that “sterling silver” is just as pure. The truth is that there is a grade of silver that is purer than both of these. As with gold, the differences between this grade and the one below it are infinitesimal, and insignificant to the typical investor. However, the differences between this grade of silver and sterling silver are definitely worth noting.

  •         925: This is what we know as “sterling silver”, although when it is used in bullion, it will often be listed as “925 silver”.
  •         999: Perhaps the most common purity, this is known as “fine silver” and is used in most bars and a number of popular coins.
  •         999.9: Known as “ultra fine silver”, this is found in some popular coins, including the Silver Maple Leaf, which is one of the purest silver bullion coins on the market.

In the past, circulated coins were minted in purities ranging from 50% silver (as was the case with many British coins produced between 1920 and 1947) and 90% silver (as was the case with many pre-1960 Canadian and US coins). However, these days a cheaper cupronickel alloy is used.

What Is Sterling Silver?

Silver isn’t adulterated as much as gold. However, sterling silver is very common, and this contains just 92.5% silver. The additional 7.5% usually consists of copper, but other metals can also be used.

Contrary to popular belief, the purpose of sterling silver is not to reduce the quality of the metal in the name of profit, but to strengthen it in order to create functional items (sterling silver is used to create everything from tableware to cigarette lighters). Understandably, sterling silver is not as common in bullion coins or bars, as investors prefer the purer “fine silver”.