Karat in gold trading

A karat (spelled carat in British usage, and not to be confused with the carat weight used for gemstones) expresses gold purity in twenty-fourths. 24K is pure gold (in practice 99.9% or finer). 22K is 22/24 or 91.67% gold, the common standard for jewelry in India and the Middle East. 18K is 75%, 14K is 58.3% and 9K is 37.5%. The rest of the alloy is other metals, usually copper and silver, added for hardness and color.

How it applies to gold trading

The traded gold price (XAUUSD, COMEX, the LBMA fix) refers to fine gold, so the value of any item is its weight multiplied by its purity multiplied by the price. At $4,000 per troy ounce, which is $128.60 per gram, a 10-gram 22K bangle contains 9.167 grams of fine gold worth $1,178.80 before any making charge or premium; the same weight in 24K is worth $1,286. Jewelers quote 22K and 24K prices separately for this reason, and the 22K price is always about 8.3% lower.

For traders the karat system is mainly a conversion issue when comparing local jewelry prices with the international market, or when reading demand data from jewelry-heavy markets.

A common mistake

Comparing a local 22K per-gram price with the international 24K price and concluding the local market is cheap. The 8.3% purity difference explains most of the gap.

See also: Fineness, Gram and 10-gram pricing, Making charges, Troy ounce.

Frequently asked questions