Fineness in the Gold Market
Fineness means parts per thousand of a precious metal in an alloy or product. There are other ways of expressing the purity of gold – in particular, caratage (spelt with a ‘k in the United States), which means parts of gold per 24 and is widely used for jewellery. Everyone knows that 24K means pure gold. However, in the gold bullion market, fineness is by far the most important and useful way of defining purity.
The importance of fineness in the London bullion market is for two main reasons. To be acceptable as Good Delivery in the London market, a large gold bar must:
- Have a minimum fineness of 995 (often expressed as 995+); and
- Contain a minimum of 350 and a maximum of 430 fine troy ounces.
The other common fineness used in the bullion market is 999.9, sometimes referred to as ‘four nines’. This is found in many refiners’ large bars, in most kilobars and in modern bullion coins.
Measuring Gold Fineness
The age-old methods of determining the purity of gold are the touchstone and fire assay. In the hands of a skilled operator, the touchstone can give a reasonable indication of how much gold a piece of metal contains, but this is nowhere near accurate enough for the modern bullion market.
Fire assay, on the other hand, can produce remarkably accurate determinations of the fineness of gold. The method can be described very simply: a piece of gold alloy is carefully weighed and then all the impurities are removed by a combination of alloying, heat treatment and acid dissolution, leaving only the pure gold content, which is then weighed again. It is a direct method of assaying, which means that it is the actual gold content of an alloy that is being measured. This in turn means that it can be used across the whole range of gold contents that are found in raw materials, industrial products and high purity bullion. Fire assay has been practised since ancient times, but to achieve the ultimate levels of accuracy which the method can achieve, great care and experience on the part of the operator are essential. The London gold market traditionally relied on the use of fire assay by its accredited refiners for the determination of the fineness of acceptable bars. More recently, however, the LBMA Good Delivery Rules indicate that a different method of determining fineness, namely spectroscopy, could be used.
There are many different spectrometric techniques that can be used for analysing precious metals. What they all have in common is that instead of determining the purity of the precious metal itself, they measure the levels of impurities present and by subtracting the total of these from 1,000, arrive at the fineness. The other thing that spectrometric methods have in common is that they rely on ‘exciting’ electrons in the impurity elements to a higher energy level. This results in a vacancy in the initial electron shell which is filled by an electron dropping into it from a higher energy level. This results in the release of a photon having the characteristic energy or wavelength for the particular impurity atom. Analysing the number and wavelengths of all the photons emitted allows an elemental analysis of all the impurities to be carried out simultaneously. Until recently, LBMA suggested that for gold, spectrometric methods should be used only for finenesses above 999.5. The reason was that it is challenging to determine fineness accurately using these methods at significantly lower gold contents. This is because spectroscopy requires the availability of standards (containing known levels of the impurities to be determined) to adjust the initial measurement of the photons released from the sample. More recently, the LBMA Good Delivery Rules indicate that spectrometric methods can be used for gold, but stress that the analyst must determine the level of all impurities present in order to achieve an accurate fineness.
There are several different ways of producing the excitement of impurity atom electrons in commercial spectrometers. In precious metals labs, the most common methods are to use either a spark or a plasma to achieve this and then analyse the visible light which is emitted. This is known as optical emission spectroscopy (OES). These methods require a small amount of the sample to be removed and vaporised, so they are not classed as being non-destructive. But another approach is to shine a beam of high-energy X-rays onto the sample surface, which results in the emission of similar photons as mentioned above (but in this case, these are high-energy X-rays rather than visible light). This is known as X-ray fluorescence (XRF). While this approach does not produce the same accuracy as fire assay or OES techniques (and is also limited in only providing an indication of the surface layers rather than the bulk of the sample), it has two major advantages. Firstly, it is non-destructive and, secondly, it is quick. XRF instruments can be small enough to be handheld. They are now widely used in hallmarking offices to check the fineness of jewellery. Similarly, in India, where for many years much of the jewellery sold was under-title, many gold traders now use ‘Karat meters’ to check the fineness of the jewellery being sold back by their customers.
Famous (or Infamous) Finenesses
A wide range of finenesses are used in gold bars, coins and manufactured products. We are indebted to our colleagues at Metals Focus for their help in compiling the following list:
Gold bonding wire used in integrated circuits needs the strictest control over its raw materials. Tiny quantities of alloying elements are added to ‘five nines’ gold to achieve the necessary properties.
In 2007, the Royal Canadian Mint launched a 1-troy ounce 999.99 fineness Maple Leaf coin and a small number of 100 kg versions with the same design and fineness. Wonders of Gold tells the dramatic story of how one of these coins was stolen in March 2017 from the Bode Museum in Berlin.
To ensure accurate results, fire assaying requires standards in the form of 999.99 gold which go through exactly the same processing as the test samples.
Retail customers in parts of China have, in recent years, increasingly asked for 999.99 gold rather than the than the traditional 999 chuk kam jewellery. There seems to be no logical reason for this apart from this fineness apparently conferring increased status for the purchaser.
With few exceptions, kilobars are produced in 999.9 fineness gold. The main exceptions are in India and Turkey where 995 kilobars are still the standard.
In the days when gold was an important part of the circulating coinage in many European countries, it was important that the coinage alloy was hard enough to prevent the rapid loss of coin weight due to abrasion. Post-revolutionary France adopted a fineness of 900 for its Napoleon coin rather than the traditional English model of the 22 carat (916.7 fineness) Guinea. After the ‘invention’ of the bullion coin concept in the form of the South African Krugerrand in 1970, other mints began to produce and market bullion coins for sale to investors. Most of these were produced in 999.9 fineness gold.
This fineness is best known for its use in traditional Chinese chuk kam (pure gold) jewellery.
In India, most investment bars and coins are of 999 fineness.
The reason for the London gold market adopting a minimum of 995 fineness for the gold which was traded there stems from the success of the Miller gold refining process invented in Sydney in 1867 and subsequently adopted by many gold refiners around the world. The optimum fineness produced by the Miller process is around 995.
This is the traditional minimum fineness of the Tael bars traded in the Hong Kong Gold and Silver Exchange.
In the mid-1980s, a new 990 fineness gold jewellery alloy was developed. It contained 1% of titanium and unlike traditional jewellery alloys, it could be strengthened by the metallurgical process known as precipitation hardening. Unfortunately, the presence of titanium in the alloy meant that when heated in air, an oxide film would form on the surface and, largely as a result of this, the alloy did not prove to be a commercial success.
This is the fineness traditionally traded in the form of both bars and jewellery in Thailand.
Many of the most famous gold coins in history have a fineness of 916.7, including the English Guinea, the British Sovereign, the South African Krugerrand and, perhaps somewhat surprisingly, the American Eagle.
The biggest market for 22K jewellery is India, though because of the extensive use of lower carat solder in many traditional styles, the average fineness of many items is significantly less than 916.
In Turkey, 22K jewellery has been favoured as a store of value, especially in the form of heavy plain gold bangles.
Throughout the Middle East, jewellery purchasers have long favoured this fineness for investment jewellery.
Manufacturers around the world have traditionally relied on 18K gold for their finest creations in both plain gold and diamond jewellery.
14K jewellery is popular in the markets of many European countries, Turkey, South Korea and the United States, especially among younger and more price-conscious purchasers.
Until the liberalisation of the market in 2018 (see the entry for 6K below), 10K represented the bottom end of the US jewellery market.
Prior to 1854, the minimum fineness which could be hallmarked and sold in the United Kingdom was 18K. But as a result of pressure from watch-case manufacturers, a new minimum standard of 9K was permitted. At first, this was slow to be adopted by jewellery manufacturers, but over the next century, it became completely dominant. Today, around 60% of the items hallmarked in the UK are 9K.
As in the UK, 9K is the minimum fineness of jewellery that can be sold as gold in France, Austria, Portugal and Ireland.
Germany, Denmark and Greece stipulate 8K as the minimum fineness for jewellery.
A ruling in 2018 by the US Federal Trade Commission removed the stipulation that a retailer could only call an item ‘gold’ if it were 10K and above. 6K jewellery soon started to appear.