Glossary

Bid price is the price a buyer is willing to pay for an asset at a given moment. In the gold market, the bid represents what dealers, refiners, or investors will pay to acquire gold from a seller, while the ask is the price at which they will sell it. The difference between the two is called the spread, and it represents the dealer’s potential profit. When you sell scrap gold, the offer you receive is effectively a bid, typically discounted below the spot bid to cover refining, overhead, and margin. Comparing bids from multiple buyers is the most effective way to maximize the payout on any gold sale.

Fineness expresses the purity of a precious metal as a decimal or parts per thousand, rather than as a karat value. Pure gold has a fineness of 999, meaning 999 parts per thousand are gold, often written as 0.999 or “three nines.” Common gold finenesses include 916.7 for 22K, 750 for 18K, 585 for 14K, and 417 for 10K. Fineness is the standard marking system used on bullion bars and coins worldwide, while karat is more common on finished jewelry, especially in the United States. To convert karat to fineness, divide the karat by 24 and multiply by 1000. Fineness provides a precise, internationally consistent way to state gold purity.

Gold purity describes the proportion of actual gold in a metal alloy, expressed as either karat or fineness. Pure gold is 24 karat, or 99.9% gold, but it is too soft for most jewelry, so it is mixed with harder metals like copper, silver, nickel, or zinc. Lower purities such as 18K (75%), 14K (58.5%), and 10K (41.67%) are more durable and affordable. Purity directly determines melt value: a 14K piece contains 58.5% as much gold by weight as a same-weight 24K piece. In the United States, items sold as gold must be at least 10K and accurately stamped with their purity. Always verify purity before pricing any gold item.

A karat (abbreviated K or kt) is a unit that measures the purity of gold alloy, on a scale of 24. Pure gold is 24 karat, meaning 24 of 24 parts are gold. Each karat equals 1/24 of the whole by mass, so 18K gold is 18/24, or 75% gold, while 14K is 58.5% and 10K is 41.67%. Karat should not be confused with carat, the unit used to weigh gemstones. US law requires jewelry sold as gold to be at least 10K and stamped with its purity. Higher karat gold is softer, more yellow, and more valuable; lower karat gold is harder, lighter in color, and less expensive.

Melt value is the intrinsic commodity worth of an item based solely on its precious-metal content, assuming it were refined into pure bullion. For gold, melt value is calculated by multiplying the item’s weight by its purity fraction and the current spot price per gram. For example, a 14K ring weighing 5 grams contains 2.925 grams of pure gold (5 x 0.585), and its melt value equals that figure times the live per-gram price. Melt value ignores artistry, brand, age, gemstones, and collectibility. It serves as a floor reference when selling scrap gold, and buyers typically offer 60% to 90% of melt to cover refining and profit.

A pennyweight (abbreviated dwt) is a unit of mass used in pricing precious metals, especially by US jewelers and gold buyers. One pennyweight equals 1/20 of a troy ounce, or approximately 1.55517 grams. The symbol “dwt” comes from “denarius weight,” reflecting its origin in ancient Roman and British coinage. Because there are 20 pennyweights in a troy ounce, converting between the two is straightforward: multiply a per-dwt offer by 20 to compare it to the spot price per ounce. Buyers sometimes quote in pennyweights because the smaller unit can make payouts appear larger at a glance, so consumers should always convert to grams or troy ounces before comparing offers.

A premium is the amount paid above the spot price of gold for a finished product, or conversely the discount a buyer applies when purchasing scrap. When buying coins, bars, or jewelry, the premium covers fabrication, minting, distribution, dealer margin, and demand for collectible or branded pieces. American Gold Eagles, for example, often carry premiums of 3% to 8% above spot. When selling scrap gold, the “premium” works in reverse: buyers pay below spot, effectively charging you a discount, since they must refine and resell the metal. Understanding premiums in both directions helps consumers recognize fair offers and avoid overpaying for bullion products or accepting lowball scrap quotes.

Scrap gold refers to gold items sold for their metal content rather than for resale as jewelry or collectibles. Common examples include broken chains, single earrings, class rings, dental gold, outdated pendants, and gold from estate lots. The value of scrap gold is based entirely on weight and karat purity, calculated against the live spot price with a deduction for refining. It carries no premium for design, brand, or condition. Buyers of scrap gold include refiners, coin shops, pawn shops, and mail-in programs, and they typically pay 60% to 90% of melt value. Intact or designer pieces may be worth more sold as jewelry than as scrap.

Spot price is the current market price at which a given asset, such as gold, can be bought or sold for immediate delivery. For gold, it is quoted per troy ounce in US dollars and updates continuously, nearly 24 hours a day, across global commodities exchanges. The spot price reflects the latest consensus of supply and demand in the futures and over-the-counter markets, influenced by interest rates, currency values, inflation, and geopolitical events. Retail gold products, like coins and jewelry, are priced at a premium above spot, while buyers purchasing scrap gold pay below spot. Spot price is the baseline for every per-gram and per-pennyweight calculation.

A troy ounce (ozt) is the standard unit of weight used for precious metals worldwide, including gold, silver, platinum, and palladium. One troy ounce equals 31.1034768 grams, or about 9.7% more than a standard avoirdupois ounce used for groceries (28.35 grams). A troy ounce also contains 20 pennyweights or 480 grains. The spot price of gold is always quoted per troy ounce in US dollars, so any per-gram or per-pennyweight calculation must convert from this base unit. The troy system dates to the medieval trade fairs of Troyes, France, and remains the universal standard for bullion, coins, and commodity markets today.