Grams vs Ounces and Dollars
I just received a call on the Priced in Gold Hotline asking for clarification about ounces and grams of gold and other precious metals.
First off, precious metals prices are most commonly quoted in US Dollars per troy ounce. We all haves a pretty good idea of what a dollar is, but a troy ounce is something we don't often see in any other context. It isn't the same as the ounce used in US household measures or scales… those ounces (known formally as avoirdupois ounces) weigh 28.3495 grams, and come 16 to the pound. Troy ounces weigh about 31.1035 grams, and come 12 to the troy pound. (Note that the word "ounce" comes from the latin for one-twelfth.)
Measuring things smaller than an ounce becomes very cumbersome in the troy system, where each ounce is divided into 20 pennyweights, and each pennyweight is divided into 24 grains.
And there are many other kinds of ounces, as well: Apothecaries' ounce, Maria Theresa ounce, Spanish ounce, Roman ounce, Dutch metric ounce, and Chinese metric ounce, to list just a few. Each has a different weight. There is even an International metric ounce of 25 grams, for which 20 ounces make a metric pound of 500 grams.
On the other hand, the gram is an international unit of scientific measure, with little room for confusion.
Grams also have the advantage, being metric, of being useful for a wide range of weights. Using prefixes, we can talk about micrograms (useful for describing the value of a single Japanese Yen or Chilean Peso; milligrams, useful for giving the value of most stocks, or a single USD or EUR; grams for the value of a bitcoin, a high priced stock like GOOG or AAPL or a stock index like the S&P 500 or the Dow Jones Industrial Average; kilograms for the value of houses, college tuitions or BRK-A; or tonnes, kilotonnes, or even megatonnes for the net worth of millionaires and billionaires, or regional, national or worldwide econometric statistics.
To convert the price of gold in any currency (for instance today's London PM fix of $1,369.25 USD per troy ounce) into the price of that currency in gold grams, just divide 31.1034768 by the gold price (for instance 31.1034768 / 1369.25 = 0.02272 grams/USD). I often find it more convenient to express this in milligrams, so I multiply by 1000 to get 22.72 mg per USD.
I have also considered the possibilitiy of using the original definition of the US Dollar as my unit of weight instead of the gram. The Coinage Act of 1792 defined the dollar as 1.7 grams of gold or 27 grams of silver, but these weights are for "standard" purity of about .900 fineness. This gives about 20.5 USD per troy ounce of pure gold.
So another way to state the price of a USD today would be to take 20.5 USD/oz (then) and divide it by 1369.25 USD/oz (now) to get 0.01497 – so one dollar today would be worth about 1.5 cents in 1792 dollars. And you can convert any USD price today to its 1792 price by just multiplying by 0.01497. For instance, today's DJIA close of $15,081.47 becomes $255.795 (not so different from the 352.763 g price you'll find on Priced in Gold.)
This has a lot of appeal, as it makes clear how far the USD has fallen in purchasing power, but I worry that it confuses things by introducing another kind of dollar, and takes focus away from the point that we should be leaving all fiat currencies behind us, and moving into the clarity of pricing purely in gold.
There is no need for each country to define its own weights and measures for gold money. We have the gram and we have gold. That is all we need!
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