The importance of carat and fineness in gold

Additional information > The fundamentals of precious metals – a broad introduction to the basic principles > Carat vs. Fineness: Understanding gold purity

Gold has fascinated people for thousands of years, perhaps because its lustre and value have made it an object of desire for many cultures. But not every piece of gold is the same. Two concepts or units of measurement are commonly employed to indicate the purity and quality of gold jewellery as well as that of bullion bars and coins. These are the carat (or karat) and fineness. In this article we will take a closer look at both terms, and also explain why one of these two units is gradually diminishing in importance in the context of gold trading and asset preservation.

Carat: the classic measure of gold purity

When people hear the term carat, it’s probably gemstones rather than gold that first spring to mind. However, distinguishing the nuanced usage of the term for gold and gemstones is very important. Although the term is used in both contexts, these really are two fundamentally different measurement standards. While carat refers to the weight of the stone in gemstones; when mentioned in the context of gold, carat is understood to be a unit measure of the degree of purity of the precious metal. For gold, the carat number indicates how many parts of pure gold (out of a total of 24) the piece actually contains. So 21 carat jewellery consists of 21 parts gold and 3 parts other metals – a measure which corresponds to a purity of 87.5%. The most famous gold coin in the world, the South African Krugerrand, has a 22-carat rating and thus consists of 22 parts gold and 2 parts copper, the parts which give the Krugerrand its characteristic orange-red tint. The unit symbols used for carats are ‘kt’ or ‘K’. The specific use of the term karat as a unit of measurement for gold has historical roots and is associated with the ancient coins known as the ‘solidus’ and the ‘keration’. While the historical solidus was around 24 carats, the mass and value of a keration, from whose name the word carat is ultimately derived, was 1/24 of the solidus. Centuries later, in German-speaking countries, karat also referred to the 24-karat weight of gold in a medieval mark.

Fineness: a precise indication of the purity of gold

While karat is a more traditional and descriptive method of indicating gold purity, the concept of fineness offers a far more precise measurement. Fineness data is usually expressed in parts per thousand and always refers to the pure gold content. For example, a fineness of 999/1000 corresponds to 99.9% pure gold and thus equates to a 24-carat rating. However, in certain contexts, the term fineness may more specifically refer to the content of a particular precious metal contained within an alloy consisting of multiple components.

The dwindling importance of carats

In the modern gold-trading world, the importance of the carat as a unit of measurement is rapidly diminishing. Instead, more precise units of measurement such as fineness have now come to the fore. This is primarily due to the need for an accurate, standardised valuation of gold, particularly as regards the international trading of gold bullion bars and coins. A unit of measurement such as the carat, which only allows information to be expressed in increments of around 4.17% (i.e. 1/24 units) – is simply far too imprecise given the high value of gold. Here, the use of fineness detail in increments of parts-per-thousand, or even less, guarantees a significantly higher level of precision. However, carat information will not disappear completely from the gold market – so you won’t find yourself left with nothing but old stamps and hallmarks. Specifying gold content in carats is also likely to remain popular in the jewellery sector. However, collectors and investors always prefer detailed information to help them determine the precise value of their gold.

Fineness in thousandths	Use	Carat equivalent (kt)	Percentage
333/1000	Jewellery	8 kt	33,3 %
375/1000	Jewellery	9 kt	37,5 %
417/1000	Jewellery	10 kt	41,7 %
585/1000	Jewellery	14 kt	58,5 %
750/1000	Jewellery / Dental gold	18 kt	75,0 %
835/1000	Dental gold	20 kt	83,5 %
875/1000	Jewellery	21 kt	87,5 %
916,66/1000	Jewellery, coins	22 kt	91,6 %
999/1000	Jewellery, bars, coins	24 kt	99,9 %

Summary:

Carat and fineness are the common units of measurement used to determine gold purity.
Carat (or karat) is the older unit and indicates how many (x/24th) parts pure gold a product contains.
Fineness measures gold purity more accurately in parts-per-thousand.
In practice, fineness is almost always understood to reference gold purity, though it is sometimes used to refer more specifically to the precious-metal content in a multi-component alloy.
The gold trade now tends to downgrade the importance of the carat unit in favour of the more precise detail fineness allows.
Nevertheless, the carat number is still often quoted, especially in the gold jewellery market.