How to Calculate the Jeweler’s Markup for Gold Jewelry
If you’re buying gold jewelry, you need to know more than the daily price of gold. You should familiarize yourself with gold weights and karats. This will let you calculate the jeweler’s markup in any gold item’s price.
Gold Weight Measurements
Jewelers weigh gold and the metals used for alloying in troy ounces. However, depending on the circumstances, the terms and units of weight referenced may vary. Sadly, I think sometimes this is solely done to keep the average consumer from making quick and accurate calculations.
- 1 troy pound = 12 troy ounces
- 1 troy ounce = 20 pennyweights (dwt)
- 1 pennyweight (dwt) = 24 grains (gr)
- 15.43 grains (gr) = 1 gram (gm)
- 31.10 grams (gm) = 1 troy ounce
Note these equations carefully. In particular, learn the conversions for pennyweight (dwt), grain (gr), and gram (gm). (Don’t confuse the abbreviations of the last two). You’ll find yourself frequently dealing with these three weight references on a “price per ____” basis.
Gold Karat Values
The karat value (K) of a gold item measures the purity of its gold. In other words, it measures the ratio of pure gold to alloy metals. 24K gold is 100% pure. 12K gold has 12 parts gold and 12 parts alloy metal, or 50% purity.
Divide any K value by 24 to determine the purity percentage, or consult the following table.
|Karat||Parts Gold||Percent Gold|
You can round 14K to 60% and 10K to 42% for easier approximations.
Calculating the Markup
When sellers say they don’t sell on the basis of weight, they’re pricing according to what the traffic will bear. In other words, you’ll have to deal with an arbitrary markup for a gold item.
However, if you know the weight and karat of the gold item, you can calculate the gold value yourself. Also, you can get a good idea of the jeweler’s markup.
Below, you have three examples of gold items sold by pennyweight, grain, and gram. Let’s calculate the markup in these cases, using $400/troy ounce as the daily gold price. (Editor’s Note: Yes, this article shows its age. However, the math remains the same, regardless of the daily gold price).
A dealer wants to sell a 14K gold item weighing 3 dwt for $90.
- To get the pennyweight price, divide the daily gold price per troy ounce, $400, by 20. (1 troy ounce equals 20 dwt).
- Thus, $400/20 = $20 per dwt.
- To get the pure gold price for the item, multiply 3 dwt, the weight of the item, times $20.
- Thus, 3 x $20 = $60. (This would be the price IF the item were 24K or 100% gold).
- To get the 14K gold price for the item, multiply $60, the pure gold price, by 0.6. (Remember, 14K gold contains approximately 60% gold and 40% alloy).
- Thus, $60 x 0.6 = $36.
So, the 3 dwt, 14K item contains $36 worth of gold, when gold sells at $400 per troy ounce. Therefore, we’ve determined the jeweler’s markup for the alloys (and everything else) at $90 for the item comes to about 2.5 times the value of the gold.
A dealer wants to sell a 14K gold item weighing 3 gr for $5.
- To get the grain price, divide $400 by 480. (1 troy ounce equals 480 gr).
- Thus, $400/480 = approximately $0.83 per gr (or 83¢ per gr).
- To get the pure gold price for the item, multiply 3 gr times $0.83.
- Thus, 3 x $0.83 = $2.49.
- To get the 14K gold price for the item, multiply $2.49 by 0.6.
- Thus, $2.49 x 0.6 = approximately $1.49.
So the 3 gr, 14K item contains about $1.49 worth of gold, when gold sells at $400 per troy ounce. Therefore, we’ve determined the jeweler’s markup at $5 for the item comes to slightly more than triple the gold value.
A dealer wants to buy a 14K gold item weighing 3 gm for $15.
- To get the gram price, divide $400 by 31. (1 troy ounce equals approximately 31 gm).
- Thus, $400/31 = approximately $13 per gm.
- To get the pure gold price for the item, multiply 3 gm times $13.
- Thus, 3 x $13 = $39.
- To get the 14K gold price for the item multiply $39 by 0.6.
- Thus, $39 x 0.6 = $23.40.
So the 3 gm, 14K item contains around $23 worth of gold, when gold sells at $400 per troy ounce. Therefore, we’ve determined that the jeweler’s offer to buy the piece at $15 comes to about 65% of its gold value.
Calculating the Gold Content Value of a Jewelry Piece
In summary, to determine the gold value content of an item, you first need three bits of information.
- The daily gold price
Next, if you encounter weights measured in pennyweights, grains, and grams, remember these conversions.
- 20 dwt to a troy ounce
- 480 gr to a troy ounce
- 31 gm, approximately, to a troy ounce
Divide the daily gold price per troy ounce by the appropriate number above. Then, multiply that result by the weight of the item to calculate its pure gold price.
Finally, multiply the item’s pure gold price by its gold content percentage (its karat value divided by 24). This final result indicates the value of the actual gold content of the item. Now, you can figure out the jeweler’s markup for the piece.