Today, the usage of the troy ounce unit of weight is down to almost only measuring the mass (weight) of precious metals. In the past it had been used as part of the apothecary system and was the base of the British Imperial troy ounce from about 1400 through 1971.
The usage of troy ounce weights traces its history back to the ancient Roman monetary system. At one point in Roman history, bronze bars were used as currency. The aes grave (meaning heavy bronze) weighed one pound. The unit called uncia, which became ounce in the English language, was defined as one-twelfth the weight of the aes grave.
The troy ounce weighs 31.1034768 grams (usually rounded to 31.1 grams) or 480 grains or 20 pennyweights. In contrast, the avoirdupois ounce used to weigh bananas and humans weighs 28.349523125 grams (usually rounded to 28.35 grams), 437.5 grains, or 18.229 pennyweights. A troy ounce is about 10 percent heavier than the avoirdupois version. To be precise, the troy ounce is 192/175 times the weight of the other ounce.
In the London Bullion Market and on commodity exchanges in the United States, precious metals contracts are specified in a certain number of troy ounces. On the New York COMEX, for instance, a gold contract is for 100 troy ounces, a silver contract is 5,000 troy ounces, platinum is 50 troy ounces, and palladium is 100 troy ounces.
Two events, one that just happened and one coming in April 2016, may end up with the use of troy ounce measurements in precious metals becoming obsolete.
With the recent release of the 2016-dated Chinese Pandas, the sizes are no longer stated in troy ounce measurements. Instead, the coins that used to weigh one troy ounce now weigh 30 grams, slightly less than prior year issues. Smaller-sized coins are also proportionately smaller. To help minimize confusion, the new coins list their precious metal content in grams.
This change was announced about a year ago. In the Far East, metric measurements are the standard, so the new coins make them more practical for trading in that part of the world.
The Shanghai Gold Exchange is planning to begin trading 1 kilogram (1,000 grams or about 32.15 troy ounces) gold contracts in April 2016. Once again, the weight standard matches what is commonly used in the Far East.
There are two features to these forthcoming SGE contracts that have a good chance of shifting the world’s dominant precious metals markets from the West and also away from the U.S. dollar. First, the SGE contracts will be fulfilled by immediate delivery of the physical metal instead of merely being the exchange of paper assets. Almost certainly, some percentage of the world’s gold investors would prefer 100 percent certainty of owning gold versus merely holding a piece of paper. Second, the SGE contracts will be priced in Chinese yuan and payment can only be made using that currency.
If you think that the close timing of these two events that push for metric weights of precious metals instead of the troy ounce measurements means they are related, it is not out of the question. The Chinese government has been aggressively signing bilateral agreements with governments across the globe to displace the use of U.S. dollars in international transactions and payments, using instead the currencies of the signatory nations. If not deliberately timed to coincide with each other, the modification of Panda weights and the forthcoming trading of Shanghai Gold Exchange contracts both using metric standards is consistent with other actions of the Chinese government.
Since the world’s largest gold consuming nations, China and India, use metric weights for governmental and private precious metals trading, it is highly likely that people in many other Far East nations will also adopt metric units and the Chinese yuan as benchmarks for measuring precious metals transactions.
Considering this information, I would not be at all surprised to see the usage of troy ounce weights for precious metals disappear within the next decade or two.
Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He is the owner emeritus and communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Coin Week (http://www.coinweek.com). His radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).
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