A troy ounce is the unit of weight used to price gold, silver, platinum, and palladium everywhere in the world. It equals 31.1035 grams, which is about 9.7% heavier than the ordinary ounce (28.3495 grams) printed on grocery packaging.1National Institute of Standards and Technology. NIST HB 44 2024 Appendix C – General Tables of Units of Measurement That 10% gap is why the distinction matters: weighing precious metal on a kitchen scale, or reading “oz” on a listing as if it were the everyday ounce, will understate what the metal is actually worth.
How the Troy Ounce Differs From the Ounce You Know
The ounce most people are familiar with is the avoirdupois ounce, the default in the U.S. customary system. It weighs exactly 28.349523125 grams. The troy ounce weighs exactly 31.1034768 grams, so each troy ounce is roughly 2.75 grams heavier than the ordinary one.1National Institute of Standards and Technology. NIST HB 44 2024 Appendix C – General Tables of Units of Measurement
Both systems share an old unit called the grain, but they group different numbers of grains into an ounce. A troy ounce contains 480 grains; an avoirdupois ounce contains 437.5.2The Perth Mint. Troy Ounce vs Ounce: Whats the Difference? That 42.5-grain gap is where the extra weight comes from.
On paper, the troy ounce is usually abbreviated “oz t” or “t oz.” When a bullion listing or receipt just shows “oz,” ask before buying. Over five ounces of gold, the difference between the two units is around 14 grams of metal, worth several hundred dollars.
Pennyweights, Grains, and the Troy Pound
Within the troy system, one troy ounce is divided into 20 pennyweights, and there are 480 grains in each troy ounce.3National Institute of Standards and Technology. Conversion Factors for Precious Metal SalesNIST HB 44 2024 Appendix C – General Tables of Units of Measurement Jewelers and scrap-gold buyers often quote prices in pennyweights. A dealer offering “$100 per pennyweight” is offering $2,000 per troy ounce, since a pennyweight is one-twentieth of a troy ounce. Always convert pennyweight quotes back to a per-troy-ounce figure before agreeing to sell.
The troy system also has its own pound, and this one is counterintuitive: a troy pound contains only 12 troy ounces, not 16.1National Institute of Standards and Technology. NIST HB 44 2024 Appendix C – General Tables of Units of Measurement So even though a troy ounce is heavier than an ordinary ounce, a troy pound (about 373.24 grams) is lighter than an ordinary pound (about 453.59 grams). You’ll seldom see troy pounds in modern quotes, since the industry works per troy ounce, but the number sometimes turns up in older documents.
Gross Weight vs. Fine Metal Content
When a coin is described as “one troy ounce,” that can mean one troy ounce of pure metal or one troy ounce of total weight including alloy. The two aren’t the same.
The American Gold Eagle is the standard example. It contains exactly one troy ounce of pure gold, but its gross weight is 1.0909 troy ounces because it’s a 22-karat coin (91.67% gold), with silver and copper added for durability. The American Gold Buffalo is 24-karat and 99.99% pure, so its gross weight and gold content are essentially identical. Both coins are priced by their gold content, not their total weight.
Reputable dealers list the actual gold weight (often shown as “AGW”) separately from the gross weight. Check which figure a listing refers to before comparing products from different mints or purities.
Why Every Gold and Silver Price You See Is in Troy Ounces
Gold, silver, platinum, and palladium are all quoted in troy ounces on every major market. The International Organization for Standardization treats them almost like currencies, giving each a three-letter code under ISO 4217: XAU for gold, XAG for silver, XPT for platinum, and XPD for palladium.4SIX Group. ISO 4217 Currency, Fund and Precious Metal Codes On the COMEX futures exchange, a standard gold contract represents 100 troy ounces.5CME Group. Gold Futures Contract Specs When you look up a live spot price on a broker platform or news site, that price is per troy ounce by default.
Turning a Troy-Ounce Weight Into a Dollar Value
The spot price is the current market price for one troy ounce of a given metal. It moves throughout the day with supply, demand, currency swings, and news. To find the raw market value of what you hold, multiply the spot price by the number of troy ounces. Five troy ounces of gold at a $2,500 spot price is $12,500 of metal.
Almost no one actually transacts at spot. Dealers charge a premium above spot when you buy and pay below spot when they buy from you. For common one-ounce bullion coins and bars in normal market conditions, buying premiums typically run 3-10% over spot. Smaller items carry higher premiums; one-gram bars can be marked up 15-30%. When you sell common bullion back, expect roughly 1-3% under spot. Larger quantities usually get better pricing, with volume breaks at 10, 20, or 100 ounces.
These calculations also matter for insurance coverage, estate valuation, and tax reporting. Because metals can move several percent in a single day, the valuation date should match the event: the sale date for taxes, the policy effective date for insurance.
How the IRS Treats Precious Metals
The tax rules are where the troy ounce becomes legally consequential, because reporting thresholds are set in troy-ounce quantities and the tax rate on gains is higher than for most investments.
The IRS classifies precious metals as “collectibles” under IRC Section 408(m).6Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts Long-term capital gains on collectibles are taxed at a maximum federal rate of 28%, compared to the 20% top rate that applies to most stocks and real estate.7Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed Gains on metals held one year or less are taxed at ordinary income rates.
Dealer Reporting on Form 1099-B
When you sell certain precious metals to a dealer, the dealer may have to file IRS Form 1099-B. The reporting obligation depends on whether the CFTC has approved trading by regulated futures contract for that specific form of the metal and whether the quantity sold meets or exceeds the minimum contract size. Sales to the same customer within a 24-hour period are aggregated and treated as one transaction.8Internal Revenue Service. Correction to the 2025 and 2026 Instructions for Form 1099-B Because the standard COMEX gold contract is 100 troy ounces, selling less than that in a qualifying form generally won’t trigger a 1099-B.5CME Group. Gold Futures Contract Specs The gain is still taxable whether or not a form is filed; reporting it on your return is your responsibility.
Cash Payments Over $10,000
Any precious metals transaction involving more than $10,000 in cash requires the dealer to file Form 8300 with the IRS.9Internal Revenue Service. Form 8300 and Reporting Cash Payments of Over $10,000 “Cash” includes physical currency, cashier’s checks, and money orders. The IRS aggregates related transactions over short periods, so breaking a $15,000 payment into two doesn’t avoid the filing. The form is informational.
Metals Held in an IRA
You can hold certain precious metals inside an IRA, but only specific forms qualify. American Gold Eagles, American Silver Eagles, American Platinum Eagles, and bullion meeting minimum fineness standards are permitted, and a qualified trustee such as a bank or approved non-bank custodian must hold the metal.10Internal Revenue Service. Investments in Collectibles in Individually Directed Qualified Plan Accounts Rare coins, numismatic pieces, and metals below purity thresholds are prohibited. Buying a prohibited collectible inside an IRA is treated as a taxable distribution of the purchase amount, potentially with early-withdrawal penalties if you’re under 59½.
Face Value on a Bullion Coin Is Not Its Real Value
U.S. bullion coins carry a legal tender face value stamped on them, but that number is symbolic. A one-ounce American Gold Eagle has a face value of $50; a one-ounce American Silver Eagle, $1.11United States Mint. Bullion Coin Programs The metal in each is worth many times more, and the face value functions mainly as proof of official U.S. coinage. Spending a one-ounce gold coin to settle a $50 debt would mean giving away thousands of dollars in gold.