Gold purity is measured using a scale of millesimal fineness, which denotes the number of parts per thousand of pure metal in the alloy. The term “fine gold” refers to gold that is at least 99.9% pure, commonly referred to as “pure gold”.
- 999.99 (Five Nines): This is the purest form of gold, 99.999% pure. It’s also known as five nines fine gold.
- 999.9 (Four Nines): This is 99.99% pure gold, often referred to as four nines fine gold.
- 999 (Three Nines): This is 99.9% pure gold, commonly referred to as “fine gold” or three nines fine gold.
- 990 (Two Nines): This is 99.0% pure gold, or two nines fine gold.
- 24 Karat: This is the purest type of gold on the karat scale, equivalent to 999 fine gold.
- 22 Karat: This is 91.67% pure gold. It’s often used in jewellery.
- 18 Karat: This is 75% pure gold. It’s a common purity level for gold jewellery.
- 14 Karat: This is 58.33% pure gold. It’s used in jewellery and is more durable than higher-karat gold.
- 10 Karat: This is 41.67% pure gold. It’s the minimum karat designation that can still be called gold in the US.
- 8 Karat: This is the lowest karat gold, with 33.3% gold content. It’s not commonly used.
Where is fine gold used?
Fine gold is used in various applications:
- Bullion Production: Fine gold is often used to create gold bullion bars and coins. These items are typically used for investment purposes, where the purity of the material is crucial.
- Jewellery making: Although fine gold is very soft and not typically used for everyday jewellery, it can be used in certain high-quality pieces.
- Electronics: Fine gold is used in computers and other electronics due to its excellent conductivity.
- Dental applications: Gold’s biocompatibility makes it suitable for certain dental procedures.
- Medical applications: Fine gold is used in certain medical applications due to its resistance to bacteria and corrosion.
- Aerospace applications: The aerospace industry uses gold in various components due to its resistance to heat and radiation.
Please note that while fine gold is highly valued for its purity, it’s also more susceptible to damage and wear due to its softness compared to lower-purity gold alloys.
What is the difference between pure and fine gold?
The terms “pure gold” and “fine gold” are often used interchangeably, but there is a slight difference between the two.
- Pure gold: This term is often used to refer to gold that is 24 karat, meaning it contains no other metals or alloys. It is the highest level of purity achievable. However, achieving 100% pure gold is nearly impossible due to the difficulty of refining it to that level. Therefore, pure gold is typically 99.9% pure.
- Fine gold: This term typically refers to gold that has a purity level of 99.9% or higher. It’s almost completely pure in composition. The term “fine gold” is often used when the gold is so pure that it contains only trace amounts of other elements.
In conclusion, both pure and fine gold refer to gold that is high in purity, but fine gold is a more specific term that refers to gold with a purity of 99.9% or higher.
How fine gold affect the gold loan interest rate?
The purity of gold, often referred to as fine gold, can significantly affect the interest rate on a gold loan. Here’s how:
- Loan amount: If you want a higher loan amount, you may get some benefit on the interest rate. Lenders usually provide better rates for larger amounts because it reduces their administrative costs for every unit of loan they sanction.
- Gold purity: The purity of gold directly affects the interest rate. Higher-purity gold typically attracts lower interest rates because it has a higher resale value and provides better security for the lender.
- Lender’s policies: The policies may differ from lender to lender. Some banks and financial institutions might offer promotional rates or discounts to existing bank customers as well.
- Loan tenure: Shorter tenures usually have lower interest rates compared to longer tenures. This is because a shorter tenure minimises the risk of market fluctuations affecting the value of the gold over time.
- Market conditions: The geo-political and economic factors also heavily influence interest rates. For example, in uncertain and distressed environments the cost of borrowing generally increases, affecting the rates on gold loans as well.
In summary, the purity of gold is one of the key factors that lenders consider when determining the interest rate on a gold loan. The higher the purity of the gold, the lower the interest rate may be.
With minimal documentation, multiple repayment options, and free insurance of pledged gold, a gold loan serves as a reliable financial solution, particularly during high gold rate periods. Borrowers can access funds quickly without the need to sell their precious jewellery, ensuring both liquidity and asset security. Additionally, the gold loan interest rates, making it an affordable borrowing option for individuals looking to manage urgent financial needs, whether for medical expenses, business expansion, or personal commitments. The ease of application and swift disbursal further enhance its appeal, making gold loans a preferred choice among borrowers seeking financial flexibility.
Calculating loan value based on gold fineness
The loan value based on gold fineness is calculated using the Loan-to-Value (LTV) ratio. Here’s how:
- Determine gold value: Get the current market value of your gold items. This is done by assessing the purity and weight of your gold.
- Decide loan amount: Decide on the loan amount you require based on your financial needs.
- Calculate LTV ratio: The formula for calculating the LTV ratio is:
LTV Ratio = Loan Amount *Value of Gold\times 100
For example, if the market value of your gold is ₹100,000 and you need a loan of ₹60,000, your LTV ratio would be:
LTV Ratio = ₹60,000 *₹100,000\ 100 = 60%
This signifies that the lender is willing to offer you a loan amount equal to 60% of the market value of your gold assets.
How to identify fine gold
Identifying fine gold is crucial for buyers and investors to ensure authenticity and value. Fine gold, typically defined as 99.9% pure (24 karat), lacks impurities and retains its natural shine. Here’s how you can verify its purity:
- Hallmarking: Look for the BIS (Bureau of Indian Standards) hallmark, which certifies purity in India. It includes a BIS logo, purity in karats, and the jeweller’s identification mark.
- Purity Stamp: Fine gold is often stamped with “999” or “24K,” indicating its high purity level.
- Magnet Test: Gold is non-magnetic, so genuine fine gold should not be attracted to a magnet.
- Acid Test: A drop of nitric acid on fine gold will not cause a reaction, ensuring authenticity.
- Professional Testing: Using an electronic gold tester or visiting a certified jeweller can provide accurate results.
Always buy gold from reputed sellers to ensure authenticity and fair pricing.
Why is fine gold preferred for investments?
Fine gold is highly preferred for investments due to its high purity and stable value. It typically refers to gold with 99.9% purity (24 karats), making it the purest form available for investment purposes. Investors choose fine gold because it retains intrinsic value over time and is globally recognised.
Key reasons why fine gold is preferred:
- High purity: Fine gold contains minimal impurities, ensuring a higher value per gram compared to lower-purity alternatives.
- Better liquidity: It is easily tradable worldwide, making it a highly liquid asset.
- Hedge against inflation: Fine gold acts as a safe haven, protecting wealth during economic instability.
- No risk of tarnishing: Unlike alloys, fine gold does not corrode or degrade over time.
- Ideal for reserves: Central banks and investors store fine gold as a long-term asset.
Due to these advantages, fine gold remains a preferred choice for investment and wealth preservation.
Tips for utilising fine gold in loan transactions
Here are some tips for utilising fine gold in loan transactions:
- Valuation: The loan amount depends on the value of the gold. Higher purity gold can fetch a higher loan amount.
- Credible lender: Since you’re pledging your precious gold, ensure the lender is reliable and trustworthy.
- Repayment options: Understand the repayment options. You can opt for Equated Monthly Instalments (EMIs), pay interest as EMI and principal later, make partial payments, or choose bullet repayment where you settle the entire loan amount at the end of the loan’s tenure.
- Refinancing: If you find more favourable loan terms or lower interest rates with another lender, consider refinancing your gold loan.
- Foreclosure: If you can afford to settle early, consider foreclosing the loan to save on interest costs.
Remember, making regular payments according to the agreed schedule is vital to prevent any penalties.
