From newbies purchasing their very first ounce, to traders controlling a huge number of ounces, nobody should be in the silver space without...
(by Half Dollar) Silver is money.
At the core of money is a very specific weight and a very specific purity of precious metal, nothing less, and nothing more. It's not hard to understand, but confusion does reign supreme in our modern society, so the fact that the US dollar and it's derivatives, such as $0.10, $0.25, $10, and $20, are supposed to be nothing more than a very specific weight and purity of silver or gold is lost on most people should not be surprising. The US Constitution requires, by name, both gold and silver to be our money, not gold or silver, and while it is true that palladium and platinum arguably meet the requirements needed in order to be money, and while it is true that most of the people in this world today talk about other things as if they were money but are not, for simplicity in this article, let's just assume I'm writing about precious metal in general and silver specifically.
Here's the question: What is the difference between "one ounce" and "one troy ounce"?
The short answer is that there is a small but significant difference.
Every person in the silver space, from the individual buying his or her very first ounce of silver, to the retail day trader potentially controlling thousands and thousands of ounces, should know the difference. Furthermore, not understanding the difference between one ounce and one "troy" ounce could mean a huge difference when it comes to the total weight of silver that a person holds. The difference comes down to the number of grams that are in one ounce versus the number of grams that are in one troy ounce.
THE OUNCE AND THE "TROY OUNCE"
One ounce, which could be an ounce of weight of anything, really, such as one ounce of coffee beans, contains 28 grams. Moreover, one ounce contains 28.35 grams when being more strict in the conversion from the English System (ounces) to the Metric System (grams), but in a general, when people refer to one ounce, they're referring to 28 grams. The "troy ounce", however, is heavier than a regular ounce. So how many grams are in a troy ounce? Well, one troy ounce contains 31.1035 grams, although most people casually refer to the weight as 31.1 grams.
Purchasing one single ounce of silver, whether it is one ounce or one troy ounce, does not make too much difference as that person either has 28 or 31.1 grams of silver. Over time, or, for example, when purchasing 5,000 ounces of silver, the difference between purchasing "regular ounces", for lack of a better term, versus purchasing "troy ounces" can be huge! In other words, if a person purchases 5,000 regular ounces of generic silver bars, they will be acquiring 140,000 grams, but if a person purchases 10 monster boxes of American Silver Eagles, which would equal 5,000 one ounce coins, measured in troy ounces as opposed to regular ounces, that person would actually end up with 155,500 grams of silver! Said differently, over the long run, or on the purchase of, say, 5,000 ounces of silver, the slightly over 11% difference in weight between one regular ounce and one troy ounce really adds up!
THE CHINESE COMPROMISE?
Some may argue that 11% is a huge difference, and really, it is!
I mean, who wouldn't like to have 11% more money, or who wouldn't like to get 11% better at something, or who wouldn't like 11% more battery life in a cellphone when unable to charge?
Interestingly, and perhaps for efficiency's sake, most of the world uses the Metric System as opposed to the English System. That said, just like most people throughout the world can relate to the price of a piece of meat when it is priced in grams or kilos better than when it is priced in ounces or pounds, it is more likely that a person understands the price of gold or silver when it is priced in grams or kilos better than when it is priced in ounces, especially considering the various types.
Enter the Chinese Silver Panda: By default, it weighs in at a cool 30 grams.
That's what we call a compromise.
Woot!
SIZE MATTERS
What is the bottom line, and are there any takeaways?
The bottom line is that it is important to understand the differences in how silver is measured. And to think, I've only gone over the weight aspect of measuring silver. Remember, there is also the purity aspect of silver, which is the topic of some other article for a different day, but there are a few takeaways, indeed. First, If a person is purchasing silver over time, to get the most bang for the buck, all things considered, troy ounces weigh more than regular ounces. Conversely, if we're talking about an economic collapse, which may not be out of the realm of possibility, especially if the US dollar hyperinflates as so many people are expecting, then we may also be talking about a barter scenario in which giving up as few grams as possible is what matters the most. Secondly, if one is purchasing "paper silver", that is to say, purchasing a financialized silver product that is in one way or another connected to the silver "market", since we're talking about a difference of 11% depending on the way the weight is measured, one can get a sense of whether the financialized silver product is undervalued, overvalued, or value indifferent. Finally, for the sake of diversification, understanding the differences in the way silver is measured can be a fun, practical way to diversify one's savings and investments. I personally have a variety of silver with many different weights and purities, from .9999 fine silver bars measured in grams to to .900 fine old silver coinage. To say the very least, diversification is critical when converting one's savings into real money.
There's no arguing the fact that a silver bar is valuable, no matter how its weight is measured. Arguably, however, every person in the silver space needs to understand the various measures of weight.
What's the difference between a regular ounce and a troy ounce?
A lot more than people think.
Stack accordingly,
Paul "Half Dollar" Eberhart