Fineness

Fineness is the measure of a precious metal’s purity, expressed in parts per thousand (‰). It indicates how much of a metal sample consists of pure gold, silver, or platinum, as opposed to alloying elements such as copper, silver, or zinc. For gold, fineness directly determines both market value and eligibility for institutional custody under LBMA and refinery standards.

Definition and Formula

Fineness expresses the ratio of pure metal content to total weight. It defines how many parts per thousand of the total mass represent pure gold or another precious metal.

Formula:
Fineness = (Mass of pure metal ÷ Total mass) × 1000

A gold bar with a fineness of 999.9 means that 999.9 parts per thousand are pure gold, and 0.1 parts are other trace metals.

Examples:

• 995.0 = 99.50% pure (Good Delivery minimum standard)
• 999.0 = 99.90% pure (standard for minted bars)
• 999.9 = 99.99% pure (“four nines fine,” premium investment grade)

Historical Context

The concept of fineness originates from medieval minting and assay practices, where refiners measured purity to standardize coinage and bullion. In the modern bullion market, fineness replaced karat notation (used in jewelry) as the universal quantitative purity metric.

For example:

• 24 karat gold ≈ 999.9 fineness
• 22 karat gold ≈ 916.7 fineness
• 18 karat gold ≈ 750.0 fineness

The transition to decimal fineness improved measurement precision and international standardization in institutional trade.

Determination and Testing Methods

Fineness is determined through assay testing, which analyzes the chemical composition of the metal sample.

Key methods include:

• Fire Assay — the most accurate laboratory method, used for official certification;
• X-ray Fluorescence (XRF) — non-destructive surface testing for routine verification;
• Ultrasonic or density testing — supplemental methods for vault-level authenticity checks.

Each LBMA-accredited refinery operates an internal ISO/IEC 17025 assay laboratory and submits reference samples for independent verification by LBMA referee institutions.

Role in Refining and Production

Fineness defines the quality grade of gold produced by refineries. Refining processes such as chlorination, electrolysis, and solvent extraction aim to reach 999.9 or higher purity before casting into Good Delivery bars or kilobars.

Bars below the 995.0 threshold cannot be accepted into LBMA-accredited vaults or interbank settlement systems. Maintaining fineness consistency is both a technical and regulatory requirement for refiners and custodians.

Impact on Valuation and Trading

Gold prices are quoted per troy ounce of fine gold — meaning value is based on pure metal content, not total bar weight.

Example calculation:

400 oz × 0.9999 = 399.96 fine ounces of gold

This calculation is essential for accurate pricing, insurance valuation, and custody reporting. Even small deviations in fineness can affect large institutional transactions and audit reconciliations.

Fineness in Custody and Compliance

Within institutional custody, fineness serves as a legal and operational control metric. Vault operators and custodians record fineness for every bar in inventory, using it to verify that holdings meet minimum LBMA or COMEX standards. Insurance policies and audit certificates reference total fine ounces rather than gross weight.

Custodians also ensure compliance with:

• LBMA Good Delivery Rules (≥ 995.0 fineness);
• OECD Responsible Gold Guidance (traceable refining and sourcing);
• FATF AML/KYC frameworks (verified refinery of origin).

Institutional Relevance

Fineness defines the technical integrity and financial precision of the global gold market. It ensures that every reported ounce of gold represents a verifiable amount of pure metal, allowing transparent valuation, settlement, and custody. By standardizing purity measurement, fineness sustains interoperability between refineries, vaults, and financial institutions — making it one of the core parameters of modern bullion infrastructure.