How to Calculate Gold Profit
Calculating gold profit is straightforward in theory: current value minus total cost. In practice, three things complicate it — purity (not all gold is 99.9%), the premium you paid when buying, and the spread you accept when selling. This guide works through all three with a concrete example.
The basic formula
The foundation of profit calculation is simple, but you must account for purity at every step:
Profit = (current spot price per gram × purity fraction × weight) − total cost paid
Where total cost paid = purchase spot price per gram × purity fraction × weight × (1 + premium %)
Let us work through a concrete example to make this real.
Step-by-step worked example
Your purchase: You bought 20 grams of 22-karat gold when the spot price was $85 per gram, and you paid a 4% premium to the dealer.
Calculate your cost:
- Purity of 22k gold = 91.67% (22 out of 24 parts pure)
- Actual pure gold in your purchase = 20g × 0.9167 = 18.334g
- Cost per gram at spot = $85
- Premium cost multiplier = 1.04 (4% above spot)
- Total cost = 20 × 0.9167 × $85 × 1.04 = $1,626.41
Calculate current value:
The spot price has risen to $103 per gram. What is your gold worth now?
- Current value = 20g × 0.9167 × $103 = $1,888.38
Gross profit:
- Profit = $1,888.38 − $1,626.41 = $261.97
- Return on cost = $261.97 / $1,626.41 = 16.1%
This is your gross profit — before you actually sell and account for dealer spreads, tax, and other real-world costs.
Why your real profit after selling is different
Your gross profit of $261.97 assumes you can sell at spot price. That almost never happens. Here are the real costs that reduce your take-home profit:
Real-world net profit calculation
Using the same 20g of 22k example, assuming a 2% dealer spread and $25 in costs:
- Melt value at $103/g = $1,888.38
- After 2% dealer spread = $1,849.41
- After shipping/assay costs = $1,824.41
- Gross profit before tax = $1,824.41 − $1,626.41 = $198.00
- If subject to 20% CGT (UK): net profit = $158.40
- Effective return = 9.7% (vs 16.1% gross)
Comparing profit on different gold types
Not all gold products deliver the same profit outcome, even when spot price rises. Let us compare at spot $103/g, all purchased at the same time when spot was $85/g:
10g 24k gold bar at 2% buy premium
- Cost: 10g × $85 × 1.02 = $867
- Current melt value: 10g × $103 = $1,029.90
- Dealer buyback at 1% below spot = $1,019.71
- Profit: $1,019.71 − $867 = $152.71 (17.6% return)
10g 22k jewellery at 15% buy premium (realistic retail)
- Cost: 10g × 0.9167 × $85 × 1.15 = $977.43
- Current melt value: 10g × 0.9167 × $103 = $944.71
- Dealer buyback at 80% of melt value (jewellery markup penalty) = $755.77
- Result: $755.77 − $977.43 = LOSS of $221.66
Key lesson
Jewellery bought at retail with making charges rarely makes money even when spot gold rises sharply — the buy-in markup (15–25%) is simply too high to overcome. The dealer also discounts jewellery on buyback because it must be melted and reassayed. If you want profit exposure to gold, buy bullion bars or coins, not retail jewellery.
The profit calculator workflow
Rather than recalculating by hand each time, use the gold profit calculator to automate these steps: