Zakat is a compulsory act of worship that requires Muslims who own wealth at or above a certain threshold to donate a portion of that wealth, typically 2.5%, to those who are eligible. This threshold is called the Nisab.
The Nisab was set by the Prophet Muhammad (peace be upon him) at a rate equivalent to: 87.48 grams of gold and 612.36 grams of silver according to the Hanafi school of jurisprudence. In today’s day and age we do not use silver or gold as monetary exchange so when calculating your Zakat, you need to find out the equivalent of the rates the Prophet (peace be upon him) set but in your local currency. This can be done by checking the market rate of gold and silver today.
Remember you only pay Zakat if your net assets equal or exceed the Nisab threshold. If you only have gold as an asset, then the Nisab measure for gold must be used. If, however, you have a mixture of assets, then the Nisab level for silver should be used. Although some scholars still maintain that gold should be used regardless, using silver is safer and more beneficial for the recipients of Zakat. In most cases this means that if your net assets (income and savings) are above the silver Nisab threshold, you must pay Zakat on the total amount of wealth you own.