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Friday, March 12, 2010

Selling Your Gold for Scrap

Inquiries on selling your gold are continuing to come in on a daily basis so let me address this issue for those of you interested in doing this. First of all, yes this is actually a good time for you to sell old gold that you're not wearing anymore. Gold is at an all time high (although I believe, when adjusted for inflation it is still not as high as it has been in the past). Platinum is fairly high as well although off of it's peak of $2400/oz that it hit about a year ago. I'm not recommending that you sell things just because gold is at a high. If you wear and enjoy the piece and money isn't critical, I wouldn't recommend it. But if you have old pieces you no longer use it is a better time than most to sell.

However there are a lot of things to understand about the process and what's involved. First of all most of the jewelry you own is either 14k gold or 18k gold (if you've bought from me you may have something in 22k gold or if it comes from Asia or India it may also be high karat). Karat is a statement of purity. 24k gold is pure gold. 18k gold is 75% pure gold and 25% alloys (usually copper and silver). 14k gold is 58.5% pure gold and the balance is alloys. (Incidentally, "karat" is different from "carat" which is a weight measurement for gemstones, although the two spellings are routinely confused.) So even if you bought a piece that was sold as "solid" gold, it doesn't mean it's pure gold, just that it is not something that is plated or gold filled. So even if you have an ounce of gold jewelry (and I'll get to that weight issue in a minute) you don't own an ounce of pure gold that is currently worth about $1100/oz. If it's all 18k gold you only have 3/4 of an ounce of pure gold. If it's all 14k gold it's only a little more than half an ounce.

The next problem is that if you're weighing your gold at home on a normal scale you're not actually weighing in the right weight system (please try to say that phrase "weighing in the right weight system" three times fast). Gold is weighed in troy ounces. Your scales weigh in avoir ounces. If you have one avoir ounce of gold you actually only have .91146 troy ounces. So you take your one ounce of 18k gold that is actually only 3/4 ounce of pure gold and multiply the .75 times .91146. You'll see that you get only .6835 ounces of pure gold that you will actually get paid for.

Okay so now let's say you take your 1 ounce of gold, that is actually .6835 ounces of pure gold, and multiply it times $1100 for the current price of gold. You end up with a figure of $752 (give or take). Now you're getting really excited. Woohoo! $750 I didn't have before! It sounds great, except that no one is actually going to give you $752. Why? Because everyone has to make money on the deal. You take it to a jeweler, who's paying overhead and labor (so that he/she can be there when you decide you want to sell your gold). He has to pay for these things. He also is taking a chance on what the gold price is going to be. Let's say he ships scrap in to the refiner once a week. The refiner then takes at least a few days, or sometimes up to two weeks, to process and refine your metal and only then sends the jeweler a check. So what happens if gold goes down a hundred or two hundred dollars an ounce by then? If the jeweler paid you $752 he would have lost money on the transaction (forgetting about what he would lose on his overhead, etc.). Now there are refiners who will settle the day a jeweler sends in their gold but, guess what: they pay less for the metal!

Additionally a retailer has to take into account the fact that sometimes what they test the metal to isn't accurate. If someone brings in something marked 18k but it's actually 14k (or even just 17.5 k) and the jeweler pays based on the stamping (or even a test that turns out to be flawed---and some criminals are now trying to sell extremely heavily plated items that it's easy to be fooled by) they don't get paid as much, or they can get nothing at all if it's not actually gold. On top of all of this many communities require gold and jewelry purchasers to hold onto anything they buy for up to 30 days. This is mostly to attempt to prevent criminals from selling something that disappears overnight. The side effect is, again, that a jeweler has no idea of what the gold price will be when he actually sells the pieces to the refiners.

And then there is the refiner (and possibly middle men as well) who all need to make some money on the deal. Businesses have to make money to survive so you truly aren't going to get something for nothing.
Then the question becomes what is fair for everyone involved. Unfortunately there is no clear line here. Some places have much higher costs of doing business and need to make more money on each transaction. Some advertise more about this and need to make more money from it. Some little hole in the wall jeweler may not need to make much and he might pay better or, because he does less volume and his risks are higher, he might need more.

So where do you go when you want to sell your scrap? Well you don't come to Daniel R. Spirer Jewelers because I don't buy gold outright. It's not part of my business model . I do, however, take gold in towards work being done on custom pieces or on pieces from my case. I have recently updated my payments on these items and find that I am relatively competitive with what many jewelers who buy gold are offering.

I can tell you that you absolutely do not want to go the companies that advertise on national television. Besides the fact that there have been numerous exposes of their pretty horrendous actions in buying metal, any company spending that much on national advertising is not going to pay as well as your local jeweler. What I do tell people is that their best option, if they live local to Boston, is to go downtown to one of the Jeweler's Buildings (333 or 387 Washington Street--333 is usually better), and go to three or four places that buy gold (most of them do down there) and take the offer that is the highest. If you live in New York City there is always 47th Street, also filled with jewelers. Most major cities have some type of jeweler's building where jewelers are centralized and a little Google research should get you locations. If you're in the suburbs go to three or four local area jewelers and do the same thing.

There is some misinformation circulating right now (the Boston Globe's latest article on selling gold didn't help with this either) that you need an appraisal before you go to sell your jewelry. While you can get appraisals that will reflect the actual potential resale value of your goods, most appraisals are insurance replacement value appraisals which have no relation to what you will get when you sell your gold at all. But here's the biggest problem, even if you can get an appraiser to value it appropriately: any legitimate appraiser charges for his time. My minimum charge for an appraisal is $75. If you only have $150 worth of gold scrap you've just spent half of it on me. In my book, that's kind of stupid. Besides, it doesn't really matter what an appraiser says. If no jeweler is going to offer you more than $100 for a piece of gold, no appraisal in the world is going to change that.

So spend a little time doing your homework and a little time hoofing it to a few different places and take your best offer. If you're thinking about selling the gemstones in the pieces please read my prior posts on this subject. And good luck!

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