Friday, March 27, 2009

Selling my gold – how does it work?

Nowadays you’ll see promotions on the TV, in the newspaper and in magazines, advertising businesses that will buy your old gold. Everyone claims to pay the most, but how do you really know? There are several factors involved.

Gold is a commodity and has fluctuating prices based on the daily market. The past few years have seen incredible volatility in gold prices from day to day.

Remember when you are selling your old jewelry as scrap that it is only as valuable as the precious materials it contains. You will not receive any value for labor or the markup you originally paid when it was purchased.

The other confusing aspect is that most jewelry is made of 10k, 14k or 18k gold and none of those are pure gold. Each of these types or alloys of gold includes a certain standardized percentage of pure gold and the balance of the volume is made up with other metals. The other metals serve to make the gold a particular color or give it specific strength or malleability characteristics. For instance 14k gold, one of the most common alloys in use in the U.S., is 58.5% pure gold and the balance is made up of various metals such as copper, silver or nickel.

So when you bring your old gold jewelry into Spectrum Art & Jewelry to sell or trade in the following occurs:

I will sort through the pieces, looking for carat stamps indicating if it is 10k, 14k, or 18k. Federal regulations require that karat gold jewelry must have a karat stamp and a maker’s hallmark stamp to verify it is what it is being represented to be.

Sometimes I will be unable to locate a stamp on the piece. In that case, I use my best judgment (along with my experienced goldsmith’s) to estimate what I believe the item to be. Knowing the provenance of the piece is very helpful. Sometimes the stamp is worn off or was removed when a ring was sized. We can usually tell if something is gold plated or another metal all together.

Then I’ll weigh the different collections of 10k, 14k or 18k. We measure gold in Troy ounces. There are 20 pennyweights (or dwt) in a single Troy ounce.

As I mentioned before the different alloys contain different percentages of pure gold. I have formulas that help me estimate the amount of pure gold.

Most of the time we do not melt the gold down ourselves to make into new pieces. Only simple, solid pieces lend themselves to this practice. Pieces like elaborate cocktail rings or chains don’t melt well and the end result risks being unsatisfactory. We usually send the scrap gold to a professional refining company. Typically the same place we buy our gold supplies for making jewelry.

The refining company melts the gold scrap and performs an “assay” to determine the percentage of pure gold. They charge a percentage for this service and a fee based on the amount we submit. Once they have estimated the gold content, they consult the market price on that day to determine what to pay. Then they deduct their percentage and fees and send the balance.

When I take in your gold scrap I am assuming certain risks. I will give you a price based on that day’s market value and my formulas and the fees I expect to pay the refiner. However, it is only worthwhile to submit the gold for refining when I have accumulated enough to offset the fees. So I wait and accumulate the scrap. Fluctuations in the market value can improve or dramatically decrease the money I receive in return.

So there you have it. This system applies to everyone who takes in scrap gold, no matter what they tell you. We are all subject to the same market variations. Most refiners offer a very similar percentage and fee schedule. It is just a matter of how much does any vendor give you from the money they expect to receive when they resell your gold. All of us perform this service in order to profit from it to some degree.

I find the best system for me is to encourage people to trade their old gold toward store credit or a new jewelry project. That way I can afford to offer a higher price for their old jewelry. The reason you don’t see me running big ads in the newspaper and attracting 100s of people to the gallery to sell their gold is that I don’t want to take the risks that come from a volume of gold trade. I prefer to keep each transaction personal and sort out the best possible way for someone to get the maximum value (be it money or acquiring something new and beautiful) from their old treasures.

The single most important consideration when selling your old gold is to deal with someone you know and trust and who will be there in the future.

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