Selling Gold: Don’t Get Ripped Off

Selling gold, like your old rings and necklaces, looks enticing these days. When you see the advertisements on TV and the Internet for gold buyers, all telling you that you’ll get top dollar for your junk gold, remember that you are trading a precious metal for inflation-ravaged US dollars. All things being equal, you’d be better to hold onto your old junk gold. The prices for gold are going to skyrocket in the coming months and years. Don’t be surprised to see spot prices for gold above $5,000 within the next three years.

Gold is a pretty cool substance. One ounce of pure gold can be stretched into a wire five miles long, or hammered into a sheet so thin that it would cover an area 100 square feet in size and light would pass through it. The word “carat” (of which the notation for gold, “karat,” is a variation) comes from the Arabic word “qirat,” which means “bean pod.” In Oriental bazaars, a tiny carob seed was a unit of weight measurement.

This list below shows the karat number of gold, followed by the percentage of pure gold in the alloy.

10K 41.7%
14K 58.3%
18K 75.0%
24K 100%

What kind of alloys go into gold products?

GOLD COLOR CHART

These are the alloys added to pure 24K gold to make its distinctive color.

• Yellow Gold: Copper and silver. Yellow gold comprises 85% of the gold sold throughout the world.
• White Gold: Nickel, Zinc, Silver, Platinum, and Palladium. White gold symbolizes friendship and is the most important of the colored golds.
• Pink (Rose) Gold: Copper. Pink gold has become increasingly popular and looks lovely when combined with yellow or green gold.
• Green Gold: Silver, Copper, and Zinc Green gold is being used more and more with pink gold and yellow gold and is an important part of Black Hills Gold’s signature grape leaf design.

I decided to test the market yesterday, and sell a piece of jewelry at the highest price I could find that day. So I called five gold buyers and visited the one that gave me the highest quote on the phone.

Today, July 4, 2009, gold’s spot price is $931.50 per ounce of 99.99% pure gold. So, every tenth of an ounce is worth $93.15 today.

The old 14K ring I sold to the gold buyer fetched $90.00. The ring weighed 0.3 ounce. So, I was paid $30 per tenth ounce. Big difference from $93.15, huh?

Here is how the buyer explained the pricing process. They start with the daily spot price of 24K gold. Then, they determine the karat of the gold, and multiply the spot price by the percentage of pure gold in it. Then they deduct the refining costs to smelt and recover the 24K gold. Finally, they deduct 10% as their profit.

So, my transaction’s numbers looked like this:

Spot price $931.50
Times 58.3% $543.00 of 24K gold in 14K gold
Times weight 0.30 ounce
Gold value $162.90
Less refining ($ 18.60)
Less 10% profit ($ 54.30) actually 33% of $162.90
Net cash value $90.00

This was the best price I could find. So, as you see, the dealers can and do play games with the percentages, prices, and deductions. It’s almost as honest and easy to understand as buying a used car. Almost.

I don’t really know if the refining cost is high or not. I don’t know if the profit deduction is high or low. And neither will you. So, after the gold buyer lays out his bid for your gold, negotiate to get your best price.

My recommendation is that if you are desperate for cash, call around and get phone quotes from dealers before you get in your car and start making visits to dealers. They won’t want to tell you anything by phone because they want to you to be in the store so they can close the deal. Then approach your gold selling transactions with knowledge, which will keep you from getting ripped off.

So, I got killed on this transaction, and the gold buyer will make a big profit at today’s gold price. He’ll likely wait until gold prices go up before he smelts the gold, and then he’ll make more. If you try to sell your gold without knowing their games, you’ll also get the lowest price, not the highest price.

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One Response to Selling Gold: Don’t Get Ripped Off

  1. seks hikaye says:

    I am amazed with it. It is a good thing for my research.

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