Gold Bugs, Gold Bears and Melting Down Grandma's Ring

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The good news is that gold prices are floating near an all-time high. The bad news is that, when investors rush for the glittering yellow metal, it generally means that they're rushing away from stocks and other commodities. But while gold's high prices spell a dark future for the economy, they may be a literal gold mine for people sitting on unwanted jewelry.


Making Money on Gold


When it comes to investment, gold is a mixed bag. On the bright side, its prices soar in times of economic insecurity, which means it can be a great place to make money when more traditional investments are hitting the skids -- like right now: As long as people are too scared to put their money in stocks and bonds, gold will continue to hold its value and will probably rise.

The trouble is, gold isn't all that useful: It isn't as strong as steel nor as light as aluminum, as conductive as copper nor as durable as platinum. In fact, when gold prices are this high, it is really only useful for making jewelry. Unfortunately, with the economy on the skids, people aren't buying jewelry -- they're selling it. So, as the price of gold rises, it is actually becoming less useful.

But for people with old, unwanted jewelry filling up their drawers, the threatening financial clouds dotting the horizon may have a silver -- or gold -- lining. After all, with prices hovering at an historic high, this may be the best time in history to get rid of unwanted gold.

How Much Is Your Scrap Gold Worth?

Of course, with gold prices going through the roof, it's also a good time to get cheated, and the market is cluttered with companies paying a fraction of actual gold values. As in any selling situation, the key to getting the highest price for scrap gold is finding out how much it is actually worth.

The first step for figuring out the value of a piece of jewelry is determining the current market value of a gold pennyweight, which is the standard measurement for jewelry. NASDAQ's commodities price list is a good resource, as it constantly updates the price for a troy ounce of pure 24-carat gold. There are 20 pennyweight to an ounce, so -- for example -- if gold was going for $1,890 per troy ounce, the scrap price of a pennyweight of 24k gold would be $94.50.

Most of the time, jewelry is made out of 10-karat or 14-karat gold, so it's necessary to adjust the scrap price accordingly. For example, 10k is 41.67% gold, so multiplying the 24k pennyweight price by .4167 will yield its pennyweight price. Similarly, 14k is 58.3% gold, so multiplying the 24k pennyweight price by .583 will yield the 14k gold pennyweight price. Using the earlier example, if 24k gold was worth $94.50 per pennyweight, 10k would be worth $39.38 and 14k would be worth $55.09. Since many gold dealers post their pennyweight price for 10k, 14k and 24k gold, these numbers make it much easier to figure out how good an offer is.

Determining the market value of a piece of gold jewelry is easy: It is simply weight (in pennyweights) multiplied by price. As an example, a standard men's wedding ring might weigh roughly three pennyweight. Using our gold pricing example, if it was made out of 14k gold, it would be worth somewhere around $165.27.

Convenience Isn't Always Best

Gold buyers rarely offer the full scrap value of a piece of jewelry, but by doing a little work, sellers can vastly increase the amount of money that they can take home. Generally speaking, the more convenient a gold-selling method is, the less money it pays out. This is certainly the case with Cash4Gold, the best-known mail-away gold purchasers. On the surface, the process couldn't be simpler: customers mail their gold jewelry to Cash4Gold, which mails them back a check. Unfortunately, the checks are often for a fraction of the face value. In fact, in a recent investigation, the company offered a mere 18% of the actual value of the gold they were sent. In the case of our 14k man's wedding ring -- valued at $165.27 -- that would be just $29.74!

That isn't to say that all mail-in gold companies are as questionable as Cash4Gold; the same investigation found that sellyourgold.com offered roughly 90% of the full value of the gold jewelry it was sent. But while the payouts from gold companies may vary greatly, it's clear from the collection of scandals, legal inquiries and complaints to the Better Business Bureau that the ease of mail-in gold sales often comes with a high price.

Getting the Best Price

Despite their sometimes-shady reputation, pawn shops can be a great alternative for gold sellers hoping to get the best price for their jewelry. Often, respectable pawnbrokers openly display the price that they offer for 10k, 14k and 24k gold, which can clear up a lot of confusion. For that matter, if a pawn shop is interested in reselling a piece of jewelry, it may be willing to pay more than just the scrap gold price. Chances are that the payout will still be less than the jewelry's full value, but sellers who get bids from three or more pawn shops can often get great deals.

Generally speaking, online auctions are the most profitable method for selling jewelry. To begin with, companies like eBay (EBAY) can put sellers in contact with a wide variety of potential buyers, many of whom might be willing to pay more than scrap value for an interestingly-designed piece of jewelry. Beyond that, online auctions allow sellers to take advantage of the difference between wholesale and retail pricing. In short, pawn shop owners buy jewelry at wholesale prices with an eye toward making a profit through resale. Auction bidders, on the other hand, are used to paying full retail, so they are often willing to pay a price that lands somewhere between retail and wholesale. For them, the final price might be a big discount from retail, while the seller will make much more than the wholesale value.

Ultimately, though, even today's high gold prices pale beside sentimental value and -- while the recent jump in gold prices has multiplied the value of old jewelry -- selling old baubles is only profitable if you won't regret it. In other words, if you're planning on selling grandma's wedding ring, make sure the money you get is worth the heirloom you're sacrificing.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.






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Imurdstny9

I work for a Goldbuyers at the Mall. We are a national company and have been paying higher prices than most jewelry stores in the areas we are. We do all the testing in front of the customers and can pay cash on the spot! Check us out at Goldbuyersatthemall.com for locations and testimonials.

September 09 2011 at 7:57 PM Report abuse -1 rate up rate down Reply
iplayslow

Any honest gold licensed gold buyer should pay you more than $45 per penny weight of 15K scrape gold. Anything less than that is a rip off.

September 09 2011 at 7:01 PM Report abuse rate up rate down Reply
1 reply to iplayslow's comment
iplayslow

Oops, its 14K, not 15K. Typo mistake.

September 09 2011 at 7:02 PM Report abuse rate up rate down Reply
eyedocandynj51

I WILL PAY ANYONE 1200 A OUNCE BASED ON 24K PRICE OF COURSE 18,14 AND 10K WILL BE LESS PER OUNCE. NO MIN OR MAX...CONTACT ME

September 09 2011 at 6:56 PM Report abuse -1 rate up rate down Reply
1 reply to eyedocandynj51's comment
Michael

Idiot. Gold close at 1650 an ounce and you will buy at 1200. I tell you what I beat you, I will buy any ounce of gold at 900..........

September 23 2011 at 9:37 PM Report abuse rate up rate down Reply
Ross Family

Just curious...who's buying up all this gold were turning in? I hope it is staying in the US and not being used against us in a foreign land to strengthen their own economy while ours is taking a dive.

September 09 2011 at 4:47 PM Report abuse rate up rate down Reply
Suzy

The only thing I've ever pawned before was my engagement ring from my late ex-husband. We separated in 1991, and by 1992, I was definitely ready and in need of extra cash, since I was also a single mom.. I went into Boston that day and pawn shops wanted so little, like $50. I kept thinking, I would hold out, and it was a good thing I did. I saw a block where there were tons of jewelers. There were so many "unknown" jewelry stores, and then a jeweler on the corner with a great reputation and very popular. I went in there first and they offered me $450! I was like, wow, that's more than $50, but let's try other jewelry stores. Would you believe that all of the other 4 jewelers I showed the ring to, were only willing to offer me about $10-$20! Yet the jeweler up the street was willing to give me way more!! I took the bigger amount of money, and ran......

September 09 2011 at 4:39 PM Report abuse +1 rate up rate down Reply
hmadden

Gold is very useful in electronic circuits. In space applications, gold doesn't cold weld in vacuum. It also reflects infrared extremely well.

September 09 2011 at 4:37 PM Report abuse rate up rate down Reply
desertgemstudio

These AOL articles seem to cover PART of the stories. Buying gold is complex. As shared in an earlier post, a lot of jewelry is under karated, either legally or illegally. It may be stamped 14K, but could be 13.5 as allowed by law up until Oct 1981 (15 USC 295). To date, many items are under karated, illegally.
Another issue buyers might consider is provenance (history) of the item. Some pay more if it is stamped Tiffany, Cartier, etc. due to the name recognition. Or pay more for certain Period jewelry like Edwardian, Art Deco. On the flip side are wedding rings where the history is usually involving divorce and that has bad "juju" . These rings are mostly scrap.
Counterfeit jewelry is another problem. But, can be resolved with mechanical testers and/or acid tests. Both involve some degree of skill and hazard exposure.
If a buyer has the education/equipment, they will pay for the quality/marketability of gemstones included. Most buyers lack this element and cover themselves by minimizing this aspect.
Some State laws play into the purchases. Here in Washington State, a buyer of secondhand precious metal must comply with RCW 19.60.010. Seller must be 18yoa/older; current/valid gov't issued ID; no personal property crimes in past 10yrs; legal owner/agent of property. Buyer must fill out a report of sale within 24HR, turn that in to the local police dept, hold item for 30 days in that jurisdiction before disposal.
Then there is the amount of time it takes to remove any stones set in the jewelry. A tennis bracelet set with 44 .01 carat diamonds is literally a pain in the rear to remove.
Even after all this, the buyer must have a minimum amount to send into the refinery to justify the refining fees and maximize returns. We buy small lots, accumulate to the point when it's profitable to send in.
Time is the critical element in many of these transactions.
Profit is also a critical element. 100% gross profit is not unheard of in many disciplines of business. After overhead is backed out, 12-18% net is reasonable here in the United States. After all, we are a capitalistic society.

September 09 2011 at 4:37 PM Report abuse +1 rate up rate down Reply
rothsteinjewelry

You can search Yahoo or Google or Yelp.com for the best places to sell gold, and look for the testimonials. If you had called us, we offer at least a full 80% of the market value. This covers the cost of melt & assay & losses due to non-gold parts, & any other labors associated with the process. We also broker the little diamonds and other parts such as watch movements, so you as the client get the most value. I don't know what they were telling you - Prongs are gold!! Panned nuggets are not 24Kt pure... we melted some. Lots of impurities. Look us up if you want more info. Janet, ~Rothstein Jewelers in Beverly Hills~

September 09 2011 at 4:30 PM Report abuse rate up rate down Reply
rog4406

That's not what Glen Beck or the Watergate convict say.

September 09 2011 at 3:39 PM Report abuse rate up rate down Reply
David Rivero

Gold is a much better conductor than copper. It carrries more free electrons.

September 09 2011 at 2:58 PM Report abuse +1 rate up rate down Reply