Gold Jewelry, Value of…

In today’s economic environment, many gold and silver buyers are popping up all over.

There’s the mail-us-your-jewelry-and-we’ll-mail-you-cash groups. That just doesn’t seem like a good idea. The pieces could be “lost” in the mail. Plus, their profit margin is quite high. Their high profit margins mean less payment – much less – to you.

There’s the gold-party-groups. If you host the party or if you attend a friend’s party, the experience appears to be better. But, what are the buyers paying per ounce? Is their profit margin high?

Then there’s the rent a hotel for a weekend to buy gold and silver. Think about it, how much does it cost to rent a large portion of a hotel? That cost plus their desired profit margins mean less money to you.

Of course, jewelry dealers buy jewelry, and so do coin dealers provided there’s value in the metal – gold, silver or platinum. Some jewelers and coin dealers also pay for semi-precious stones (diamonds, emeralds, rubies, sapphires, etc.).

But, let’s step back and look at the metal value of jewelry. For this commentary, let’s focus on gold.

First, what is the karat of your gold jewelry – 10k, 14k, 18k, 24k? In the US, 14k is common. In India, 18k is common. Pure gold at 24k is not as common since pure gold is too soft for most jewelry.

When you hear the gold price per ounce, the ounce is a troy ounce which is 20 pennyweights or 31.1 grams. A troy ounce is heavier than the ounce (avoirdupois ounce) found on your kitchen scale.

Also important, the market price of gold represents pure 24k gold.

Jewelry gold of 18k, 14k or 10k contains 75%, 58.3% and 41.7% of gold respectively. Therefore, if you have an ounce of 14k jewelry gold, the price per ounce will be proportionately discounted.

Now, jewelry and coin dealers do not have the ability to melt and refine the jewelry gold into usable pure gold. They, in turn, have to ship the jewelry scrap metal to a gold refiner. This obviously costs the coin and jewelry dealers time and money.

Plus, the gold refiner has to have a profit margin to cover his costs of melting the scrap jewelry and extracting the  gold. Generally, the larger the amount the refiner buys from a dealer, the more he pays per ounce.

For grins, let’s look at the math for determining the value of gold jewelry – the rates and profit margins are just examples to illustrate the math.

You collected your unwanted jewelry including any stones and non-metal attachments. On your kitchen scale, they weighed 2 ounces.

Let’s say the current market price of gold is $1000 (a round number for ease of the example) per troy ounce. You’re thinking, wow, between $1000 and $2000 dollars of value.

You take your jewelry to the dealer. After you agree, he cuts and removes all non-jewelry gold items from your jewelry. He weights the jewelry gold, and you have .5 troy ounce of 18k gold.

You’re disappointed, but that’s still $500.

Not so fast.

Let’s do the easy math first.

At 18k, the jewelry gold is 75% pure gold. So, $1000 multiplied by 75% is $750. Your .5 troy ounce equals, at best, $375.

But the gold refiner charges for the refining, for ease of math, let’s say 10%. Now, we’re down to $338. Let’s not forget the dealer to whom you are selling, they need to cover their costs. Again, let’s say 10%, we’re now at $304.

Well, $304 is $304 more than you had for jewelry you didn’t care about anymore.

(Some news media sent samples to mail-in buyers, the mail-in buyers’ comparable purchase for this example would be less than $100.)

Hopefully, that simplistic example helps you understand that selling your gold jewelry is not as simple as weighing it on a kitchen scale for the ounces, looking up the Kitco price per ounce, multiplying the two and asking for that value. Also, this example alerts you to the wide disparity between buyers.

In summary, be careful, and do your homework.

Oh, and just as a caution, there’s some good fake gold being paraded into dealers’ shops. To protect themselves, dealers will ask you if they can perform cutting tests and acid tests to verify that your jewelry does contain gold. If you are not sure you want to sell, you can refuse and take your jewelry away intact.