Billboards, TV ads and signs pop-up everywhere saying, “We buy gold!”
Now, even Dave Ramsey – that bastion of financial peace – has added his voice and support in an advertisement touting one of the gold buyers.
Stop and think. People frequently look for the easy and fast way to make the biggest profit. If there are that many people “buying gold,” there must be some large profit margins in their business plans.
Roughly a year ago, Good Morning America performed a simple test to show viewers what a handful of gold buyers would pay.
Let’s look at the details.
Using expert resources and 14 karat gold, they built bags of jewelry worth $410 in gold for that time period. Their expert advised them an offer of $350 or roughly 85% of the gold value would be a good offer.
Remember, the gold buyer considers cost of doing business and profit to determine their offer for your gold, so expecting 100% of gold value is unrealistic.
They visited a local jeweler in addition to obtaining three mail in companies’ bids.
|Actual Offer||Percent of Good Offer||Percent of
|1 Mail In – 1st Offer||$ 206.00||58.9%||50.2%|
|1 Mail In – 2nd Offer||$ 275.00||78.6%||67.1%|
|2 Mail In||$ 89.71||25.6%||21.9%|
|3 Mail In – 1st Offer||$ 66.05||18.9%||16.1%|
|3 Mail In – 2nd Offer||$ 137.00||39.1%||33.4%|
Interestingly, they did not ask a coin and bullion dealer what they would offer for the same amount of jewelry.
But, look at the results. The local jeweler was close to the initial projected “good offer.” However, the three mail in companies were not close. The first company’s offer was dramatically different than the other two, but it still was much less than the projected offer.
You’ll note in the study, Good Morning America asked Jeff Aronson, the CEO of Cash4Gold, to comment on the low offers. He replied, “”That’s what that material was worth to me at that time. That’s what it was worth to me to process. I make no apologies for pricing, whatsoever. I’m a service business.”
That’s an interesting point. He’s a “service business” with a high profit margin. If you don’t like the deal, they return your gold.
As one commenter mentioned, the issue is not so much what these gold buyers pay. Instead, the problem is they portray themselves, if not directly, then indirectly, as paying top prices for gold.
As an excellent alternative, many coin and bullion dealers buy gold jewelry at up to 90% of gold’s current market value. (Take a look at this earlier post describing how jewelry’s gold value is determined.)
Mr. Aronson made another comment designed to scare people, “If all you care about is the net dollar, and you’re willing to go to the seedy part of town, and you’re willing to travel around … I want you to go there. I don’t want you to come to me. I want you to come to me for convenience and ease. That’s what I want you to come to me for. If not, I’m happy for you to go someplace else.”
Coin and bullion dealers have shops in well respected parts of town. Do you think it’s a smart business decision to have a coin and bullion shop in a seedy part of town? Security is always a concern for precious metals. Dealers are not going to compound that problem by setting up in a shady area.
Furthermore, you can find coin and bullion dealers at coin shows as well.
Perhaps your time is worth more and you want the convenience of mailing your gold. But, if you want the better prices, look to a coin and bullion dealer.