Florida Avenue is the main drag in our little town in central Florida. In less than a mile, you’re likely to see three or four folks standing on the sidewalk wearing headphones, bopping to music, and waving big glittery signs or arrows with “We Buy Gold” written across them. It’s a common sight across many cities today.
During my annual trip to Arizona, my friend Phil asked me about gold. He owns some gold with no emotional value tied to it, and I convinced him of two things. First, he should not sell his gold; and second, he should hold it in a portable form with an easily recognizable value, like Gold Eagles. If things really get tough, he wouldn’t want to have to barter jewelry with no easily agreed-upon value.
There are many places where he could probably sell his jewelry, but how would he know if he was getting a fair price? I didn’t know either, but I knew I had a friend who would.
I called up my good friend Rob. His family has owned a pawnshop for decades; it even has a “We Buy Gold” sign in the window. Who better to ask?
Rob explained his position as a dealer. For him, gold is a highly volatile asset; its price swings can have a major impact on his margins. When he buys gold, he must hold it – sometimes for several months – until he has enough to sell to a refinery. His highest percentage payout at the refinery is tied to the volume he sells.
Under Florida law, even if he buys the gold outright, as opposed to taking a pawn, he’s required to hold the item for at least 30 days. The normal “We Buy Gold” facilities have a 15-day minimum hold.
When the price of gold is rising, a lot of folks come into his store to sell. When it drops, Rob can get caught with inventory he can’t sell at a profit. The dealer does take a sizeable risk.
Rob walked me through the process his clerks use to evaluate gold, using a necklace as an example.
Weight
First they put the item on a scale to weigh it. Most dealers weigh the item in “pennyweight,” not ounces. One pennyweight is 1/20 of a Troy ounce.
I asked Rob, “If I weighed a gold necklace on my wife’s Weight Watcher’s scale and it weighed 1 oz., that’s 20 pennyweight on your scale, right?”
He replied, “Not exactly.”
A Troy ounce is not the same unit of measurement as the “ounce” on a postal scale or the scale you weigh yourself on at home. When you see the price of gold quoted in the paper, it’s in Troy ounces.
He also mentioned that some dealers weigh the gold in grams. There are 31.1 grams in a Troy ounce. (I’m using pennyweight in our example because that’s what Rob uses in his store.)
Karat
The second step is to determine the karat weight (abbreviated “K”) of the gold. “Karat” is the term used for purity; 24K gold is 99% pure.
Commercially made jewelry will always have a karat marking on it. If there’s no marking, it’s a huge red flag, and most dealers won’t buy it.
A dealer will still verify that the karat marking on the gold is accurate. There are several styles of test kits that dealers use; Rob noted that karat markings are usually accurate, but not always.
Some inaccurate markings are actually there to deceive you. For example, “14K Filled” or “14K HGE” (heavy gold electroplated) are both gold-plated designations. That’s why they check.
Doing the Math – “Cheat Sheets” Provided!
After that, it’s a matter of math. It’s not especially complicated, but the terminology used by the jewelry industry can puzzle people.
Assume you have a 20-pennyweight piece of 18K gold, which means it’s 75% pure gold. Fifteen is 75% of 20, so you have 15 pennyweight of 24-karat gold.
And since 20 pennyweight equals one Troy ounce, that’s 0.75 oz. of 24K (pure) gold.
To make this process even more straightforward, I – with Rob’s help – put together two Gold Conversion Worksheets for our Money Forever readers. Both walk you through the process step by step.
That’s Great, But How Much Money Will I Get?
On average, “We Buy Gold” dealers pay about 76% of the spot price to sellers for their gold.
As a dealer, Rob loses approximately 5% when he takes the gold to the refinery. Because the refiner actually melts down the gold, its appraisal is even more accurate than Rob’s. When he weighs the gold in the store, there may be steel (not gold) springs, a little filler, or even some soap scum (remember we are talking about used jewelry) on the product; that all adds to its weight.
One pennyweight is 1/20 of an ounce, so it doesn’t take much to register a little more weight on Rob’s scale. When the refiner melts out the actual gold, it’s usually about 5% less than what he calculated.
Rob emphasized that his weight estimates never quite match what’s left after the gold’s been melted down. The refiner never buys the gold at spot price; when you boil it down (pun intended), his margins are normally 10-12%… certainly not exorbitant.
When I asked Rob if he had any suggestions for our readers, he said to take one item and shop it around. He suggested using a heavy item; it will give you a more accurate reading of what the jeweler is paying per Troy ounce. Go to three or four places and get quotes, and you will likely get a variety of prices.
Also, always ask the dealer for the weight and the karat of your item. They will probably quote the weight in pennyweight, knowing full well that most folks cannot convert it to Troy ounces.
Write it down so you can easily compare dealers’ offers. If a couple of dealers give you the same weight, and then one is different, ask them to recheck it; don’t hesitate to mention that other dealers told you something else. If the jewelry has a karat mark and the dealer tells you it’s inaccurate, ask why – and get a second opinion.
Secret Shoppers
Today’s market for gold buyers is more competitive than you might think. To learn what the competition is offering, dealers will periodically send a secret shopper around with a gold item to their competitors to ask for a bid, should they decide they want to sell it.
Some gold buyers are very aggressive. Rob mentioned one store where the appraiser stands behind a piece of thick plastic, like at a currency exchange, and the customers slide their gold through an opening.
In one instance, a lady went into a particular store to have her jewelry appraised; the clerk slid paperwork and cash back through the slot, and refused to return her jewelry. It took fifteen minutes of escalating demands before she was finally able to speak to a manager and get her jewelry back.
If you’re shopping around, trust your instincts. If it doesn’t feel right, don’t do it! There are plenty of reputable places that will buy your item, so do business where you feel comfortable. Shopping around can easily net you a few hundred dollars more for your item.
Remember Those Late-Night Commercials for Mail-In Gold Dealers?
I asked Rob about the firms where you mail in your gold, and they send you back the cash. Just like dealers in town, some are reputable, and some are not.
Many also charge a high “assay fee,” which lowers your total return. From a practical standpoint, it’s much more difficult to comparison shop and negotiate through the mail. So while it’s probably the most convenient way to sell your gold it’s likely you’ll get less for it. Like anything in life, if you’re doing less legwork on this then you’re going to get less of a pay off.
Selling Directly to a Refiner
I asked Jeff Clark, the editor of BIG GOLD, if he had any suggestions. He indicated that local gold markets vary throughout the country. Some markets lack competitive buyers, so shopping around is paramount.
He also pointed out that gold refiners do not negotiate. They take the metal, melt it down, and pay you accordingly.
Jeff pointed me toward two refiners, Dillon Gage and Precious Metal Recovery, and I phoned them both.
Dillon Gage has a $10,000 minimum order and requires a tax ID number. It pays out 99% of spot price, minus an assay fee for analyzing the gold.
Precious Metal Recovery pays 93%-96% depending on quantity, with no assay fee. If you ask, the company will also provide a coupon for a portion off the shipping for larger orders.
Just like with dealers, if you go directly to a refiner, it’s still important to compare prices and shop around.
While we’re talking gold today Money Forever covers many more financial subjects of interest to retirees including high-yield dividend stocks, annuities, reverse mortgages, mutual funds, TIPS, and much more. Find out more by clicking here.
Eddie says:
“On average, “We Buy Gold” dealers pay about 76% of the spot price to sellers for their gold.”
Yeah, well..but how does the seller know? The buyer has the weighing equipment, the buyer has the “test kit”. The buyer knows the spot price. Frequently the seller has no way to authenticate anything. Generally “dealers” who buy gold are more than willing to cheat the unwary.
Most gold jewelry doesn’t have enough gold in it to be all that valuable. This “industry”, like pawn shops, exist as a way of separating poor people from anything they might own that has any value. Just a sign of the times. There’s a sucker born every minute, and two more waiting to relieve him of his treasure. Sad.
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5th February 2013 at 5:14 pm
sangell says:
How much are gold crowns worth? I have some of my fathers, he had all his teeth pulled before he died and then I have a two of my own old crowns from former molars. Can I trade old crowns for a new implant?
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5th February 2013 at 5:52 pm
KaD says:
Sangell, I’m wondering if the dentist couldn’t use the old gold to make a new implant. I’d be surprised if they couldn’t.
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5th February 2013 at 6:09 pm
Didius Julianus says:
Dental gold, if memory serves, is 16 karat or 66% pure gold. I used to work in and manage coin shops way back in the 1970s to mid 1980s. Funeral directors or employees would come in ” all the time” with gold crowns to sell. does not take much imagination to know where those came from. Pricing of that type of gold is similar to the process described in the article above.
I have one gold crown – I will tell my loves ones to be sure they get it when the time comes as I know it will not stay in my mouth. Everyone should do the same.
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5th February 2013 at 6:11 pm
Didius Julianus says:
The dentist should be able to use the old gold, they custom make crowns so should not be a problem.
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5th February 2013 at 6:12 pm
Eddie says:
If we’re talking dental gold, there are four types. Of the four, most crowns are made of type three dental gold, which is about 75% pure gold. Dental gold alloys differ in hardness depending on the application. Most all of them are alloyed with silver and other metals like platinum to get specific characteristics of strength, malleability, etc.
Except, most crowns today are either porcelain fused to metal, which uses some platinum in the mix and typically looks like “white gold” underneath the white porcelain…or they are completely ceramic (no gold at all). All ceramic crowns are far and away the most aesthetic…and the cost is lower, so it’s kind of a win/win.
For durability and biocompatibility, though, nothing beats a gold crown.
When I get scrap crowns, I do save them. But I can’t tell by looking if they have any gold in them. In twenty plus years of practice I haven’t collected enough gold scrap to even turn in to a refiner for recycling. An average crown might contain 3 pennyweights of gold.
Since the 1970s (the last time gold got really expensive) dental labs have learned to use base metal alloys for crowns…and many lower end clinics do go cheap…and you can pretty much bet that great deal you got in Mexico on crowns was partly because they used base metal. Base metal crowns do work, but they can cause allergic reactions in some sensitive patients…but they are perfectly legal. You should let your dentist know if you have a preference for what they call “high noble” metal.
Implants are made from titanium, not gold. The magic there that makes them cost so much is in the surface preparation, which is carefully etched to mimic bone, so that bone will grow against the implant and it will become osseo-integrated.
Most dentists do not cast their own crowns, and most labs use new gold to fabricate crowns, unless it’s a do-over for the same patient.
In recent years, there have been problems with dentists using foreign labs that have no quality control, like in China for instance. You might get a crown that contains cadmium from such a lab, and that would make you sick. It is illegal in my state to use these labs, but there are unscrupulous people in every field. It pays to ask pointed questions sometimes.
Just a little insider info, fwiw.
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5th February 2013 at 6:54 pm
varnelius says:
Not that I’m interested in selling gold, but I feel like testing all of the various Gold Buyers/Pawnbrokers in my area just to see how honest they are.
We have a free weekly newsmag in our area, I should send them the results so that if someone locally does ABSOLUTELY have to sell their gold, they’d at least have a published testrun to say who is the most honest/likely to pay out the most.
I know I did take my dad to sell a broken ring a year or so ago (gold prices were still fairly close to what they are now), and they gave him a paltry $75. There were even diamonds in the damn thing.
I will stress tho, that no one should be selling gold, as its about the only safe store of value these days (PMs in general).
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5th February 2013 at 9:39 pm
Bostonbob says:
My wife went to sell a couple of broken pieces of jewerly a couple of years ago. She had them checked out for weight and purity locally and the shop that checked them said that if the offer she had from the chronic Advertiser was true she should take it. Once the PMs were sent the revised offer was much lower. She said send them back they raised the offer 25%. How much were they ripping off people before. I know you only hey ripped off if you are ignorant. Yes I let my wife sell some gold. We did pay for a couple of months of UMASS for my son.
Bob.
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5th February 2013 at 10:03 pm
SSS says:
Pay attention to this article, folks. It’s MOSTLY accurate. Tell all your friends to read it.
Do NOT, whatever you do, sell gold to a mail-in company. Never. Do NOT, whatever you do, sell gold to a company like “Good Ol’ Tom,” which nationally advertises a lot on TV. Both will rip you off.
Above all, follow the advice in the article to find out what exactly you have in gold. You probably have stuff in 10, 12, 14, 18, and 22 karat gold. Know what the fuck that means. Then use the conversion tables for all this troy ounce, pennyweight, and grams bullshit. The buyer will weigh the different carats you have and pay accordingly. At least TRY to know what you have before selling. It may take an hour or two of reading and math, but it may also make you hundreds or thousands of extra dollars as an informed seller. You’ll know when you’re being lowballed.
Sell to reputable, local gold buyers ONLY after checking out offers from them. I highly recommend a reputable local coin dealer who’s buying gold. They tend to be the most honest people in town. Ask ALL of them what percent of spot they are paying. I find the article’s claim of 76% of spot to be way low, but that’s the only beef I had with the article.
My investment advice for the month. Please send donations to Admin through the instructions at the upper right of the page. I get a huge, really huge, cut of the take. Thank you.
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5th February 2013 at 10:30 pm
DaveL says:
SSS says most of it is true. Yes, most of it.
“When he buys gold, he must hold it – sometimes for several months – until he has enough to sell to a refinery. His highest percentage payout at the refinery is tied to the volume he sells.”
I did this stuff back in the early 80′s. My buyer would sell to the refinery. He could layoff anything he bought with just a phone call, at the daily price, and deliver within 3 days.
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5th February 2013 at 12:02 am
IndenturedServant says:
I just so happen to have an IdentAlloy certificate here for a gold crown I got a couple of years ago after breaking a tooth in half.
Au 59.5%
Ag 26.5%
Pd 2.5%
Cu 8.5%
Zn 2.5%
I remember thinking when I got the thing that it might make me a choice target for the goons running the FEMA camps. Each one gets one hit to my face and the first to knock the crown out wins!
I_S
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5th February 2013 at 2:16 am
card802 says:
Also, reading in some of the survival blogs, many Argentinians wished they had a few bags of gold jewelry rather then gold coins after their economic melt down in 1999.
The markets that sprung up did not make change. If you wanted an item and all you had was a gold coin, too bad. Those with gold jewelery could barter more effectively.
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5th February 2013 at 6:55 am
Thinker says:
SSS, you’re right about the coin dealers. I’d also recommend a quality jeweler. I’m lucky enough to live next to a high-end jewelry designer here in Chicago. A couple of years ago, she started offering her clients a “gold-selling service” where they could bring her their jewelry and she would sell directly to a refiner, since she also buys wholesale from said refiner. By cutting out the middlemen, the seller got more money and the jeweler and refiner also got a good end of the deal. Even better, a jeweler knows how to assay the gold and has all the equipment to weigh in troy ounces.
And, as Card points out, it’s always good to have someone who can turn your gold into something you can barter with; jewelry or not, if a large piece is broken down into smaller ones and marked with assay and weight by a professional, it’s more likely to be accepted in lieu of cash.
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5th February 2013 at 10:08 am
Eddie says:
Indentured Servant
That is a “low precious” type three gold substitute. Your dentist probably charged you and your insurance company for “high precious”. Not saying he did, but it happens all the time.
Thinker
Is the designer near you Casting House? I have worked with them on designing jewelry myself. I used to toy with it until metal costs got so outrageous. (And before anyone asks, no I didn’t use gold I took out of anyone’s mouth, LOL.)
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5th February 2013 at 10:46 am
Thinker says:
Eddie, no, not Casting House. She’s a small, independent jeweler with her own shop, where she also sells the work of similar artisans. Does a lot of custom work. Nice stuff, if pricey — but works almost exclusively in 18K.
The economic situation has hit her hard and she’s winding down and closing the shop soon, planning to work on commissions only. I notice, too, that her “sell your gold” policy has changed to a store credit rather than outright cash, probably in an attempt to make a living from it. Even her wealthy client base isn’t spending money on jewelry any more.
You know times are tough when…
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5th February 2013 at 10:59 am
IndenturedServant says:
@Eddie, I think the decision was based on my propensity for grinding my teeth. The first thought was to use a porcelain crown but they are too brittle.
I_S
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5th February 2013 at 2:28 pm
Bob says:
The “We Buy Gold” shops didn’t exist when Gold was selling for a few hundred per ounce. They sprang up about when Gold prices breached $1,000/oz. The existence of such shops is an indication that the price of Gold is topping or has already topped.
The “We Buy Gold” shops will disappear when the price of Gold falls during the deflationary collapse. That will be the time once again to start accumulating Gold.
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5th February 2013 at 4:12 pm
Eddie says:
So, Bob. In 2008 Gold took a major hit when the markets bottomed, but quickly recoverd and then surged in price. Is that what will happen this time?
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5th February 2013 at 4:42 pm