Selling Your Scrap Gold
Economic downturns are a fact of life and you never know when you might be caught up in events outside your control. That is why you always have to be prepared for the circumstances life might throw at you. If during good times you have accumulated some gold either as jewelry or coins, then selling your scrap gold is one such step that you can take when times are rough. There are many advantages of having some gold as an insurance policy against tough times.
What is “Scrap Gold”?
In its simplest terms, scrap gold is any gold that is sent back to the refiner for recycling. Mostly it is broken jewelry that is no longer needed. Gold coins are rarely melted down because they are already in a handy readily recognizable format and are therefore easily exchanged (after all they were money). But for the sake of this article we will include coins in the definition of scrap unless they have a premium (collectable) value due to rarity.
Due to the rise in the value of gold in recent times, selling scrap gold has gained in popularity as a means of raising necessary cash. Gold has appreciated as a store of value, and liquidation is a very relevant option especially in dire economic times. Selling gold is not something most people do everyday and so it requires a bit of knowledge in order to ensure that you get a fair price.
Scrap Gold Purity
Gold purity is measured in “karats” with 24 karat gold being pure 100% gold. 24 k gold is too soft to make durable jewelry and so it is alloyed (or mixed) with other harder metals. So if you mixed half nickel (or palladium) and half pure gold you would get a 12 k “white” gold. Mixing copper with the gold will give you “pink” or “rose” gold while mixing silver with gold will give you “green gold”. If you wanted a 12 k yellow gold you might mix half pure gold some nickel and some copper to get the desired color.
Other typical Karat weights of gold are 18 karat which is 18 parts gold and 6 parts other metal or 75% gold. 14 k gold is 14 parts gold and 10 parts of another metal, making it 58.3% gold and 10K gold contains 10 parts gold and 14 parts of other metals, so it is 41.7% gold. Note: Ten karat gold is the minimum karat designation that can still be called gold in the US.
When you sell your scrap gold the buyer will determine the karat value of your gold and then weigh it in either grams, pennyweight or Troy ounces and multiply the weight by the percentage of gold times the price of gold.
So if Gold is selling for $1800 / Troy Ounce and you have 1 ounce of 12k gold the formula would be $1800 x 1 oz. x 50% or $1800 x 1 oz. x 0.5 in this case the value would be $900. Very few dealers (read none) will give you full spot price but the best dealers will come fairly close. If a dealer says he is giving you spot price, he is probably making it up some other way and you should be very cautious!
Getting the Best Price When Selling Your Scrap Gold
Despite the publication of market prices for gold, the amount paid for scrap gold from jewelry and coins will be a little less than this due to the process involved in the purification and refinery of these items. Calculation of gold prices can be done by use of online gold calculators.
There is always a spread of at least 5% between “bid” (the price they pay you) and “ask” the price you pay them if you are buying. You should always try to find out what the spread is and get several bids on your gold before selling. Generally disreputable gold dealers don’t like to tell you the spread (but even reputable dealers are sometimes reluctant). Because, often the typical gold buyer will only offer you 50% of the spot price. So when he sells it to the refiner he will make a 100% profit on what he paid you. And he doesn’t want you to know that there is someone else out there willing to pay you twice what he is paying.
But even if he won’t tell you the spread if you understand the formula for calculating the value of gold and you know the spot price you can see how much of a spread he is taking.
How to Determine the Karat Value of Your Gold
All quality jewelry is stamped with the karat value. You may need a good magnifying glass or “jeweler’s loop” to read it though. On necklaces and bracelets it is usually stamped on the clasp, while on rings it is stamped inside. Unfortunately, if the clasp is broken or the ring is extremely worn you may not be able to read it. But all is not lost at that point the gold buyer has to test it. To do so he rubs it on a stone or file and puts a drop of acid on it. The acid strength is set to determine the karat composition. The weakest acid will leave 10k gold but dissolve other “base” metals. While the strongest acid will dissolve everything less than 18k gold (even 14k gold).
Jewelry can also be “gold plated” or “gold filled” and if it is it can’t be sold as scrap. So if your clasp says 18GF or 18KGP it may look like 18k gold but it is really only gold filled or plated and isn’t worth selling.
Timing the Sale of Your Scrap Gold
Scrap gold prices tend to fluctuate based on the “Spot” price of gold as traded on the commodity exchanges. Obviously if you are looking to raise cash you would like to sell when gold is at its peak. But when you need money you generally don’t have the luxury of trying to time the market. So you will probably just have to accept the market price on the day you decide to sell. It is more important to find a reputable buyer who will give you as close to spot price as possible than to try to choose the right time and sell at half the spot price.
What Can You Sell as Scrap Gold?
A number of items are important for use as scrap gold, these are mostly valuable items and jewelry. Such items include old watches, gold coins, broken jewelry, gold fillings, and gold teeth. Hallmarked and non-hallmarked gold, platinum and silver also make for valuable items. Some items however, especially the plated ones fetch very little if any value (unless they are in good condition and you can find someone interested in them for their original purpose). The price for your gold items will vary with the carat weight of the items as this is the most important indicator of purity.
In some countries scrap gold can be sold to refiners, most of whom have websites indicating their physical location, contacts and prices. In other places refiners only want to deal with larger quantities and so you must sell to a dealer. Smaller dealers often sell to larger dealers who sell to refiners. Naturally the more middlemen the worse price you get. So finding a large dealer who sells directly to a refiner should get you a better price.
Anyone interested in selling their unwanted gold should do some comparison online first to find the best deals in the market. Selling scrap gold involves a few processes. A myriad of companies dealing in sale of scrap are available online though one has to be careful about the payments considering the existence of spam websites.
Note: The testing and weighing process can destroy any jewelry value of your gold so be sure you want to sell before they file and bend your ring to remove the stone and test the gold content.
- Why Buy Gold? Gold is Still Money
- Where to Sell Silver Coins
- Why Gold is a Good Investment for Inflationary Times
- Inflation Adjusted Gold vs Stocks vs Bonds
- What Happens to Gold if We Enter a Recession?
- Beginners Guide to Gold Investing
- Gold Bullion
- Gold – The Optimal Investment for Inflation
- Precious Metals Silver Gold
- Why (and How) China is Boosting the Price of Gold
Image courtesy of Kittikun Atsawintarangkul / FreeDigitalPhotos.net