Gold prices have seen an unexpected rise in 2014 and people with used gold jewelry are wondering if this is the right time to sell. Here are five secrets that buyers do not want sellers to know when they purchase their used gold jewelry.
The price index switch. U.S. buyers of gold jewelry will use one of two gold price indices to set their purchase prices: the New York Spot Gold price or the London Fix price. They will typically use the index that their refiner uses, but sometimes shady buyers will say they use one index when they are actually using the other. The reason is the price difference. The New York Spot gold price is a price index of gold transactions principally in the United States, while the London Fix price indexes European and international markets.
While the prices are often close, the London Fix will show international gold price trends sooner since the majority of gold transactions occur outside the United States. In other words, if there is an upward spike in international gold prices, the London Fix will show it first, followed by the New York Spot Gold price. A U.S. buyer could set their gold purchasing price at the New York Spot Gold price knowing they will get a little extra by selling it at the London Fix. The best advice for a seller is to watch the London Fix and sell to a buyer who sets their price at the London Fix when the index is high. That way, the seller knows he/she is getting the best international market price up front when the market is right.
Knowing weights and measures is crucial. When buyers advertise their purchase rates they often try to impress customers with the per ounce price for refined 99.99 percent gold. Currently the London PM fix for a pure troy ounce of gold is $1,319.25, an increase of $94.75 since January 1. While this amount may seem like a lot, no common jewelry manufactured today is 99.99 percent gold, nor is it anywhere near a troy ounce. Most gold buyers will use the metric system to weigh gold jewelry. A typical gold wedding band for men will weigh between 3-6 metric grams, for women 2-4 grams, depending on the gold alloy.
There are 31.1 grams in a troy ounce, the international standard measure for gold transactions. So, a 3.1 gram wedding band would be worth $131.92 on the international market today, but only if it were made of 99.99 percent gold, which it is not. Some gold buyers will use the English system of pennyweights and grains. One troy ounce is 20 pennyweights and a pennyweight consists of 24 grains. The best advice is to accurately measure gold jewelry before presenting it for purchase. That way sellers can have independent verification of the weight of their jewelry before the buyer puts it on their scales.
Knowing Karats is crucial. Everyone knows at some level that a 10 karat gold wedding ring is not 99.99 percent gold. The amount of gold in the metal used to make jewelry, called an alloy, is measured in 1/24th parts. So, ten karat gold alloy is 10/24th parts gold, or 41.67 percent. 14 karat gold alloy is 14/24th parts gold, or 58.33 percent. It is called an alloy because there are other periodic elements in gold jewelry. For reputable manufacturers, common yellow gold jewelry will consist of gold, copper, zinc and silver.
Each of these periodic elements lends particular characteristics to the alloy, which jewelry manufacturers have determined to be optimal for daily wear, durability and looks. White gold jewelry will include enough nickel to turn the alloy white, for instance. Owners of ten karat gold jewelry should realize that less than half of their jewelry’s metal alloy consists of actual gold, yet ten karat is commonly marketed, many believe falsely, as “gold.”
Calculating and comparing the best price. Armed with the international market index price and knowing the weight and percentage of gold in their jewelry, sellers can now hunt for the best purchase price from buyers. The best advice is to create an index for their jewelry that the seller can quickly compare prices to. A typical scenario goes like this. The optimal value of a 14 karat gold necklace that weights 8.4 grams can be calculated on the current London PM Fix, which today is $1,319.25 per troy ounce. There are 31.1 grams in a troy ounce which works out to be $42.42 per gram. A necklace weighing 8.4 grams will thus be worth $356.32 if it were made of 99.99 percent gold. Since the necklace is 14 karat, or 58.3 percent gold, it is optimally worth $207.74, which is 58.3 percent of $356.32.
Sellers will never get the optimal 100 percent value for their gold jewelry, because buyers themselves only get, at most, between 95 to 98 percent from their refiners and also pass other costs to the seller, like overhead. This optimal number is only an index to compare prices to.
Shop local for the best price. The last of the five secrets to selling gold jewelry is one of the most important. Internet buyers of gold have some of the worst purchase price rates, often ranging in the area of 50 percent. In other words, the 14 karat necklace which was calculated above to be optimally worth $207.74 will be purchased by most Internet cash-for-gold shops for around $104. The best deals can be found among local buyers and jewelry stores. Shopping locally also has the advantage of being able to quickly compare prices and haggle. Sellers can expect to get anywhere from 70-80 percent of the optimal value of their gold jewelry, sometimes more depending on the buyers’ circumstances and interest. The best advice is to shoot for 90 percent or more and come down by haggling. Buyers will still get profit at even 90 percent, but maybe not enough to their liking.
The perceived value of gold jewelry is often much different from its actual market value. Every seller of gold jewelry knows that people will often attribute value, sentimental or otherwise, to gold jewelry which will often be very different from its real market value. Buyers of used gold jewelry will use this same perception to buy jewelry from people who believe the jewelry to be useless, or have no value. But sellers who are armed with these five secrets to selling their gold jewelry will be better prepared to get the best price in this upturned gold market.
By Steve Killings