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2 posts from April 2008

Maximize the Price for Your Gold Jewelry

GoldbarsimageWith the price of gold bouncing around the $1000 per ounce mark, consumers worldwide are sorting through their jewelry boxes for gold jewelry items they no long want.  Since the metal is being sold as scrap, it does not matter if the rings, bracelets, and other items are damaged or broken.

What many consumers do not realize is that where they sell their jewelry items may have a significant impact on how much money they get for their gold items.  Consumers must sell their gold items to retail business like jewelry stores, pawnshops, or coin dealers.  These retailers then sell the scrap jewelry to wholesale refiners who provide that service and are often located in different cities.

Just like there are no rules dictating what price a jeweler can sell an item, there are no rules on what price the retailer must offer for buying from consumers.  Prices offered by retailers can vary significantly with some retailers offering as much as double the rice as other retailers.  Why is there such a big variance in prices?

  • Gold jewelry is an alloy with only a part of the weight being precious gold.  For example, 14-karat gold is 14/24 or about 58% gold.  Therefore, a one-ounce piece of jewelry only has about 0.58 ounce of gold.  When consumers bring in a bag of jewelry items, they seldom know the exact weight and composition of the metal.  Likewise, some retailers are not as experienced at determining the actual gold content of jewelry.
  • Gold refiners typically pay retailers for scrap at about $20 to $30 an ounce less than the current market price for gold so are getting about 97% of the current market price.  However, retailers are generally offering consumers 50% to 75% of the gold’s value so are pocketing the rest.  With potential profit margins of 50% or higher, it is no wonder pawnshops are posting big signs advertising they are buying gold jewelry.

Moneyhand2 It is up to the retailer to decide how much of the value they want to offer the consumer and up to the consumer to accept or go elsewhere.  In fact, going elsewhere might be a worthwhile strategy if they have a significant amount of jewelry.  By getting price quotes from several retailers, the consumer can avoid the low offers and perhaps make double the money.  If you do not know what you have or what the true value of the gold is, getting numerous price quotes can help you maximize your gold jewelry sale.

If you do not have many options of places to sell your jewelry items, the more you know about your gold jewelry and the composition of the gold, the more advantage you will have when negotiating with the retailer.  If you have an accurate scales, weighing your jewelry can help you estimate the value if you can separate the jewelry into 10-karat, 14-karat, 18-karat, or 24-karat (pure) piles.  If you can get the retailer to offer you 75% of the gold’s value at current market prices, you should feel fortunate.

The more knowledgeable you are when selling your gold, the more money you will get.  Be wary of impulse selling, especially if you are depending on the retailer to tell you what you have and what it is worth.  On a recent trip to the diamond district in New York, there were people with “gold buying” signs about every twenty feet on the sidewalks.  Do not assume that you are getting a special deal in these tourist locations.  It is certainly not worth making a trip to New York or similar large city since retailers in your hometown might be willing to give you a better price.  The key is being knowledgeable so you will recognize an appropriate price.

Tourist Trap Diamond Shopping

I received the following email yesterday.

Aruba_shopping_2 We bought princess cut diamond earrings in Aruba a year ago & came to discover through obtaining an appraisal here in the US that one of the diamonds is glass filled.  We went to the most reputable jeweler here in town & he recommended that we look at your website to learn more about glass filled diamonds.  During the course of the past year, we have tried unsuccessfully to get our money back.  When that did not work, we then said that our friends who go to Aruba every March would bring the earrings & exchange them for us.  That did not work either as the jeweler told them that for us to get the quality that we thought we were getting to begin with we would have to pay more money.  Our question to you is “is the value of the earrings less than what we bought them for”?  We have thought about selling them to someone here in the US but wonder if anyone would buy them knowing they are glass filled.  What is your advice? 

This is a classic example of what happens when tourist purchase diamonds at tourist locations.

1) While shops at tourist locations might be a good value for local, handmade items, diamonds are a completely different product.  Those tourist shops are purchasing them from the same cutters and wholesalers that source our diamonds.  The false assumption is that these tourist location retailers are somehow lower price.  The online diamond retailers in the United States have the most competitive market in the world.  Shoppers from South Africa, India, Australia, Russia, and Canada find diamonds are less expensive on the US retail market than in these countries that mine and cut diamonds.  The real deals are the low single digit margins on most diamonds at online retailers in the United States.

2) We recommend that diamond shoppers purchase GIA graded diamonds to ensure they know what quality of diamonds they are purchasing.  The GIA does not grade diamonds that are fracture-filled because that is a temporary process.  The GIA would identify any permanent diamond treatments on their Diamond Grading Report.

3) Tourist location retailers rely on impulse buyers for their business and they are shielded from the buyer’s remorse because it is so difficult for shoppers to return purchases they realize were not as advertised.  Buyer beware applies when you purchase outside the borders of the US because legal resource is very limited.  There is no Better Bureau, Chamber of Commerce, or local TV station available to uncover unlawful or unethical business practices.  The Aruba shoppers are likely in for a surprise if they think they will get a refund if they take the earrings back to Aruba.  The fine print on the sale probably only allows a store credit, if even that, and how wants to purchase from someone you already know does not practice good business ethics.

4) The deals that seem too good to be true while on vacation or even at the local jewelry store should raise a big red flag.  If the prices are lower than online retailers, that simply means the quality is not as advertised.  Tourist location retailers are not giving their goods away and typically have higher overhead than online retailers have.  This is especially true of tourist thinking they can find a good deal in the Diamond District of New York.

Because the shoppers in the Aruba story above did not know the quality of the diamonds they were buying, they probably paid much more for what they bought than they should have.  Now that they realize their mistake, their options are limited because most diamond shoppers are now well educated via the internet on how to get the best values when shopping for diamonds.  They will only get pennies on the dollar if they sell them to a jeweler or pawnshop, and they will find it difficult to find consumer who will buy them for anything close to what they paid if they disclose what they know about the diamonds.  Buyer beware also applies if you are considering buying from an individual.  You might be able to find a deal if the individual needs to sell, but it is only a “good deal” if the buyer knows exactly what they are purchasing, and the price is appropriate.