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Selling Scrap Gold - A Case Study

 

You have probably seen their ads on TV. "Send us your scrap gold and we will send you a big fat check". As a former salesman of precious metals, I decided to put one company to the test. What I found out was surprising -- to say the least. 

Preparing To Sell My Scrap Gold

selling gold 10 karat ringI chose a small 10 karat gold ring to send in to company X. In a worst case scenario, I might never see my item(s) again. So this was a way to limit my losses in case that happened.

10 karat gold stampHow could I tell the ring was 10 karats? Items containing gold will have the content marked or stamped on the item. This is usually expressed in karats but sometimes is expressed in parts per thousand. For instance, if you see 500 stamped on your gold jewelry, it is an alloy containing 50% gold.

If you have read my Gold Weights & Measures article elsewhere on this site, you know that a pure gold item is expressed as 24karats or 24K. Anything less and the item is an alloy of gold and one or more other metals. My ring has 10K stamped on the inside so the gold content (purity) is 41.66%.

I requested my mail-in kit online and waited for it to arrive. Before sending the ring off, I made sure to get a "gold weight" of either Troy ounces, pennyweights or grams. Since I didn't know which of the various weights Company X would use to base their offer on, I wanted to be prepared to see how good a deal they offered.


scale for weighing gold and silverUsing my handy multi-weight pocket scale (about $20.00), my ring weighed in at 8.2 grams. With the information in Gold Weights and Measures, I calculated that 8.2 grams = .265 Troy ounces = 5.3 pennyweights. Now I was ready: 1) to see if Company X matched one of these readings after weighing my ring; and 2) to convert their stated weight (if necessary) to Troy ounces and figure out what percent of the ring's value they paid out.

Results Of My Sale To Company "X"

On Day 1, I mailed the packet they provided back to them with the ring enclosed. After about seven days, I started checking the progress using their online tracking system. On Day 12, after getting messages they still hadn't received it, I sent them an E-mail asking "where is my ring"? They quickly responded, apologizing for the delay and said my check would be mailed on Day 14 via 1st Class Mail. I received their check on Day 18 for a whopping $12.72. That was with a 20% special bonus.

There must be some mistake!!!!

So I started examining Company X's figures to try to make sense of it. First of all, did their weight match any of my weights?

Their payment was based on the ring's pennyweight which was stated as 5.3. So far, so good - it matched my pennyweight result. With 20 pennyweights in a Troy ounce, 5.3 pennyweights equals .265 Troy ounces. 

Second, what was the price of spot gold when they "locked in" my price?

They didn't provide that but checking the price of spot gold from Day 1 to Day 13, the price averaged about $800 per ounce. 

Third, what percent of the ring's gold worth did they actually pay me?

By multiplying $800 by .265 percent, I came up with $212.00. If the ring were pure gold (24K), this would be the actual value. Since the ring is only 10K (41.66 %), the gold value is .4166 times $212 or $88.32.

The $12.72 check Company X sent me was approximately 14.4% of the ring's gold value. They kept 85.6% as their processing and refining fee.

Trying To Understand Company X's Buying "Logic"

Company X's return policy states they will return a customer's scrap gold if their check is returned within 10 days. I took them up on their return policy by mailing the check the next day (Day 19). Notifying them in an E-mail that their check was being returned, I told them of my calculations. I asked them "how accurate were my calculations and what was I missing in understanding this low payout"?

Their response was my calculations were "almost accurate". But because my ring was not 24K and required refining to extract the gold, payment was based on a sliding scale. Also, because my total shipment was less than one ounce (20 pennyweight), my payment was in their lowest payout category.

It was then they made a surprise offer...

Without my asking, the representative checked with management and offered a price based on the five ounces and higher category. They now were willing to send me a check for $28.49 for the ring. That brought their payout percentage of the ring's gold value of $88.20 to 32%. Not enough! So I thanked them for the offer but asked for my ring back. It was finally returned on Day 44.

Selling Scrap Gold - Lessons Learned

If you decide to sell your scrap gold to one of the big companies advertising on TV, or to one of the local jewelry stores that accept these items, or even attend a "precious metals party" that a friend or acquaintance is holding, consider this:

  • Convert the weight of each piece to a "gold weight" such as Troy ounces, pennyweights, grams or grains. If you don't have a scale to do this, ask your friendly postmaster or butcher. Their scales will give you the Avoirdupois weight which, when multiplied by 0.911, will give you the Troy weight.

  • Get the purity of each gold piece which is usually expressed in karats. If you see a 24K stamped on the piece, it is pure gold and requires no refining. Other common karatage markings are: 22 karats = 91.67% gold purity, 18 karats = 75.00% purity, 14 karats = 58.30% purity, 12 karats = 50.00% purity.

  • Find out the current price of spot gold. There are various places you can get that information including the Gold Investing Simplified Home Page.

  • For each of your scrap gold pieces, calculate the value by multiplying the weight of the piece (in Troy ounces) by the spot price of gold. Then multiply that result by the purity of the piece. For my 10K ring, the calculation was $800 x .265 x .4166 = $88.20.

  • You are now better prepared to approach buyers of scrap gold, understand their offer and negotiate the best possible deal. If you're dealing face-to-face, you can take it one piece at a time. Remember, you are in control. If you don't like their offer or the piece means more to you than what they are offering, don't sell it to them.
Keep in mind that these companies are performing a service and deserve a fair processing fee - especially if the scrap gold is not 24 karat and requires refining to extract the gold. You have to decide what is fair and if you want to part with your scrap gold based on their offer.

My suggestion? You should get at least 80% of the total gold value of your scrap gold based on the current spot price but Strive for more.





Disclaimer: I have made every effort to produce an informative and helpful article on Selling Scrap Gold based on my research and experiences. However, I make no representation or warranties of any kind with regard to its completeness, accuracy or suitability for any specific situation or purpose. See Terms&Conditions for more info.



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