Selling gold, like your old rings and necklaces, seems tempting these days. When he sees ads on TV and the Internet for gold buyers telling him he’ll get the best price for his scrap gold, remember he’s exchanging a precious metal for inflation-ravaged US dollars. All things being equal, you’d better hold on to your old junk gold. Gold prices will skyrocket in the coming months and years. Don’t be surprised to see spot gold prices above $5,000 within the next three years.

Gold is quite an interesting substance. An ounce of pure gold can be drawn into a wire five miles long, or hammered into a sheet so thin that it would cover an area of ​​100 square feet and light would pass through. The word “carat” (of which the gold notation, “karat,” is a variation) comes from the Arabic word “qirat,” which means “bean pod.” In Eastern bazaars, a tiny carob seed was a unit of weight measurement.

The list below shows the number of karats of gold, followed by the percentage of pure gold in the alloy.

10K 41.7%
14K 58.3%
18K 75.0%
24K 100%

What types of alloys go into gold products?

GOLD COLOR CHART

These are the alloys that are added to pure 24-karat gold to get its distinctive color.

o Yellow Gold: Copper and silver. Yellow gold comprises 85% of the gold sold worldwide.
o White Gold: Nickel, Zinc, Silver, Platinum and Palladium. White gold symbolizes friendship and is the most important of the gold colors.
o Rose Gold (Rose): Copper. Rose gold has become increasingly popular and looks beautiful when paired with yellow or green gold.
o Green Gold: Silver, Copper and Zinc Green gold is increasingly used with rose gold and yellow gold and is an important part of Black Hills Gold’s signature grape leaf design.

I decided to test the market yesterday and sell a piece of jewelry for the highest price I could find that day. So I called five gold buyers and visited the one who gave me the highest quote over the phone.

Today, July 4, 2009, the spot price of gold is $931.50 per ounce of 99.99% pure gold. So each tenth of an ounce is worth $93.15 today.

The old 14 karat ring that I sold to the gold buyer sold for $90.00. The ring weighed 0.3 ounces. So, they paid me $30 per tenth of an ounce. Big $93.15 difference, huh?

This is how the buyer explained the pricing process. They start with the daily spot price of 24 karat gold. They then determine the karat of the gold and multiply the spot price by the percentage of pure gold it contains. They then deduct refining costs to melt down and recover the 24K gold. Finally, they deduct 10% as their profit.

So my transaction numbers looked like this:

Cash Price $931.50
Times 58.3% $543.00 of 24K gold in 14K gold
times weight 0.30 ounce
Gold Value $162.90
Less refining ($18.60)
Minus 10% profit ($54.30) actually 33% of $162.90
Net Cash Value $90.00

This was the best price I could find. So, as you can see, dealers can and do play with percentages, prices and deductions. It’s almost as honest and easy to understand as buying a used car. Almost.

I really don’t know if the refining cost is high or not. I don’t know if earnings deduction is high or low. And you neither. So after the gold buyer bids on your gold, negotiate to get your best price.

My recommendation is that if you’re desperate for cash, call and get phone quotes from dealerships before you get in your car and start visiting them. They won’t want to tell you anything over the phone because they want you to be in the store to close the deal. Then, approach your gold sales transactions with knowledge, which will prevent you from being scammed.

So, I was killed in this transaction, and the gold buyer will make a huge profit at today’s gold price. He will probably wait until gold prices go up before melting gold, and then he will do more. If he tries to sell his gold without knowing his games, he will also get the lowest price, not the highest price.