Tips for Novice Gold Sellers

July 31, 2011 -- If there's any upside to the rancorous debate about the debt ceiling, it's this: That ankle bracelet gathering dust in your jewelry box is worth a lot more money now than it was a few months ago.

Fears that the nation will default on its debts has pushed the price of gold to $1,616 an ounce, up 18% since the beginning of the year. That's prompted a lot of hard-up consumers to earn extra cash by selling unwanted jewelry.

Consumers interested in selling their gold will find no shortage of buyers. Gold-buying kiosks are popping up at malls across the country. Many jewelry stores, pawn shops and online dealers pay cash for gold. Gold parties allow participants to meet their neighbors and go home with a check.

But while gold is considered a safe haven during tough times, the market for gold is fraught with risk. Tips for novice sellers:

Ask for credentials. The business should be licensed by your state to buy gold. You should also look for a buyer who's been around for a few years, says Gary Smith, a master gemologist appraiser for Smith's Jewelers in Montoursville, Pa. "If they've been doing it for six months, and it's a combination barbershop, gas station and gold buyer, you might not be getting the best value," he says.

Check with the Better Business Bureau. So far this year, the BBB has received 408 complaints against gold, silver and platinum dealers, vs. 581 for all of 2010, says Kelsey Owen, marketing coordinator for the BBB.

Cash4Gold, an online company that advertised during the 2009 Super Bowl, has been the subject of 350 complaints during the past three years, primarily from consumers who said the company's ads were misleading, according to the BBB. The BBB has given the company a C- rating. Florida Attorney General Pam Bondi has launched a civil investigation of the company in response to a "pattern of complaints" from customers who said they were paid far less than their gold was worth.

Cash4Gold spokesman Evan Nierman said the BBB complaints represent only 0.03% of the company's 1 million transactions. "We are proud to cooperate closely with our local Better Business Bureau, and we work to ensure that every issue is addressed quickly and resolved to the full satisfaction of all parties involved," Nierman said.

Get an appraisal first. Have antique or intricate jewelry appraised before selling it to a buyer that pays by weight. Those gold chains that nestled seductively in your chest hair back in the '80s are probably worth more for meltdown value than their artistry. But collectible jewelry could be worth more than the gold it's made of, says Cecilia Gardner, president of the Jewelers Vigilance Committee, a non-profit trade association.

"If you know you've got a unique piece of high-end jewelry, you're probably going to do better selling it as an entire piece," she says.

Smith says he recently appraised a sterling silver bracelet that was probably worth $40 as scrap metal. Because it was signed by the noted Danish silversmith Georg Jensen, though, the bracelet's resale value was about $900, he says.

Comparison shop. Since lots of buyers are eager to purchase gold, it's worthwhile to get several bids before you sell. Prices for gold vary significantly, depending on where you sell it, the price of gold when you sell and "the number of hands in the pot," Smith says.

For example, some home party sponsors pay sellers as little as 50% of the value of their gold, because the companies and the homeowner who hosts the event get a cut of the profits, Smith says. Likewise, gold dealers who work out of mall kiosks may pay only 60% to 70% of the value, because those dealers have to pay salaries and rent, plus the gold refiner's costs, Smith says.

Protect your jewelry from loss. Before shipping jewelry to a buyer, get an appraisal so you'll have proof of value if the jewelry is lost, the BBB recommends. You should also check the buyer's reimbursement policy in the event of a loss.

Keep up with the price of gold. You can find the most recent spot prices for gold at Kitco.com. That's not the price you're going to get, but it will give you a good basis for evaluating offers.

Be realistic. Your old class ring might provide you with some extra walking-around cash, but it won't make you rich. Scrap dealers will only pay you for the amount of gold in your jewelry, and "very few things are made of solid gold," Gardner says.

For example, a 14-karat ring is only 58% gold; the rest is base metals, Smith says. Before making an offer, a buyer may perform what's known as a "karat fineness" test — which involves scratching the metal — to determine the gold content.

Be prepared to show ID. Gold buyers are required by law to ask sellers for government-issued identification, Gardner says. This requirement is designed to help police investigate the sale of stolen property and deter money laundering. All reputable gold buyers comply with these rules, Gardner says. "If you're not asked to identify yourself, you're in the wrong place."