Gold Rush: People Rush to Sell Gold Instead of Finding It
Let the seller beware when conducting gold transactions through the mail.
March 20, 2009 — -- We've all seen the ads for companies that let you send in your old gold jewelry and they will send you cash. It's suddenly such a lucrative business that industry pioneer Cash4Gold was able to afford a coveted Super Bowl commercial with Ed McMahon and MC Hammer.
And in this recession, many people are looking for ways to make extra money. So we wanted to know, if you send your gold to one of these companies, will you get a fair price for it?
'GMA's' Test
We assembled three packets of gold and had master gemologist appraiser Don Palmieri and his team at the Gem Certification and Assurance Lab in New York City verify master gemologist appraiser Don Palmieri and his team at the Gem Certification and Assurance Lab in New York City verify that they were nearly identical in weight and that every piece was 14-karat gold. We then double-checked those results at another independent lab.
Based on the karats, the weight and the price of gold that day, Palmieri said each packet was worth more than $410. He said that once buyers had figured in their profit margins, we could see optimum offers of about $350.
We wanted proof that we could get that price, so we went to a store in Manhattan without identifying ourselves. Sure enough, the jeweler there tested our gold and offered us $345 per packet.
Get Gold Cash
Dollars 4 Gold
"If I was looking to get $350 for my items and I got $89 for them, I would not be happy," said Dan Brauser, president and chief financial officer of Dollars 4 Gold. "We commit to the consumer that if they're unhappy with our payment for any reason, we'll go ahead and send their material back to them, no questions asked."
Cash4Gold
That leaves Cash4Gold, the biggest in the business. Cash4Gold says it has conducted more than 700,000 transactions since it was founded in 2007 and now employs more than 300 people. We were curious about the company because it has a "D" rating with the Better Business Bureau.
Let the Seller Beware
"That means that we have enough concerns about this company that we recommend caution in doing business with them," said Brodie White, president of the Southeast Florida Better Business Bureau (BBB). "We've seen the complaint volume grow, rather than dwindle."
Three-hundred customers have complained about Cash4Gold in the past year, many about the price they were offered. So how much did Cash4Gold offer us? $66.05.
We asked appraiser Palmieri what he thought of that amount. "Wow," he said. "That's incredible. Incredibly low."
So we called and asked for our gold back, an option all customers have. Then the company made us another offer for $137. The company later explained that it re-evaluated our packet and one of our pieces could be sold as-is instead of melted down, giving it more value. Palmieri, the appraiser, was not impressed. "It's still pennies on the dollar," he said. "It's still many, many percentage points lower than what they could get if they didn't mail their gold out but checked with a local professional."
The market price for gold had drifted down slightly by the time Cash4Gold received our packet, but not enough to correlate with its two offers. So we asked Cash4Gold chief executive Jeff Aronson why his company's offers were so low.
"That's what that material was worth to me at that time," he explained. "That's what it was worth to me to process. I make no apologies for pricing, whatsoever. I'm a service business."
Cash4Gold points out that its own Web site states that it is not the best price option for all customers and that if customers don't like the offer, their jewelry is returned at no cost. But the company says most customers cash the check without any further questions and that its customers are focused more on service and convenience than on price.
"If all you care about is the net dollar, and you're willing to go to the seedy part of town, and you're willing to travel around ... I want you to go there," Aronson said. "I don't want you to come to me. I want you to come to me for convenience and ease. That's what I want you to come to me for. If not, I'm happy for you to go someplace else."
Cash4Gold says its BBB complaints represent a tiny fraction of its business and that it expects its letter grade to rise soon when the BBB updates its records to show that some additional customer complaints have been resolved.
Use an Unmarked Box
So what's the best way for consumers to proceed? We learned a lot from our experiment. One of the most frequent complaints to the BBB is that when customers send their gold to mail-in companies, it is stolen, possibly from the mail.
Make Your Package Less Obvious
The companies we tested sometimes use soft-sided mailers, which makes it easy for thieves to feel that there's gold jewelry inside. Solution? When we sent in our gold, we sent it in unmarked boxes and put the company mailers inside and it got there just fine.
So if you are going to use a mail-in service, we recommend you do the same and also insure the items you are sending.
Get an Appraisal
If you have a lot of gold to sell, get it appraised first. Appraisals cost roughly $25 to $150 an hour.
An appraisal is especially important if you have pieces that may be designer or collectable items. These could have a much higher value as-is than they do melted for their gold content. For example, an Art Nouveau brooch from about 100 years ago could easily be worth $15,000 because of the sought-after design, but worth only $500 for the gold content.
Shop It Around
If you know your gold is nothing fancy and don't want to spend the money on an appraisal, one way to get an idea of the value is to simply stop into a couple local jewelers and ask them what they would give you for it.
If you need to get as much money as possible for your gold, get several offers before selling.
Reject the First Offer
Whether you deal with local businesses or a mail-in outfit, it seems worthwhile to reject the first offer and see if the company will make you a better deal. Many customers have reported that they had success when they did that. And others report being frustrated that they did not reject the first offer and thus did not get as much money as they could have.
Do-It-Yourself Tests
There are some very rough tests you can do at home to get a general idea of what you have. First, use a magnifying glass and look for the karat stamp: 10, 14 or 18 karat gold. Be forewarned that it's not always accurate, but it is a starting point for discussion.
Next you need to know the rough weight. Here's a clever trick. A penny weighs 2.5 grams. A nickel weighs 5 grams.
So hold your jewelry in one hand and coins in the other and you can get a rough feel for the weight. For example, a slender, ladies gold chain weighs about the the same as a penny, 2.5 grams.
You can also use a food scale, but keep in mind they're not usually accurate at less than 5 to 10 grams. So because you know a nickel weighs 5 grams, stack nickels on the scale until it starts registering weight correctly. Then put your jewelry on top of the nickels.
Online Calculators
The value you derive from the online gold calculators will be what's called the "melt value" of the gold. But you shouldn't expect to be paid that much for your gold. Buyers always factor in their own profit margin and pay somewhat less because of that. We found that we were able to get as much as about 85 percent of the melt value when we took our gold to a New York jeweler. The percentage you can expect will vary. That's why it's so helpful to get multiple offers before you sell. Precious Metal Calculator
The Scrap Gold Weight Conversion and Melt Value Calculator
Tips for Selling Gold
Choose a reputable jeweler, someone who's known to you or has been recommended by a trusted source. Preferably, select a jeweler who's a member of the Jewelers Vigilance Committee.
If you are using an Internet based business, be sure to fully understand the procedures and methods they require in order to complete the transaction. Only by following their policies will you be able to get your gold back if you decide to decline their purchase offer.
Set off on your expedition with reasonable expectations. When you bought the jewelry, you paid for more than the value of the gold. The price included labor, packaging and the retail mark-up of the item. It may have also included non-gold substances, like gemstones. You probably will not be reimbursed for the non-gold components of the purchase price.
The jeweler will only pay you for the actual gold in an object. Since gold is always blended with other metals to make jewelry, expect that a substantial percentage of the object is made of something other than gold. Don't expect to be paid for the non-gold component of the jewelry.
The jeweler may conduct a test to determine how much gold is in the jewelry – known in the trade as its "karat fineness." This is called a "scratch" or "acid" test. Expect the jeweler to actually scratch the gold to conduct the test.
The price offered to you by the jeweler may not be the market price of gold that day. Prices are not regulated, so the parties are free to negotiate a price that's acceptable to both sides.
Bring a form of government issued identification. Jewelers are required to ask for this in case the police show up later with lots of questions about stolen property. Some jewelers are also required by anti-money laundering laws to obtain seller identification.
Dollars4Gold Statement
Click here to read statement from Dollars4Gold.