Understanding The Retail Used Gold Market

The gold market has many facets; perhaps because gold is such a fixture throughout so many different cultures, and the fact that it is recognized worldwide as not only currency, but one of the best materials for the manufacture of jewelry.

To the individual, there are four distinct markets when it comes to gold, and each of these has subcategories, which we will not get into here.

Investor Class
Gold Jewelry, Retail New
Retail Used
Wholesale Used
This article will focus on the last two markets; when gold prices start climbing, you will see commercials attempting to sell you gold, and commercials trying just as hard to buy old gold that you may have. This is usually the result of jewelry which is no longer worn, or jewelry which has been handed down by family or friends.

A Matter Of Measures

The first thing you should understand are the weight measurements most commonly used to measure gold. They are:

Grams (from standard ounce, equals 28 grams (28.349))
Grams (from Troy Ounce, equals 31 grams (31.103))
Penny Weight (DWT, equal to 0.64301 grams)
First, let's take a look at grams - as long as you are buying and selling in gram weight, it does not matter whether you are thinking in Troy or Standard Ounces - that would only make a difference if you are buying the gold in Ounces. Most transactions at the used retail level will usually be done in grams. So, 75 grams of gold instead of 2.37 ounces.

To convert Penny Weight, or DWT measurement to grams, use the formula DWT/0.64301. So, if you have 5 pennyweights of gold, you would to the following formula:

5(pennyweights) divided by 0.646301 = 7.776(grams)

The formula would simply work in reverse if you were converting grams to pennyweights:

8(grams X.646301 = 5.170(pennyweights)

The next step is figuring out what the gold is worth at the market prices. The formula for figuring the current gold rate per gram by karat is quite easy, as long as you know the market price of gold. These rates will vary depending on karat, so each karat class uses a different formula, which you will find below:

10k: Market Price of Gold x.01341

14k: Market Price of Gold x.01876

18k: Market Price of Gold x.02413

So, to see what the market price of 10k gold is, take the current market price of pure gold (1333.10) and perform the following formula:

1333.10 x.01341 = $17.87/gram 10k gold.

This is a very easy formula; for other karat purities, simply put their multiplier in from the list above (14k =.01876, 18k =.02413) to get the current market rate per gram. This is very important to do, whether you are buying or selling gold.

Understanding Karats And Purity

The next factor when dealing with gold is understanding how karats measure purity. Most gold sold in the US will be between 14 - 18 karats. Pure gold is 24 karat, which is how it is measured in the Investor Market, but by the time the gold has been turned into jewelry it will almost always be a lower karat. Karats will tell you the actual purity of the gold, within a small variance. These standards are set by the US Government for all gold jewelry manufactured or sold in the US.

This system arose because making jewelry out of pure gold does not work very well. 24 karat gold is extremely soft and malleable, and will not stand up to the rigors of daily wear. The karat of gold jewelry will let you know exactly how much of the jewelry is gold. This system was adapted so that people could know the exact amount of gold they were receiving in any given formulation; the following chart will show the three most coming karat measurements in the US as a percentage of pure gold (24k):

10k =.417 of pure gold (or 41.7%)

14k =.585 of pure gold (or 58.5%)

18k =.750 of pure gold (or 75%)

This is one of the things many people do not think of if they have an ounce of old gold jewelry. If it is all 10k jewelry, for instance, you would multiply the current market rate (measured at 24k) by.417. So, if an ounce of 24k gold was going for 1300, an ounce of 10k gold, if you get full market price, will only be worth:

1300 x.417 = $542.140 (10k value)

Or, if we figure the price per gram, as discussed above:

1300 x.01341 = 17.43/gram (10k)

Finding The Karat - And Testing It

Many jewelers put their own proprietary markings inside of rings or on jewelry, but there are some standard markings that are used by most manufacturers, and they are generally quite easy to understand. The main things to look for will be the karat marking, and any markings which indicate whether a piece of jewelry is plated. The markings for the three most popular karats are listed below; they will either be the number (often with a 'k' behind it) or the number designation of that karats purity:

10k - 10k or 417

14k - 14k or 585

18k - 18k or 750

You will see that the second set of numbers is the same as the percentage or purity levels as outlined above. Some other markings to look out for are the standard markings for plated jewelry, and the most popular of these are listed below:

HGE (stands for Heavy Gold Electroplate)

1/20th (stands for a 1/20th thick plating, could also be some other fraction)

GF (stands for Gold Filled)

There are standards, especially for jewelry manufactured in the US, but just because it is properly stamped does not mean it is real gold. Gold is not generally shiny - this is the first sign that a piece of jewelry might be plated. The best way to tell is to order a cheap acid testing kit from the internet; the kit should come with a small square of stone. The jewelry is rubbed on the stone to leave a mark, and then acids of various strength are used to determine the karat of the gold. The three most popular acid strengths are for 10k, 14k and 18k. Plated gold will disappear almost immediately under an acid test, and this is the cheapest way to determine the karat of gold jewelry.

However, most jewelry will be accurately marked.

Buying And Selling Gold At The Used Retail Market

So, now we know how to figure out what a karat of 10k gold is worth. Remember, 10k gold is only 41.7% gold; other metals are added to make the jewelry tougher and to slightly alter the color for aesthetic purposes. Using the above information, we know that if the current market rate on gold is $1300.00, pour price per gram will come from following formula for 10k gold:

1300.00 x.01341 = 17.43/gram

The next thing if you are selling 10k jewelry or scrap gold is that this number ($17.43/gram) represents getting 100% of market value. This will not happen. Usually, gold sales at this level will be made by small, independent jewelry stores, pawn shops, or companies which advertise on the internet or TV. No matter where the gold is finally sold, getting the highest percentage of the current market value will be the goal. This can range anywhere from about 33% up to around 90%, but the average you will see is around 50 - 60% of the current market rate, or in this case (at 60%) $10.45.

The more gold you have, the closer you can get to the brokers which pay the highest rate. These people usually only do business with larger transactions in mind, though. What any store or business should be able to tell you is a firm figure on what they will pay per gram, or the percentage they pay of the current market value.

The margin of difference (whether they are paying 40% or 60% of market value) will be determined by a couple of factors. One of the most important is how often they sell to their broker. If there is a sell to the broker only once a month, they have to be concerned about how much gold may drop in the period of time before the next sale.

If too high a percentage of market value is paid, it is very possible for the gold you have in the desk today be worth less than what you paid for it just three weeks ago. Other factors include the overhead of the business buying the gold, and how much profit margin they need to make it worthwhile to them.

Go to more than one buyer, and when dealing with any business that involves sending the gold to them lock them down on the price per gram before you ship your gold to them. Any legitimate business or individual buying gold should be able to quote a solid number per gram (or pennyweights), or a solid percentage of market prices. If they don't or won't do that it is an indicator that something is wrong - you should avoid doing business with them.

Look around, and find the store with the highest percentage of market. Quite often, local jewelry stores and pawnshops will offer rates that are better than the internet and TV companies, but this will vary from one location to another. Remember to take all the stones out of your jewelry, and don't forget to save them, especially the diamonds. Pooling gold from more than one individual can be a good idea, as a larger amount of gold will result in more bargaining power when it comes time to make the sell.

When you are searching for diamond or gold jewelry, estate sales and pawn shops are great places to find incredible bargains - as always, the buyer beware!