Web sites often low-ball the price or fail to return jewelry. Here’s how to get a good deal.

By Bob Frick, November 2011

When a local jewelry store went out of business, Janet Fritz of Hilton, N.Y. bought boxes of its gold jewelry. She thought she’d resell some through her The Primrose Garden eBay store and sell some to “cash for gold” Internet sites.

SEE ALSO: Our Quiz on What You Need to Know About Gold

To find out how the sites work and which pay the most, Fritz devised an experiment: She sent identical, simple gold bands to nine sites to see how they responded. The results were neither identical nor simple. A couple of the sites offered decent deals, but the rest left her frustrated or underwhelmed. One dealer said it had lost her ring, one wouldn’t send it back when requested, and some of the offers were “ridiculously low,” says Fritz.

Her experience underscores the difficulty of finding a good deal when you’re selling gold jewelry. And as the price of gold rises, so does the number of complaints about precious-metal dealers. The Better Business Bureau reported 574 complaints against gold, silver and platinum dealers for 2010, a figure “we could easily double this year,” says BBB spokeswoman Kelsey Owen. Some complaints involve inflated offers in advertising. Other consumers say they mailed gold pieces but never received a check, nor did they get their jewelry back.

Advertisement

Figure the Value

So if you need cash, what’s the best way to unload gold jewelry? Unless you know a buyer you can absolutely trust — maybe a local jewelry store — you must first figure out the value of the gold before trying to sell it. That’s based on the gold’s weight and purity, and it’s not hard to calculate.

To determine the weight, you can use a kitchen scale, ask a jeweler for help or see whether your local post office will do the job. Gold is measured in a number of ways. A generic U.S. scale measures 28 grams per ounce, while jewelers use Troy ounces, each of which is made up of 31.1 grams. Also, some dealers use pennyweights (abbreviated dwt ), each of which is equivalent to 1.56 grams.

The purity should be inscribed somewhere on the piece. It won’t be 24-karat gold, which is pure gold and too soft for jewelry. But you’ll see markings such as 12k, which means 50% pure; 18k, which means 75% pure, and so on. Some gold pieces have no karat markings, but a “scratch test” can reveal the purity. Buy a test kit online for about $30 on Amazon.com or eBay. or take your metal to a jeweler.

You could do the math to figure out the value of the gold in the jewelry, also called its “melt value.” But it’s better to use an online calculator that will accept all different types of weights and purity measures. The one at Dendritics.com will also look up the latest price of gold — or you can enter a price yourself. The current price is available at many Web sites, such as GoldPrice.org .

The rings Fritz used were 4.4 dwt of 14k gold, and at the time of her experiment in May, gold was hovering at about $1,500 an ounce. Given that weight and price, the melt value for each ring was about $192. (Fritz says the retail price of each ring was $298, which gives you an idea of the markup on simple gold items.)

Fritz sent the rings to the nine cash-for-gold outfits via certified mail. What generally happens is that the dealer inspects the item and tells you the price it’s willing to pay. Then you can choose to accept or reject the offer. There are exceptions, however. Some outfits just send you a check directly. If you reject the offer or the check, the dealer is supposed to mail the gold back to you — at your expense.

Other transaction details vary widely. Some vendors e-mail their offers, and others send them by regular mail. Among the dealers that Fritz contacted, the time frame in which she could accept or reject an offer ranged from as little as one day to as many as 15 days. If you accept an offer, some sites will pay by certified check, and some will offer to deposit the money directly into a bank account.

Always pick a vendor that allows you at least a few days to respond. If you don’t respond on time, some buyers assume that you’ve accepted their offer and will mail you a check. And if you don’t like the amount you’ve been paid, they may claim the gold has already been melted down, leaving you little recourse.

In Fritz’s case, offers for her identical rings were all over the map. The top bid was 60% of the melt value, and the lowest was 9%. After rejecting a host of low offers, Fritz reports that some of the vendors “were practically going out of their way not to return my property.” One sent her a check, and when she rejected the amount and asked for the ring back, she was sent a check for a higher (but still low-ball) amount. Another dealer sent her a check for a small amount without giving her the option to accept or reject the offer.

The bottom line to Fritz’s experiment? Despite the runaround she got from a few dealers, she found a couple of vendors with whom she felt comfortable doing business.

What’s a Fair Price?

When you sell gold coins or bars, you should expect to receive at least 90% to 95% of the current market value. But with gold jewelry, you’re likely to get only 70% to 80% of the melt value. The difference reflects the dealer’s profit, plus the cost of melting and refining your gold and turning it into new gold jewelry or bullion.

If your gold has some designer cachet — think Cartier or Tiffany items — or is valuable as an antique or heirloom, you shouldn’t be selling it for scrap. In those cases, it’s worth more than the melt value, says Michael Gusky, owner of Goldfellow.com. a cash-for-gold dealer. (Gusky also owned a gold jewelry manufacturing business that he sold to Warren Buffett’s Berkshire Hathaway in 2007.) But Gusky says such higher-value gold jewelry is “a very small percentage of the market.”

If you decide to sell your gold through the mail, take these prudent steps:

Establish that your gold has no special value above its melt value, and figure the value of the gold content. Vet money-for-gold sites by checking with the Better Business Bureau for complaints. Also consult the list of approved vendors at the Web site of the Jewelers Vigilance Committee. an industry ethics group. Both groups can help you avoid bad vendors, but neither can help you find those that will offer a good price for your gold.

Find out what the vendor is willing to pay for gold as a percentage of the current gold price. If it’s less than 70%, move on (with one exception, noted below). Some vendors will pay a higher percentage of the price the more gold you send. Gusky says his business might pay as little as 50% of the melt price for “a small pair of broken gold earrings,” but his firm’s average payment is 72%. Deal only with sites that give you the option to accept or reject an offer before they send you a check.

Include your estimate of the value of your gold in a cover letter. and ask to be contacted by the vendor if it comes up with a different estimate.

Do not use regular mail to ship gold. Use a service that tracks delivery and receipt. And insure the package, especially if you’re sending a large amount.

Editor’s Picks From Kiplinger