This is probably the most common question that we get here at the Silver & Gold Refining Blog.
There are obviously a lot of companies advertising on TV offering “Top dollar for one’s gold”, but the reality is that gold is a worldwide commodity with a price that fluctuates by the minute and is posted by the commodities exchanges.
Realistically, no refiner is going to pay more than the gold is worth on the open market because the gold has a strict value which can be calculated using the following formula.
Weight x Purity x Price of Gold
There are, however, a few issues to consider:
- The price of gold is set in Troy Ounces which are heavier than what most of us in the U.S. consider an ounce (the avoirdupois ounce). So, if you measure your gold in standard ounces, you need to multiply your weight in ounces by 0.91145833 to get the weight in Troy ounces.
- How accurate is your scale? If gold is trading for $900 an ounce, refiners like us are not going to place your items on a postal scale and round up to the nearest ounce. We typically measure using sophisticated scales that measure in 1/100th of a gram increments.
- Purities vary. While most minted items are very accurate, jewelry marked as 14K gold may actually contain more or less than the 58.24% gold that it takes to classify as 14K. One can typically only tell this with very sophisticated testing equipment, but it is a consideration nonetheless.
- The price of gold fluctuates constantly during the trading day.
Based on this, people can often get very different values, but the formula should get you close. The bigger difference comes in what the refiner, broker, jeweler, or other gold buyer pays out as your percentage. Regardless of whom you sell your gold to, this person/company takes some risk in that the price of gold fluctuates by the minute so gold buyers often have to build in some profit to ensure they don’t lose money caused by these fluctuations.
Base on our research, the companies that spend millions of dollars advertising on TV or that travel across the country renting hotel suites and advertising gold buying events in the local paper need to make huge margins to cover their advertising expenses so they typically pay back about 1/6 to 1/2 the value of the gold and keep the rest to cover their marketing costs and make a profit.
In fact, since many of them are not even precious metal refiners, they have to pay a gold refining company to convert items like broken jewelry and such into gold bullion that can be sold on the open market.
Because of these low returns and the shady nature of many of these aggressive companies, people often recommend going to a local jeweler or coin shop that you can trust. While these companies are not refiners, they typically have relationships with gold refiners and will often pay 1/2 to 2/3 the value of your gold as they have less invested in marketing.
As one would imagine, the best opportunity to get the most return on your gold is to work directly with a gold refiner. These are the companies that actually melt your gold into bars and such so it can be sold to industry or minted and sold to investors. Gold refiners typically pay out about 85% to 90% of the value of your gold although many don’t deal with small consumer transactions so you have to look around to find those that will deal in small quantities unless you plan on going into business hosting your own gold buying parties.
