Buying used gold and silver jewelry

Jewelry Discussion
1

Hi,

A few quick questions about buying used gold and silver jewelry:

  1. To buy or not to buy: Why would I buy the jewelry and melt down
    the metal when I could buy clean, new metal from a metal supplier?
    Why go through the extra work of buying used metal and then add the
    efforts of cleaning it before melting? Where is the profit?

  2. Pricing used metal: How does one price the various karats? Only
    by the gold content, or do any added metals also have value that I
    need to pay for?

Thanx and keep shining,
D

2

Hello D,

Why would I buy the jewelry and melt down the metal when I could
buy clean, new metal from a metal supplier?

Because customers sell the gold by the gold value, you get the alloy
metals for free. You have to buy all the metals yourself and add extra
work and costs melting it all together. If you buy already mixed, you
have to pay the manufacturer for the producing costs ending up more
expensive BUT with clean metals. The choice is up to the buyer. One
can buy auropurifax or de-oxidizer in order to clean “old gold” and
it will clean the gold in a easy way ending up with fine workable
gold without having tomuch extra labor.

Pricing used metal: How does one price the various karats?

Gold will be calculated by the percentage af gold in a metal being
585, 750 or whatever. Silver, copper and other metals included in a
alloy will not be taken into account and one have to pay extra for
the refinning of these metals. All the cost infalved in the refinning
procedure will be forwarded to the customer and therefor company’s
give you a certain percentage of the goldvalue instead of the full
14K or 18K gold price. This percentage is different depending on the
company who refinnes the metal.

Yes, all the silver, copper and other metals in a alloy are for free
for a refinner if you think about it. Still they have to refine it
but they don’t have to pay for the metal which is a profit for them.
If you consider that company’s work with kilo’s of metals during a
refinning process, gramms become kilo’s and a kilo of silver is still
good for 700 euro. Copper is not that expensive but it all adds up.
I’m not even talking about platinum,rhodium and palladium.

If you whould like to have all the metals refinned, you have to pay
for each individual refinning process and customers like you and me
don’t do that.

Have fun and enjoy
Pedro

3

I choose to buy because of the profit margin. Go to
404 - File or directory not found read what they are paying for
whatever the metal you are buying and when YOU buy it used, don’t
pay any more than say 70% of the prices you see at the link provided
and keep in mind that the prices listed are based on up to 15 ounces.

What does that mean? Well, if someone has only 1/2 ounce (10 DWT) to
sell you might offer to pay only 60% instead of 70%.

Box it up, send it to the refiner and ask them to send you new
material in return. 30% to 40% profit.

Your pricing question is also answered at the link because they list
prices for each Karat separately…

Keith Hible

4 
Where is the profit?

You call your local refiner and ask them what they are paying for
scrap. You then offer the person selling the scrap 10% less. Then you
take the metal to the refiner and he pays you. You’ve made 10%. Or…
as we do, we take the metal and have it refined to use for future
projects.

Buying and selling scrap is what’s keeping a lot of retailers open
in this economy.

Have fun and make lots of jewelry.
Jo Haemer
www.timothywgreen.com

5 
To buy or not to buy: Why would I buy the jewelry and melt down the
metal when I could buy clean, new metal from a metal supplier?

Because you can buy it for enough less to more than cover the
expenses of refining.

6

I know that some of you will disagree with me, and think I’m a thief,
but, you’ll have all the sellers you can afford at a 50% margin of
the refinery’s payout. I’ve had hundreds refuse my offer, only to
return in an hour or 2, ready to sell, after making the rounds to all
the other local gold buyers- and then send their friends and family
in later. And if people bring in gold coins(bullion) like South
African Krugerands, US gold coins, Canadian Maple Leaf coins, etc, I
get almost every gold coin offered to me at 20-30% under market.
Right now, I’m paying $18/dwt for 14k scrap, 35 cents a dwt for
sterling silver scrap, and 13$ each for silver dollars. The average
hotel type gold buyers are paying around $13/dwt for 14k, so I’m way
over those guys.

Its a great way to accumulate a lot of diamonds too. I have about a
hundred 1/4 ct to 1/2 ct diamonds, all for a fraction of normal
wholesale prices. This week a lady came in needing a 1/4ct replaced
in her 3ct TW ring, I had an excellent high grade match in stock,
got $600, paid about $50 for it. Also have saved up about 300 cts of
diamond melee- all sizes and qualities. Loads and loads of colored
stones, antique pocket watches, collectable costume jewelry. Even
bought a bunch of bottles of high-end booze(retail $200/ bottle type
of stuff) for $25 each from one guy. When I come across any nice
quality-made pieces(not the average shlock stuff), I clean and
polish, tag it, and put it in the case for sale as a used piece.
People love a $1000 ring for $600, that I bought for $100.

At these margins, my biggest problem is having enough cash on hand to
keep paying out, while I’m waiting on the next big check from the
refinery. During the last 3 yrs., I’ve managed to put away(for later
sale) about 35 ounces of gold coins, as well as approx. 100 pounds of
silver coins, ingots and scrap sterling. Besides the several thousand
dwt of gold scrap sold to Hoover and Strong at average 99% of market.
All this without ever running any paid advertising, just a few signs
in my windows(facing a busy carwash), wall signs inside the store,
and word-of-mouth advertising. Did it all with start up money
borrowed from a credit card. Now just waiting for the markets to top
out, and cash in.

Decades ago, during the last big gold rush, I worked for a jewelry
chain in a mall, and daily, I watched people pour into a coin shop
down the hall, to sell their gold. I saw lines of 200-300 people at a
time, all waiting to sell the stuff they didnt want anymore. This
time, I figured it might as well be me with hoards of folks beating a
path to my door.

Dont be afraid to make a profit. ‘Profit’ is not a dirty word. The
’big gold rush’ has slowed somewhat now, but there’s still plenty of
money to be made.

Ed

7

My thoughts - Do not ‘buy’ used gold items. Instead - when discussing
making an item for a customer and they want to sell gold item[s]
towards the new cost, only offer a credit of $xx, not a buying price.
The credit roughly calculated at 30-35% of todays metal cost to you,
then toss items [keep till after the item is made and transaction is
completed] into the scrap/lamel jar and when enough is collected send
for refining, getting back a block in the carat you need. With silver
it is not worth the exercise. cjh

8 
You call your local refiner and ask them what they are paying for
scrap. You then offer the person selling the scrap 10% less.

My refiner takes 2%, and if the price falls $50-100 an ounce and/or I
have to hold for any length of time, ship and insure, I would lose
all profit and I might no t break even paying 90%. I am aware of
what others pay in my area, and some pay a bit more than I do, and
some pay quite a bit less.

I have to calculate time I will have it, that it might be stamped
14kt, but might be that old 13 1/2 kt prior to karat gold law, how
much gems weight that I have to remove and might not have any value
and actually results in less gold to be paid for. There is a bit of
risk even if I am really careful when testing. It only takes a small
mistake to have a significant impact on whether I make money or break
even.

Richard Hart G.G.
Denver, Co.

9

First check the days gold price, do the maths, as to the carat of
the piece. And offer about 60%. Checkout your local 2nd hand dealer,
you are probably offering a good deal more than him.

Learn to melt and pour, add your own scrap.

I am always very sympathetic and offer the best price I can as
people are sometimes desperate.

That, unfortunately, is where the profit is! Stones present a
problem, you really have to know what you are doing.

David
jewellerydavidcruickshank.com.au

10

The first thing is to look at your business. Just HOW are people
presenting scrap to you?

If its off the street cold, A) “I wanna sell this ring”, that may
have a different impact than B) “What about the leftover gold I have
after you finish my remodeling”?.

One ring might be say 4 dwt. How many of these do you get in a given
period? If you are accumulating say 50dwt a week and actually
SENDING it in periodically, your risk is low. Your cost might be
higher long term with more frequent assays and minimums but the odds
of gold dropping catastrophically (that would be if you net less than
you paid) are smaller during a short send in period.

If you just charged a bundle to custom something and the customer
asks question B, what you might like to do is look less than cut
throat. Maybe offer her more, just for customer relations. This is an
accommodation whereas the first scenario is a line of business. Do
not confuse the two. B) is “I want to keep your patronage”, A) is
"let’s make a profit".

I do not reuse scrap generally. I figure my clients are paying for
top quality and there’s no better quality than professionally milled
product. I don’t have to run up labor to compensate for less than
stellar material. My own point of view, others will differ I’m sure.
But then I’m not using 500 dwt a week either. In a case like that the
cost savings are worth developing an in house refining and milling
capability.

Small, less frequent buys I might think keystone. If you’re going to
hold onto it for a year, you might be better to think of that
investment like you would regular inventory. You are tying up your
working capital. But what happens to gold in a year is anybody’s
guess. I’m frequently asked what gold is going to do. “If I knew that
I’d be sipping margaritas in Belize by now.”

11 
You then offer the person selling the scrap 10% less. Then you take
the metal to the refiner and he pays you. You've made 10%.

Many people buy gold without the bother, but since it’s the
law…

Here in California, in order to buy gold from the public you are
supposed to have a pawnbroker’s licence, and do all the things
pawnbrokers do - take ID, hold for 30 days, keep records…That’s
up to whoever is asking, but it’s the law…

12

Most brick and mortar retailers are paying far less than 90%, more
like 60% as Keith says. There is no doubt about it, it has kept more
than a few jewelry stores open over the last year or two as demand
for fine jewelry slipped. It helped pay my rent for a couple of lean
months.

There is a catch though. In the USA many, if not most cities,
counties and/or states require some sort of license or permit to buy
precious metals from the public. Some locales require that you report
any and all purchases to the local police, and there is almost always
a waiting period required by law between when the metal is purchased
and when it can be scrapped out. This can range from a few days to a
month. The fees for permits are often in the hundreds of dollars per
year, and other costs required for obtaining a permit can also add
up. Purchasing and maintaining a certified scale, time off and the
fees for getting fingerprinted, securing a bond of $10,000 or more
payable to the city, county or state (to cover fines if you get
caught cheating), the time required to process and file police
reports, checking the karatage and figuring the value, packing up and
mailing, shipping both ways, and paying too much for the occasional
piece that isn’t what it’s supposed to be (or incorrectly figured and
paid by the pennyweight but weighed in grams - oops!), all put
together can make this a lot more expensive (and risky) to do than
what one might think. A check with your state’s Jewelers of America
chapter can set you straight on compliance regulations in your area.

These are some of the reasons brick & mortar retailers don’t pay
nearly as high a price as it might seem they should. The market can
also change substantially during the required waiting period, turning
what on the first of the month seems to be a killing into a loss by
the fifteenth. Buying scrap can be lucrative, but you really need to
make quite an investment in time and money for legal compliance (or
violate the law and risk the consequences) and then do quite a bit of
buying (and gambling on market timing) to make it pay.

As a post script to this and as a warning of what might be coming,
there is a provision in the new health care law that was supposed to
go into effect on January 1st, '11 that requires businesses of all
sizes to report all purchase transactions over $600 to the IRS on a
form 1099. Nobody really knows how this would actually work
(according to the Speaker of the House “we have to pass it to find
out what’s in it”, and even since it’s passage, no one, not even the
IRS knows how this provision would work in actual practice). This law
would very likely apply to purchases of scrap, meaning that you might
be required to get social security numbers from every person from
whom you bought more than $600 worth of metal (or anything else over
an entire year, so you have to keep track of what you pay each person
and make sure that they don’t try to sneak in two or three
transactions for less over a few months to avoid reporting, or YOU
are the one the IRS will come looking for) and file copies of form
1099 with the IRS and mail the forms to the person from whom you
bought the metal (this law is going to cut red tape and costs for
small businesses? Really???).

Fortunately, since the last election politicians have seen the
potential for negative impact on small businesses, the impossibility
of IRS accounting of millions of additional 1099’s and the
exorbitantly high cost of enforcement required by this provision of
the law and have put a hold on it until they can figure out how or
even whether they are going to enforce it. So for the time being, we
are off the hook on 1099 reporting as required by the health care
law. But we’re not necessarily out of the woods yet. Even though
they aren’t enforcing it yet, this provision is still the law of the
land.

Dave Phelps

13

Something to keep in mind. If you are buying gold and or other
precious metals and gems from the public in the US you have to keep
transaction records and implement an anti-money laundering program
for the Patriot Act.

James Binnion
James Binnion Metal Arts

14

Along with the Patriot Act you also need to keep in mind that there
may be local laws about buying gold and other precious materials from
the public in your town and state. Here is a jeweler who just got
arrested in SC for not complying with local laws on buying precious
metals.

Jim

James Binnion
James Binnion Metal Arts

15

A South Carolina coin dealer was just arrested for violations in the
way he was buying gold and silver. I have driven past his store many
times. He has been dealing with coins for years.

16

Hi,

A warm thank you to all who replied to my questions! Apologies for
the delay… But, I am busy setting up my gallery and studio and
have not been online a lot this past week. I am finally making a
leap of faith from hi tech to art. Yay!

Keep shining,
D