Hello Everyone,
I can’t seem to find the info from past postings so I’d like to ask
this question (again). I have a customer who has given me some 18k
pieces as a trade in to fabricate a piece. I will be sending it in to
be refined along with my other scrap. Is there a general formula for
calculating how much (after weighing) the 18k from the customer is
worth? I.e. If a store bought old gold 18k pieces from a customer,
how would that figure be calculated?
Thanks very much,
Leda
There are two questions you are actually dealing with here. The
first is how much is the old gold actually worth? The second is how
much are you going to give the customer for it? We don’t pay out what
the gold is actually worth when taking scrap towards work being done
for a number of reasons. The first is that there is always some
chance it isn’t the karat it is stamped or appears to be. The second
is that you may not get the money back from the scrap for months,
depending on how often you send scrap in (the price of gold may have
changed by then, plus you have been paid for something but won’t get
the actual money until much later). The third is that even with the
best of refiners there is always some loss involved. Fourth you have
to pay refining fees. Fifth, you are doing the customer a favor by
taking metal you can’t use instead of money. We pay out a minimum
price per pennyweight for scrap unless the customer has a whole lot
of high karat gold. Then if they have enough we just offer to send it
to our refiner as a separate batch and take a commission on it.
Daniel R. Spirer, G.G.
Spirer Somes Jewelers
1794 Massachusetts Ave
Cambridge, MA 02140
617-491-6000
@spirersomes
www.spirersomes.com
Hi Leda, This is an interesting question, and one that there certainly
is no standard answer. I think it boils down to what is the metal
worth to you, and how long can you afford to sit on that amount of
money?
Mark Geller, in his latest pricing guide, recommends you deduct the
weight of the scrap from the weight of the new item, and charge for
the difference if more, or offer to buy the excess for a certain
amount. You would charge $45 per dwt (labor not included) for a new
18K piece, and simply subtract the metal weight from the weight of the
new item. He also gives you complex charts to follow when
"exchanging" metal of different karat qualities. This is one of the
very few areas of his book that I find cumbersome and do not use.
In our business, we use the following guidelines for metal trade
in/purchasing:
#1) If a customer is purchasing any new item, either from the case or
having a piece made, we give them “full melt” for their gold. The
formula if needed is: For grams, daily gold price times karat value
(18) divided by 24 divided by 31.1 For dwt, daily gold price times
karat value divided by 24 divided by 20
#2) To purchase gold directly from a customer for cash, we use the
same formula as above times 70%. Some business may use a different
percentage, ranging from 50% and up, depending on the desired profit
margin. You must remember that here in the United States, some
states regulate the outright purchase of metals, and you may need to
be licensed to make purchases, although none that I am aware of
regulate the acceptance of metal traded in on a new purchase. Please
check with your local authorities.
You need to recognize that any metal you take in is part of your
profit margin that you cannot access until it is refined. If I am
faced with a customer that wants to liquidate a large amount of
metals, more that I can comfortably handle with my cash flow, I would
refuse to purchase or accept that metal. Only you can make that
decision.
Good luck,
JMF
Hi All - The question of trading in old gold seems to be a fairly
common request. I have several gold teeth and wedding bands (from
marriages that didn’t work) sitting around - waiting to go to the
refinery. Since my work in gold is limited - it will still be a while
before I can recoop any of the investment - but I did it as a
convenience/service for the customer. I do realize that it is a
personal choice - and the answers to this question so far, have been
very helpful in helping me to decide if it is acceptable to say no
(and perhaps suggest sending them to a business that buys metals?). Or
is it better in developing the customer relationship - to accept
their request - and be smart about the pricing of the trade in. I
think it is better to set a policy towards trade in - so, that I’m not
saying ‘yes’ to one individual and ‘no’ to another. Recently, because
of the cost factor, I have started to not accept trade in gold - but I
am interested in a long term business relationship with customers.
Also, where does one find the Mark Geller pricing guide? Does it
include the pricing of other metals as well - and any guidelines on
the pricing of repairwork?
Thanks ahead :),
Cynthia
Dear Cynthia, Mr. Geller’s web site is http://www.jewelerprofit.com
We have been using his books for more than a year, and highly
recommend them. There will be a few areas you will probably dissagree
with, and need to modify, but for retail pricing of repairs and
manufactured products, it will certainly help you run your business
at a profit. Usual disclaimer here, just a satisfied customer.
Good luck,
JMF
I recently had this situatioon. Since I don’t have facilities for
dealing with it myself, I sold the gold and credited them with the
amount I received.
Janet Kofoed