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Suggestions for buying customers gold

Hi all,

I was reading an article in JCK suggesting the trend for selling
gold will escalate this coming year.

I have a small retail store where I sell my own designs and I am
considering doing a bit of advertising for buying old gold jewelry to
help bring in some extra money. It seems to me that some people do
this in a not so ethical manner, but are out for the kill. I’d like
to offer this service in the small community where I live in a manner
that is both ethical and yet profitable. As the market is ever
changing, I also don’t wish to loose money.

Do you folks have any guidelines, formulas, rules, suggestions for
buying old gold jewelry?

Thanks in advance.

Hi Mary:

First you need to go to your local Police Station and tell your going
to buy scrap gold. They will give you a form or you make one asking
Sellers Name, Age, Address and Drivers License Number over 18 years
old. Be sure to put in fine print This is not a stolen merchandised
or items and let him or her signed it, It might be a sting operation.
After the transaction you will submit it to the Police Station and
they will tell to hold the item for at least 10 days. The reason it
might be stolen and they have ample time to recover it and you lost
your money. If the son stole it and the Mother and Officer want it
back. I believed you have the right to add service charge or the son
go to jail.

Second every ring, earring. chain and bracelet should tell seller
that you will file 1/2 mm. deep if not don’t buy. Have a testing
Nitric Acid Bottle kit, lift the top of glass needle with acid at the
bottom drop acid at the file metal return the needle to the bottle,
if there is no reaction it is gold if there is green reaction it is
not gold. To test if it is 10k, 14 or 18k if you have only Nitric
Acid And Black Stone, rub the file metal to the black stone 1 in.
long 2mm. wide and drop the acid at the middle about 6mm. round and
wait 10 seconds. Run tap water to the black stone then look real
good. If the middle of the line turn to reddish in color or changed
in color it is 10k. If it not changed at all it is 14k. and above.
The difference between 14k and 18k. First dry the black stone rub the
file metal the one that not change in color 1 in long and 3 mm. wide
drop acid in the middle about 6mm. round and wait 5 seconds then add
a pinch of cigarette ash at the middle were the acid and there will
be a reaction you can add acid if necessary and wait. Be sure to wipe
ashes at the tip of the needle it will make your acid strong. Then
run a tap water again and see if the line disappear it is14k. and if
it not disappear and have the same intense line it is 18k and above.
The difference between 18k and 22k is the color. The difference
between 22k and 24k is when you annealed them the 22k will oxidized
and the 24k will be bright yellow color. You didn’t not asked about
Platinum, Palladium and SS. I’m glad you don’t I’m thinking writ ting
this for about 4 hours now and I’m getting tired but I got one more
to answer.

Third about formula and buying. Find out what is the spot market
price of Fine Gold per Oz. then multiply it by the finest of the
metal for example 18k. finest. 750 then divided by 31. 1 there is
31. 1 grams in an oz. For examples some body is selling 25 grams of
18k yellow gold and you tested it and the price of fine gold today is
750.00 dollars. 750x.750 divided by 31.3 =18.09 per gram. If you
will buy this gold from H&S they will add a minimum of 10%for labor
and alloy and if you will sell it to them they will deduct a minimum
of 10% for refining. I think 33% off of 18. 09 is 5.97is fair so you
may buy it for 12.12. But most will buy it for half 9.05 or 9.00
dollars, 25 x 9.00 = 225.00 Hope this help.

P. S. Pleased practice the acid test with your 14k. and 18k.
hallmark ring

Good Nigth
Renatojewelers. com

It seems to me that some people do this in a not so ethical manner,
but are out for the kill. I'd like to offer this service in the
small community where I live in a manner that is both ethical and
yet profitable. As the market is ever changing, I also don't wish
to loose money. 

I suspect that you will change your opinion after starting doing it
yourself. The only way to know how much gold is in a scrap is to melt
it. Touch stone is only approximation and electronic testers is not
much better. It is not practical to melt each and every piece in
of a customer, so you are going to have to take a guess. You will
either under-estimate gold content or over-estimate. In other words,
your conduct will be either of a greedy unethical jeweler, or a fool,
that is if you pay customers on the spot.

If you decide to accumulate crap so you can do melting in bulk, how
would you know what to pay to whom? Again, you will have to average
out among your customers, which mean that some will be underpaid and
others will be overpaid. Now, from customer’s point of view (those
underpaid), you are still behaving unethically, when in actually you
will be acting as a fool all the time. On top of all that you are
going to have to deal with changing gold market and keeping records
who sold to you what, which cost money as well.

I would love to know how you are going to resolve all that in
ethical manner. The problem is that there is no solution. When people
buying jewellery, they led to believe that value of jewellery is in
gold and so when they decide to sell it, they have to face
reality of how little it actually worth. The real answer is in
educating customers that real value of jewellery is in craftsmanship,
but not in gemstones and gold.

Leonid Surpin

I think 50% of the pure gold value is a fair offer. For example 12gms
of 9ct gold contains 37.5% pure gold, so there is 12 X 37.5% = 4.5gms
pure gold, 4.5 X 50% = 2.25gms being what you pay for at the spot

I know of a dealer in town who follows the formula of asking the
seller what they want for the gold without even weighing it. If the
seller displays complete ignorance then they will buy at a killer
price. If the seller displays some knowlege and asks a reasonable
price they will ask the seller to present an offer from some other
buyer and they will beat it by 10%! They are not bothered to weigh or
verify the gold content, someone else can do that and it is worth

Obviously they are only buying at killer prices and many sellers
(customers) know there is something fishy going on. A dealer who
verifies the gold content, then weighs the items offered for sale,
then calculates a cash offer will certainly gain the trust of the
seller. Sellers are customers who are looking for an up-front and
honest jeweller. Do the 10%, make a consistent offer based on real
values and you gain a customer.

If you can break down the items and remelt them yourself for your
own manufacture then the profit is excellent; if you send the items
to the refiners then the profit is less. Learning how to break down
items for remelting and how to refine in a crucible is very worth

I don’t see that there’s any moral dilemma about buying gold off the
street. You provide cash for junk. The customers are glad you do it.

Unless you are in the estate market, the old gold people bring in IS
just junk. If you are presented with something that has appreciable
value in stones or as a collectible(NOT at retail, at liquidation)
then you can point this put and suggest a process where you find a
buyer and for your service you take a percentage fee, if that suits
you and the client. If you find you start getting a lot of this type
of goods you’d be ahead to develop a relationship with an estate
buyer or two. What you want here is quick turnaround for cash. You’ll
get to know what the dealer is looking for after awhile. Right now,
as I hear it, dealers are sitting on piles of stuff, so don’t expect
high prices or easy sales.

You ‘could’ stock some of the nicer pieces and resell in your shop
but here you hit a snag. Your client will see how much you are
selling it for and no matter how little you mark it up, they will
feel offended or taken advantage of. Better to move the goods quietly
and keep your rep intact.

There are two approaches to buying scrap. One is to turn it around
quickly, take the money and pay bills with it. Or you can just
stockpile for your retirement(A dream I never quit realize. I get to
a certain sum and darn, don’t you know, something always crops up and
I hafta cash out… cars, motorcycles, plasma TVs, its always
something boring :wink:

Sounds like you want the first approach. You should hedge your bets
as Leonid says. How much to pay? Think keystone as a start, think of
the scrap as any other product you might buy. The cash you lay out
for scrap should earn for the business in the same way as
merchandise investment should. In fact you’ll find it earns better,
if you buy wisely. Anything questionable you should either avoid or
really low ball. If there are melee diamonds involved remember that
you will lose some in breakout and some just are not worth
recovering. Colored stones not worth it unless major stones and
recut-able at an advantageous cost. Even here you encounter risk.
Stones sometimes fly apart on the wheel. I remember one such painful
diamond, yowch!

Mary -

Renato and Leonid have both given you good advice. Though it seems
contradictory, they are both accurate in their statements (NOTE:
local conditions may require local variations - check your state and
county requirements).

Renato emphasises knowing how to test for gold using the acid
test/touchstone method. This is important! Learn what the various
karats of gold ‘feel’ like in the hand. Realize that the customer may
be ‘shopping’ for the best rate. Find out before you ever test
something if they are going to sell to YOU or not. If all they want
is a verbal appraisal of the gold’s worth, charge something to make
it worth your while to test the gold. Sometimes it takes you a lot of
time, and customer doesn’t take your offer. You are taking a market
risk, and you have to make enough to make it worth your time between
the customer and the refiner.

(As I told a bicycle shop owner, "If you don’t charge me enough now,
you won’t be here next year when I really need you!)

Leonid’s best point is that many people bought their jewelry
thinking that there was an ‘investment’ quality to it; now that the
money crunch is on, they are finding out it’s worth much less than
they imagined. Be prepared for the following statements: “But it’s an
heirloom! But it was my grandmother’s! But it cost me $3000!” (And
variations thereof.) As to the concern about not being equally
ethical with all possible customers, I would say that you should set
a reasonable price, based on a reasonable market value, do your best
and get a reasonable return for your effort, know the market and
market forces, and take a balanced approach that is neither greedy
nor tender-hearted.

Buy a STRONG hand-held magnet. Test everything with it before you
test for gold. Be aware that the clasp will likely attract the magnet
(the spring in the catch), which is OK…but the whole thing sticking
to the magnet is not! There’s a whole bunch of pretty, yellow-colored
stuff out there that is strongly attracted to a magnet.

FWIW, my boss tests EVERYTHING that he buys: magnet test and acid
test, and uses a good scale (with a state certification - from the
department that certifies the accuracy of gasoline pumps & other
measuring devices). Diamonds are weighed in with the gold; they don’t
have much resale value (when going from retail to resale). The
customer gets more than the gold value, but customers are astounded
to find out that the marketing campaign about diamond value is not

BTW, check with your state’s department of revenue and find out if
there are any special licenses for ‘resellers’. If you only sell the
purchased gold as scrap, you may not need it; but if you have a
display of ‘estate jewelry’ that is the best-of-the-best of the
purchased gold, you may need some kind of state sanctification.

good luck to you,

G’day all,

I reckon that many of you who have been in the trade for a while
could relate stories about buying old gold etc.

Here’s on for the list - Many years ago, as an apprentice, I heard a
story about our local gold supplier/refinery. They were approached
by someone who wanted to sell a coil of gold. Being cautious the
supplier wanted to test some of the metal and clipped off about 12
inches (obviously not all of this was needed for the test but at
least he didn’t rely on just the last inch or so). Apparently the
test checked out OK and the transaction was completed only to
discover that had the supplier gone a little further into the coil
he would have found a nice neat solder join where the gold wire was
attached to the copper coil which had all been gold plated.

Who can add to the tales of woe?

Good luck,

One thing to remember if you are buying precious metals and gems
from the public. You have to keep good records and deal with Patriot
Act requirements. I would want to have a xerox of the photo ID of any
seller kept along with weights and payment info.

James Binnion
James Binnion Metal Arts

It looks like you already have some great suggestions. Here are I
few I would like to add:

  1. Stamped “14K” items should at large be considered 13.5K (and
    likewise down the chart). Look into JVC findings for literature on

  2. Some states require a license to buy. At the VERY LEAST, go to
    your local police department and give them your card and tell them
    what you do, that you’ll cooperate should anything happen, etc. The
    last thing you need is a court order to seize your inventory (like
    one of my local jewelers). ALWAYS get a copy of drivers license and
    a thumb print from the buyers. Use your intuition about people- if
    they seem straight-up untrustworthy, they probably are.

  3. I process these jobs a bit differently. I will start with asking
    what they want for it- but will not differ my offer based upon what
    they know/dont know. I find that trying to “assess” the client can
    really bite you in the rump. If the client doesn’t like the offer, it
    is CRITICAL at this point to explain why the offer isn’t anywhere
    close to what they paid. Otherwise, the client will leave thinking
    your trying to pull one over, even though your offer may be generous.
    The public simply does not understand markets and value. Explain to
    your client that the only way to reach a retail client is by
    advertising to a retail client (local rag, craigs list, etc.). This
    also means that they will be competing with all of the local jewelry
    stores and their advertising and expertise. A quick sale means low
    profit and a timely sale means higher profit.

I developed a chart to help jewelers and fellow valuers in this
process. Or rather to help your clients understand what markets exist
and what they can expect to retain in each market. Feelfree to
download it at:

  1. NEVER-EVER-EVER-NEVER-EVER!!! …tell your client that an offer
    is an appraisal!! This is simply a foolish thing to say/quote/do.
    You, as a professional, are responsible for your value- whether
    verbal or written and can be held accountable! What if your client
    took a verbal “appraisal” and used it for insurance?!?!? That value
    would be far below what they could replace it for retail and now YOU
    are responsible for the difference. If you really MUST do this, I
    would recommend a strong “errors and omissions” insurance policy
    from Jewelers Mutual. A valuation is a very methodological process
    that takes time and coordination. Furthermore, there are MANY
    (infinitely, really) different types of value- did you define your
    type of value before your “appraisal”? In fact, your better off
    saying “This is simply an offer to buy, NOT an appraisal!”

  2. When you get pieces that are decent (diamonds, antique, etc.),
    consider brokering. Or even referrals. Companies like CIRCA
    (, Joseph DuMouchelle Auction House (Grosse
    Point, MI) and more offer 10% finders fees. Lemonade out of lemons!

Good Luck,
Kennon Young, GG, CBJT

many of you who have been in the trade for a while could relate
stories about buying old gold etc. 

I could tell many stories like Roger’s, but I won’t. His story
actually opens up the greater issue of security in general - anytime
you are dealing in precious things there will be bad people doing bad
things, hoping to take advantage. At least. ~THE~ first two rules of
security: 1) Don’t give them the opportunity. 2) Even honest people
might steal something if they feel certain they won’t get caught.
Somebody here took exception to #2 once, because they didn’t
understand it. I know two stores who were embezzled for large amounts
because they depended on honesty and got burned. If you have a good
security SYSTEM, then it doesn’t matter. That’s why places like
secret labs, banks and other places treat everyone the same - not as
crooks but with no special trust, either. Everybody goes through the
security gate, no exceptions - everybody gets the wand, no
exceptions. Even honest people. When I go to a diamond or stone
dealer - volume gold dealers, etc… I get treated with a protocol.
Those protocols prevent me from doing bad things, even though I
won’t, and I accept them as policy.

There’s been good advise here about buying retail gold, too - test
everything, check everything, etc. That’s policy, and good policy. I
know people who buy gold (they just buy it, they don’t talk to
anybody about it, btw), and usually the worst that happens is they
get a gold filled chain by accident. And they pay so little that they
can absorb that, easily. But it’s when Grandma comes in to sell a
gold plated pewter ingot so she can feed her starving grandchildren
~sob, sob~ and you hand over a thousand bucks because you forgave
procedure - that’s when you get burned. Policy is all the time, no

Here’s another buying gold story:

Years ago, when I was in private practice as a lawyer, the bank
downstairs asked if I could find a way to test a “gold bar” larger
than the size of a brick that they had taken as security for a loan.
The surface, of course, tested 24k and finally, it was only when the
bar was drilled into that the lead core was discovered. The gold was
at least 1/8" thick but not nearly thick enough to cover the loan the
bank had made on the security of the bar.

Sheridan Reed

I am now re-thinking about going ahead with any advertising and stay
within my old borders of accepting customers gold as a proportionate
deduction when they place a custom order. What’s changed for me is
idea of people coming in the store who might not otherwise, and
therefore it becomes an issue of security, especially when I am in
the store alone.

When someone walks in and simply asks for me to buy their gold, I
now am armed with a lot more info because to your expert advice and
replies. Thanks again

Mary Ann Archer

I work with a friend (that has a retail storefront) and I handle the
"new" scrap business he has entered into since the proliferation of
cash4gold ads on TV :

We take a POS photo of each seller that has a time/date stamp and get
a copy of their ID, and current contact it does not
always match the drivers license, and a daytime/alternate/work
phone- should we need to reach them during business hours- or the
police would like to talk to them! We state that we do not buy the
stones ( unless it is a very high quality stone that the owner is
interested iin- which of over 3 kilos of gold he has bought only 2
VVS and 1 certified IF diamond all of them over 1 carat).The seller
pays a fee if they want the stones removed and returned ($50.00 flat
rate).rarely are there any stones worth keeping or reusing for

We use an electronic tester in front of the customer and if time
permits perform the acid testing too,particularly if there is a line
of customers (near the end of the month there seems to be more
sellers turning up).

Sometimes, this thins the line considerably!!!

We inspect every piece for hallmarks, purity stamps, makers marks-
Once in a while there is a piece worth keeping, and we inform the
customer (we had a Yossi Harrarii piece come in that the seller just
didn’t like- it was far too vin demand to melt down and we did not
want to pay its worth as scrap-, not to mention that his alloy
"Gilver" was in the piece 25% 24kt gold 75% silver Some call this
black gold because he coats/oxidises it to add effect to the
settings–so we sent the seller to a nearby auction house for them
to try and sell it there)/ If the purity mark and a recognizable name
are stamped in we still test but inform that the value is worth more
than scrapping it- it is then up to the customer- so an ethical
question arises - does one tell the seller they have a collectible
piece het still pay yhe standard rate for gold scrap, or buy it for
the scrap rate and put it in the case and resell it for far more
than was paid at the scrap rate- hmmm. Another time we had a
gaultieri piece come in- which we made a fair settlement on- above
the scrap rate but far below the original price of the piece (by at
least 10,000!)…so the buying involves a knowledge of current makers
and coture jewelers,as well s an understanding of metals.

We don’t buy raw materials- wire, sheet, ingots, etc- it’s too time
consuming to prove their authenticity and sometimes nformingacustomer
that what they bought was not a 24kt ingot but rather a layer of 24kt
gold over any number of bases from cardboard eith embossed
commererative likenesses to d’ore ( unless its for instance, an
Englehardt bar with a serial #- one simply calls the refiner and asks
about the serial #-) if true then we pay 40%- 50% on fine silver
bars- or there is no profit- we as a rule don’t pay more than 35% of
market on fabricated sterling jewlery. We don’t buy candlesticks,
vessels, etc.Too much hassle unless the resale is worth the price and
the stolen property check (which the customer has to pay for and
takes up to 7 business days to get a report back locally).

To buy gold in most states requires the Commissioner of Agriculture’s
stamp as to the scale being" Certified For Trade"- which we happen to
have but many don’t and as such another cost to add into your formula
for payment. Another consideration is that you must keep cash on hand
in excess of what you may normally keep in your safe/ cash drawer,
etc. and in some states to be a scrap buyer as a jewelery store
requires at least 6 forms of security to keep or get insurance…add
that into the cost and the formula for payment - it can be a major
venture to enter into the scrap business even though you know the TV
ads are rip-offs, and would like to offer the service to your
customers and community as a local alternative- equally sellers would
rather deal locally - so you should really consider the profit margin
compared to the work, insurance, costs, research, etc. and then if
you are sending your scrap lots out ( we do not) the assay charges
incurred, if any, and settlement you get from your refiner of choice
( in the rare case we have a large amount of 18kt we do send it off
to Hoover and Strong, in the US and Cookson’s or Handy and Harman in
the UK - I have dealt with them for many years and found their
settlements true and fair- and it makes a nice amount from which to
draw raw materials you don’t have time to fabricate, or platinum
products you don’t ordinarily use on account!) should be factored
into the prices paid.

All-in-all it is sometimes not worth the extra help to buy scrap, the
extra insurance, or the extra records keeping- particularly in large
cities where there is a lot of competition for the same business-In
small towns where everyone knows everyone else ( lie Murphy NC for
example) it si feasable and provides a service to locals that don’t
trust the TV companies but realize they have a lot of 14kt lying
around that they don’t wear and don’t want- in those situations you
know who should be checked out and customers that are simply wishing
to make some quick cash and do’t really expect to get more than a
couple of undred dollars and are surprised to receive $1000.00 or

We also keep a container that the soldered parts are just snipped off
and collected in- those go into aqua regi a and the gold
reclaimed,Platinum, ruthenium, osmium etc are sent out to specialty
refiners that deal in dental, photo, and rare earth metals
exclusively… I would seriously consider the service and its costs
to you before hanging the sign up that you are buying metals for
cash. Those customers you have dealt with for years know you will
usually buy their pieces as you sold them to them in the first place
and can verify their authenticity with a receipt check and you will
pay a fair price as scrap! Otherwise setting up a scrap buying
operation, installing security, training and hiring additional help,
and setting up terms with a dealer if you have none in place to buy
your collected materials could be far more hassle than profit. Some
on this thread have mentioned what amounts to, in my opinion, taking
the unsuspecting customer for a proverbial ride, I don’t think that
is right- but setting a fair price takes some calculating and daily
changes given the wildly fluctuating gold (and platinum)
markets.Please don’t just presume it is easy or profitable on a
small scale…rer

For anyone interested in this topic who will be in Tucson, Stuller
Institute has a session on buying clean scrap

I am in Canada and have started to buy scrap gold (broken necklaces,
earring etc,), from friends and am wondering if I am paying too much
or too little. I am paying 9.75 USD per gram for 10 k jewelery,
$13.25 for 14k and would pay $17.05 for 18k.

What is fair based on the $900.00 USD ounce these days? Should I
factor in refining and shipping costs? Right now I also weight any
jewelery with stones and pay for the weight at the gold value for
that karat.

Would an electronic gold tester be a good backup tool or is acid
testing the best way to go?

What about an electronic diamond tester for stones?

I am not trying to get rich here just acquire enough gold at a
resonable price so I can have more materials to work with at home. I
am not a full time jeweler

Any advice both online or offline would be appreciated


Peter, I suggest you visit a couple of local gold buyers with a
couple of pieces of what you have bought from your friends, and find
out their offers for them. Using that I would pay no
more than 10% over the highest price that you were quoted. That way,
your friends are getting the best price, and you aren’t wasting your
capital by overpaying for a supply of gold that you have no current
need for.

Lee Cornelius
Vegas Jewelers