You have probably seen countless cash for gold commercials that promise to pay you hundreds of dollars for your broken and out-of-style gold jewelry. Maybe you’ve even been invited to a gold party, in which people get together at someone’s home and sell gold instead of Tupperware. With the price of gold holding steady at record highs, it’s no wonder cashing in on the precious metal has become so much more popular than gold as an investment lately.
By now, however, most cash for gold organizations have been exposed as scams, significantly undervaluing gold jewelry and using deceptive tactics to avoid any responsibility when customers realize they’ve been ripped off. So if this is the case, why hasn’t the cash for gold craze dissipated? There must be some way to sell old gold jewelery and not get scammed, right?
How Cash4Gold and Other Scams Work
Maybe you weren’t aware that most cash for gold companies are a scam–obviously, a lot of people are in the dark about these organizations, otherwise the cash for gold industry would be out of business. The truth is, unfortunately, that mailing in your gold jewelry to one of these companies pretty much guarantees you’ll get the worst possible deal. Here’s a look at how cash for gold rips you off:
Cash4Gold
Cash4Gold is probably the most well-known company in the industry and their website currently boasts over one million transactions to date. You send your gold through the mail in a special envelope and they mail you back a check. Easy.
However, in 2009, a former employee blew the whistle on this company via the ComplaintsBoard on Consumerist.com and exposed several shady tactics, in addition to simple low-ball offers, the company used to con customers out of cash.
One included purposely sending checks for the wrong amount (a lower amount, of course) in the hopes that the customer would either not notice, or call the company to complain. In the latter case, a representative would have their money doubled–even tripled!–for their trouble, but the full amount would still be less than originally promised. Reps reportedly get a bonus based on how little they can convince the customer to accept (read the full post here).
Gold Parties
The host (or more than likely, hostess) of a gold party will invite friends and family over for food, drinks, etc., and everyone brings their old gold jewelry. The host or a scrap gold buyer will be there to weigh, value and purchase the unwanted metal. At the end of the party, the guests go home with some cash and the host gets a cut of the sales. They are often paid an extra commission for convincing others to become a gold party host, too.
It sounds like a win-win all around, but these parties are usually just a way to get ripped off while having fun. Often, the person valuing the gold isn’t even a professional in the precious metals business, just some Joe Schmoe with a nitric acid testing kit and a pamphlet. And again, this buyer will pay out significantly less for the gold jewelry than it’s worth–not only because they are serving as a middleman for refineries and taking their own cut, but the host is commissioned, too, leaving little for the actual seller.
The Real Value of Gold Today
When it comes to cash for gold services and parties, the gold buyer is often banking on the assumption you aren’t knowledgeable about the scrap metal value of your gold jewelry. There are additional tactics, other than those above, that can be used to cheat you out of money:
- Misreporting Weight: There are a number of systems used to value gold by weight, but they aren’t interchangeable. As the BBB suggests, “Don’t have your jewelry weight determined by pennyweight…and be paid by the gram.”
- Undervaluing: Be sure you know the karat value of your jewelry. Buyers sometimes report a lower karat in order to pay you less.
- Combining Karats: Don’t allow all of your jewelry to be weighed at once. Scammers will combine all the gold and then pay you on the lowest karat’s value.
Karat Values
The value of your gold jewelry depends on its purity, or karat. The higher the karat, the more it’s worth:
- 24 karat: 99.99% pure
- 22 karat: 91.66% pure
- 18 karat: 75.00% pure
- 14 karat: 58.50% pure
- 9 karat: 37.50% pure
You can check GoldPrice.org to find out what pure gold is valued to be per troy ounce (31.1 ounces).
Best Way to Trade Gold for Cash
Similar to cash for gold scams, taking your jewelry to a pawn shop or scrap metal dealer will result being paid significantly less than your gold is worth–about 30 to 60 percent less. The best way to sell gold jewelry is to take it straight to a gold refiner or to an actual jewelry dealer. Note, however, that jewelers will also consider the artistic and antique value of your piece, which someone who is only interested in scrap gold will not.
Before you sell your jewelry to anyone, though, you should research it’s value to be sure you’re getting a fair price. Remember, you won’t ever be paid the full retail value for a piece of jewelry because retail values are marked up several hundred percent and the metal has to be processed. Relying on a cash for gold program will ensure you receive as little for your gold as possible, though, so it’s best to avoid them completely.
