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Date Posted: 12:35:52 08/14/03 Thu
Author: Ralph
Subject: Buying and Selling Scrap Gold

The following are a couple of re-posts about buying and selling scrap gold. I know alot of the forum readers here might be interested in this aspect of the gold markets, so thought I'd share this information here where it will be archived for future reference.

Ralph Bryant 08-14-03

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BUYING SCRAP GOLD JEWELRY

It takes an experienced eye when seriously going out and buying scrap gold jewelry, and even then there is some very good fake jewelry out there. After years of buying and selling scrap gold in the so-called "secondary" gold markets, I've learned that the most important "caveat" of any gold buyer is this: "A Karat Mark Is Only As Good As It's Backing" -- meaning, or course, that if the mark is on a fraudulent, plated, filled, or under-karated piece, the marking doesn't mean a thing.

Here are some things I look at personally:

1. First thing I do is look for a quality stamp mark..... 10k, 14k, 18k, etc. (but remember that "caveat").

2. Once I find a quality mark, I double check that mark closely to make sure it doesn't have "HGE", "filled", or other added identifiers with the mark. These two especially, indicate that the item is NOT solid gold. HGE stands for heavy gold electroplate, and filled means that the item has a base metal core with a layer of thicker gold "clad" layering on the outside only. You will see alot of real, solid karat gold marked as 14kP or the like, which means 14 karat plumb, meaning the alloy is exactly correct for the karat quality. Don't make the mistake of thinking the added "P" means plated. Normally it stands for plumb. Actual plated items may say "plate", "plated", "wash", or other similar identifiers. Another thing to look for is a producer hallmark in conjunction with the karat mark. These became a requirement with all karat marked jewelry produced in the U.S. since about the mid-1980s, but earlier jewelry still was allowed to bear the karat marking only. If there is a karat mark, but no hallmark, look ALOT closer. Preferably using a jewelers loupe, look very closely at the karat mark. Most jewelers will add the mark to solid gold items just BEFORE the final polishing phase in producing the piece. BUT, unethical sellers and scam artists using a karat punch to mark fake or plated/filled pieces will normally do so after the item has been completed. If you look very closely, you can see a "ripple effect" around the karat marking on most "post-marked" fake jewelry, while those same ripples on the real items are polished off during the final polishing process. The fakes usually do not have enough gold covering to allow for polishing down the markings without exposing the base metals underneath.

3. Next thing to do, once you have found a karat marking, is to look at ANYTHING AND EVERYTHING that might "disprove" that marking. It might be a "worn through" area, where the underlying metal is a different color than the supposed "gold" that appears on the outside. With HGE and filled items, the gold can actually "peel" off of the underlying base metal, while other fakes can have worn spots in the gold plating, exposing a silverish color. All are tell-tale signs of a fraudulent piece.

4. Look at the construction of the item itself. You are not likely to find rhinestones or "glued in" stones in real gold. Look for obvious hand-setting of the stones, quality engraving as opposed to "made in the mold" cheap costume pieces.

5. Get to know and recognize the COLOR of real karat gold. Most fakes or plated items commonly use higher karatage gold in the plating process than that of most 10-18 karat solid pieces.

6. Pay close attention to the "feel" as Amy described. Solid karat gold will "usually" feel heavier than base metal plated items, but not always. The thing to learn is the "consistency" of what karat gold feels like in the hand, in comparison obviously to the size of the item. Pure gold especially has a very high specific gravity in comparison to other metals, even lead and heavier pot metals. Karat golds are lower in specific gravity, but still heavier than most metals used as a filler in cheaper fakes.

7. Something to look for on older rings are signs of "sizing solders" commonly used on the rear shank portion of the ring when cutting and re-sizing the shank. These solders are made to melt and bond to the karat gold at temperatures below the melting point of the actual metal, so are usually of a lesser karat value than the ring metal itself. As such, they may tarnish or discolor over the years, and are easily recognizable on older rings, especially those not worn for awhile. With a good loupe magnifier, you can also commonly see some slight pitting or porosity at the solder joints on alot of karat gold jewelry. Since this is done as an actual part of the piece AFTER production, that porosity is never really covered up like it might be on a solder job that has later been plated.

8. Get yourself a good touchstone and acid kit, or one of the modern electronic gold testers. I use one that has saved me much more than the cost of the unit (about $200 retail for a good one). The ones made by "Mizar" are excellent, and use a combination acid/metal conductivity test to determine real from fake, and with some practice and experience, you can easily identify plated and even filled gold items with one of these units. There are metal alloys out there that are made to look IDENTICAL to quality karat gold in weight AND color. The Mizar will show almost instantly whether an item is real karat gold or not. With a slight touch of the file, even the better plated and filled items are easily identifiable.

There is really alot more to all of this than just going out and buying anything that looks like gold. But the efforts of learning your stuff are well worth it in the end.

SELLING AND REFINING WHAT YOU'VE BOUGHT

Refining gold can be a sticky proposition, and unless you have a fairly sizeable quantity of it, you may be better off leaving it in jewelry form (marked karat gold). You can expect most refining lots to return anywhere from 90 to 96 percent of your "fine gold" once the refining process is completed. And there are several good refineries to choose from. One I use often is Hoover and Strong in Richmond, VA. But normally, I will not send in a refining order unless I have a minimum of 25 ounces of scrap karat gold. Anything much below that, and you can get a better price selling the scrap in marked form than you will receive in fine gold from the refining return.

There are many of the larger scrap dealers who will pay you up to 96 percent or so for marked karat gold, so if you are receiving back 96 percent or less of your gold from refining, why bother ? By the time you pay refining charges, the 3% or so "accountability loss" (fancy term refiners use for "we're keeping part of your gold"), as well as postage and insurance fees for shipping (both ways if you get fine gold in return), if you have smaller amounts of karat scrap, you can do better selling it in marked form to one of the larger scrap dealers.

Some scrap dealers will gladly exchange fine gold bullion or bullion coins for your scrap in equal dollar exchanges, but remember that the fine gold bullion will usually have a premium attached to it above the going price of gold. I would not, under any circumstances, pay more than $10 or so over spot prices for fine gold bullion, unless you are making the trade for some of the common bullion coins that may range from $5 up to around $15 over spot on the premiums. These include Krugerrands, U.S. Gold Eagles, Philharmonics, Canadian Maple Leafs, and many other "fractional" coins that have a net gold content of less than a full ounce. For the most part, the full ounce coins carry the lower premiums and are the most popular and easiest to sell while recovering some of the attached premium.

Alot depends too on exactly what kind of scrap gold you have. Marked karat scrap jewelry is always the easiest form to sell outright, but anything not marked with a quality stamp almost always requires an assay before a payment or trade is made. This includes natural gold nuggets or dust, industrial scrap, computer components, any plated or filled items, etc., since there is just no way of knowing exactly how much gold is involved until it is processed, melted, and assayed for content. And that always entails more work and added expense for the buyer, which in turn is passed on to the seller. Remember that all refineries, scrap dealers, etc. are in business to make a profit, and they are not going to do anything for free.

A good rule of thumb if you are buying scrap gold is to let the seller price it, rather than you making an initial offer. Sometimes, the price is greatly to your advantage. Other times, the seller may value it higher than you can possibly make a profit on it. Those are the times to just pass on the purchase, and look elsewhere.

Learning to estimate the weight of an item is very important (if you aren't carrying a scale around with you), and an "under-estimate" is always better than an "over-estimate". You should "be in it to make a profit" just like the dealer or refinery, and often, you can make a better percentage profit on the small scale than they normally do in large volume.

Of course, if you are simply accumulating gold found with a metal detector, it is ALL profit for you. But you can maximize those profits by shopping around for a good refiner or scrap buyer.

Hope this is of some help.....

Ralph

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