Beware of golden opportunities

Offers to buy your jewellery may not be as good as they seem, warns Teresa Hunter

THE gold price has started climbing again after falling back from new year highs. Is now the right time to rummage through drawers for your old broken chains and odd earrings to cash in on assets that have quadrupled in value over the last five years?

If so, what's the best way to go about selling your unwanted gold? Plenty of companies offer cash for gold, but some have been slammed by lobby groups and watchdogs for ripping off consumers.

Last week the Office of Fair Trading went to war on these traders, forcing two, CashYourGoldNow and Money4Gold, to shut up shop. Three others, CashMyGold, Cash4Gold and Postal Gold, promised to clean up their act.

This follows an undercover operation by researchers at Which? who bought three gold chains and sent them off to be valued. For the first chain, costing 115, they were offered as little as 6; for the second, costing 215, they were offered 9; and for the third item, costing 399, they were offered 22.

Which? described these offers as "shocking" and advised consumers to consider alternative methods of disposing of unwanted gold if they are hoping to enjoy the rewards of the soaring commodity price.

Last week gold was trading at just below 860 per ounce, having bounced back from 822, although still lagging the recent 890 peak. But in 2006 an ounce barely fetched 300, before rising to 330 in 2007.

Consumers who want to sell are advised to avoid the cash-for-gold post and internet operators and instead try to trade unwanted items with jewellers. For the best price, the British Jewellers' Association recommends going to specialist centres such as London's Hatton Garden or Birmingham's jewellery quarter.

Scotland does not have a specialist jewellery quarter, although it has its own markets, the biggest of which is the Argyll Arcade in Glasgow.

Perth-based valuer Adrian Smith says those wanting to trade should approach several retailers to find the best price they can get before making any decision.

He said: "If you have any connection with a jewellers, because you shop there, they should always be your first port of call. You shouldn't expect to get anything like the published price per ounce. Even the professionals won't get that.

"There is no such thing as a set price. Everyone will offer a different price depending on their own overheads, and how much buying and selling they do. This is why areas with bullion traders can be useful. If they buy gold all day they may operate on a lower margin."

Which? found that it was offered the best price for its chains by jewellery shops, although pawn brokers were also reasonably generous.

Jewellers offered 33 for the cheapest chain, 46 for the next expensive and 102 for the dearest - less than Which? paid for the items but significantly more than the cash-for-gold companies. At a pawnbroker they could have sold the items for 26, 32, and 80.

How to sell your gold

The price of fine gold and silver is set in London twice a day in a process called the gold fix. The published price of gold is for pure gold and is expressed in dollars and pounds for a troy ounce. One troy ounce is equivalent to 31.1g.

Gold alloys used for making jewellery will not be pure gold unless they are 24 carat. Otherwise 9 carat gold contains 37.5 per cent fine gold, 14 carat 58.5 per cent, 18 carat 75 per cent, and 22 carat 91.6 per cent.

Step 1: Find out how much fine gold your jewellery contains by checking out the hallmark.

Step 2: Remove stones. If your jewellery contains gemstones this will make it more difficult to assess the weight of gold it contains and some companies ask for the stones to be removed before the gold can be valued. If you think there are precious stones then go to a jeweller and ask for a valuation of the gemstones. The gemstones may be worth more than the gold.

Step 3: Find out the weight of gold you have to sell in grams. You may not have a scale which is accurate enough to do this, but most jewellery shops will be able to do this for you and may make you an offer for the gold you have to sell. You do not have to accept their offer but it should give you an accurate weight.

Step 4: Do your own calculation. The hallmarks on your jewellery will normally show 375 (9 carat), 585 (14 carat), 750 (18 carat) or 916 (22 carat). So if you have 10g of 18 carat gold (ie 750 fineness), this will contain 7.5g of fine gold. If the gold fix is 684 per troy ounce or 22 per gramme then the maximum value is 165. If you have 10g of 9 carat gold (ie 375 fineness), this will contain 3.75g of fine gold. If the gold fix for fine gold is 684 per troy ounce or 22 per gram then the maximum value is 82. To arrive at the price he can offer you, the dealer must deduct the cost of valuing and refining the gold in the jewellery, his operational costs and profit, and any advertising and postal costs.

Step 5: Shop around. Call the company, tell them the weight of gold you have to sell and its fineness and ask them if they will give you a quote over the phone. This will not be a binding quote as the gold price changes twice a day and they will want to check the weight and fineness before giving a binding quote.