Research Shows Selling Physical Gold For Currency Is Unprofitable

According to a recent survey carried out by precious metals specialist Goldcore it appears that consumers are losing between 15% and 80% of the value of their gold jewellery when they sell it for cash. “Consumers need to be careful when selling their gold jewellery for euros,” says Mark O’Byrne, Research Director of Goldcore. “While it may seem an attractive proposition in the short-term due to the current economic environment, when you factor in the original purchase price, you can see that  consumers are getting a very bad deal overall. There is also the fact that it is likely that gold prices will continue to rise in the long term.”

The research was mainly focused on Europe where citizens are getting poor prices when they are forced to sell their gold jewellery. Mark O’Byrne says:

“Our survey has shown that consumers are getting a raw deal from the cash for gold sector,” adds Mr O’Byrne. “Selling gold jewellery in this manner is a classic case of buying high and selling very low – akin to ‘selling the family silver’ for very poor prices.  The public is being misled that now is a good time to sell gold. At nearly $1,300 and €1,000 per ounce today, gold is well below its record high of $2,400 per ounce in 1980 in real terms when adjusted for inflation.”

The general advice is to hold onto physical gold as it is a protection from bail-ins and currency crisis. That has been gold’s function throughout history, that is what people should expect from gold going forward. People should only sell their gold holdings in extremis.

The following infographic summarizes the quantitative findings of the research. We are copying the accompanying explanation from Goldcore’s website (see below the infographic).

gold for cash goldcore money currency

The research shows how average cash for gold merchants are paying approximately €10 per gramme of 9-carat gold, which is 37.5% pure. The spot price for one troy ounce of 24-carat gold is €977 (as per July 12, 2013) and when readjusted at 37.5% for 9-carat gold, the price is €366.38.  One troy ounce equals 31.1035 grammes, therefore  €10 X 31.1035 grams = €311.03 per 9-carat ounce (or €829.31 approx per 24-carat ounce).  Cash for gold merchants are therefore paying approximately 15% less than the market price for an ounce of 9-carat gold (€311.03 is 15% less than €366.38).

Most retailers of jewellery will have a 250-400% mark-up on the intrinsic gold value. For the purposes of the survey, the average mark-up taken was 300%. Therefore, if a 9 carat (9/24 or 37.5% pure) gold ring is purchased for €1,000, the value of the actual gold content contained in the ring would be close to €250, based on gold’s market value.  A cash for gold company will pay 15% less than its market value, giving the seller just €212.5 (a loss of approx 80% from €1,000).


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