Buying Gold Jewelry

My posts have been getting less and less frequent lately. I apologize for that. Sometimes I just get busy with other things and the blog takes a back seat. Over the last month or so of slow posting I've had a lot of ideas come to mind so the posting should start to pick up a bit.

Anyway, I've finally reached my initial goals that I had set for my silver collection. I actually exceeded it by a decent amount. Having done that I decided that it was time to start getting into gold. Unfortunately, gold is expensive. I built up my silver collection over several months by spending maybe $50-$100 per month. Gold coins and bullion, however, carry a hefty premium if you buy it in small fractional coins. It only took a couple of times buying 1/10th oz gold eagles before I decided to come up with a different solution. Then I remembered Ferfal talking a few times about how he wished that he'd bought more jewelry before the crash in Argentina. He's mentioned this in several forums and in several posts on his blog. There is so much to know and it's so easy to get screwed when dealing with gold jewelry that I never gave it much thought. Then I started doing some research. Here I'll try to give you a little lesson in gold jewelry buying 101. Keep in mind that I'm new at this myself so if I miss anything important I encourage comments. In the unlikely event that I'm completely wrong about something I'd definitely appreciate some feedback. Due to the ridiculously high price of gold and my ridiculously limited funds I did some meticulous research to ensure that I wouldn't get screwed over too badly. Hopefully, this information will help you as well.

The biggest selling point of any gold piece is how many karats it is. Don't get this confused with carats or ct. A karat is the percentage of gold that there is in the piece. A carat is .2 grams. If the piece has a number followed by ct. then it's probably just an old piece that has the weight stamped on it. Pure gold is 24 karats. To figure out how much gold is in a piece you take the number of karats and divide it by 24. For example, a 14 karat gold necklace contains .583% pure gold. Here's how the percentages break down:

22k - .917%
20k - .833%
18k - .750%
16k - .667%
14k - .583%
12k - .500%
10k - .417%

I carry this little list in my wallet written on the back of a business card. For the most part, most of what you'll find will be 10k and 14k. 18k tends to carry a ridiculous premium over spot and anything higher just isn't all that practical. 12k and 16k isn't easy to find. .583 and .417 are the two most important numbers to remember. 10k and 14k are probably the only grades that you'll find at or near spot.

So what do all of these numbers mean? If you're trying to buy jewelry as close to spot as possible then you need to bring a scale and know how to calculate the spot value. First of all, most pocket scales measure by grams. They'll probably also measure by ounces but they'll be less accurate per ounce. Most people who are trying to sell jewelry sell and buy by the gram so you want to know how to calculate the price by gram. First of all, precious metals are measured by troy ounces rather than normal ounces so when you're calculating grams you need to divide spot by 31.1. Once you have the spot price converted to grams you just weigh your piece by the gram and multiply it again by the karat makeup. Here's the equation: (spot price/31.3) x (weight in grams) x (karat %)

Most gold pieces will have the karat stamped on it somewhere. It will be followed by a maker's mark. Usually it's on or near the clasp on necklaces and bracelets, on the posts of earrings and inside of rings. The writing is pretty easy to identify. It's just ridiculously hard to read most of the time unless you have a good loop. There are a few things that you need to keep an eye out for when looking for this stamp. If there's just a number followed by a k and some letters or a symbol that don't make sense then that's probably how many karats the piece is followed by a maker's mark. If the letters GP follow the karat mark then the piece is probably plated. If there's a fraction before the karat mark or seemingly part of the karat mark then it's gold filled. The fraction is a percentage of a percentage. It might say 1/20 14k. It could also say 20/14k. Either way, this means that 1/20th of the piece is made up of 14k gold. If you want to figure out the gold value in this piece you use the first equation and take 5% of that. If the fraction is different then adjust accordingly. To be honest, gold filled and gold plated jewelry is usually pretty close to worthless. Filled is better than plated but not by much. Generally, don't waste your time with it. If you see a fraction or you think it's plated then just walk away.

That's pretty much it. Knowing where to go to buy and sell gold is also helpful. I'll get into that in a future post. If you know where to shop and you know what you're buying you can buy gold jewelry at spot regularly. You just have to be vigilant and you have to know what you're buying.