Monday, October 25, 2010

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.


Anonymous said...

I've been trying to wrap my head around buying gold and silver.With the markup and size,I could not justify a 1 oz hunk.Trade a 1/10 oz for a bag of beans at 5000 an oz???
I think this is a double win/ your wife a nice necklace or such for Xmas,and when the time comes,you can sell or barter it by the gram!
Dean in az

The Urban Survivalist said...

That's how I look at it. My wife has definitely been happy about my new gold buying strategy.

I drive my tractor in pearls... said...

Anon -

We buy silver in order to "live" in a whatif situation - barter for needs....

We buy gold in order to "preserve or grow" in that in a whatif situation, we could purchase land or large items.

When there was blood in the streets in Argentina, many became rich because they could buy things that people had to get rid of in order to eat. Land, apartments.

Prepare now in order to survive and potentially thrive in a crash.

Anonymous said...

Many years ago a friend who had been to Vietnam had a solid gold ID braclet which looked identical to American style ID bracelets. I questioned him on the practicality of it and he explained it was the way Vietnamese would carry their wealth. It had exactly one ounce of pure gold so it's value was known. The chain was large links intended to be cut off individually to use for barter or cash, thus allowing them to break up the ounce of gold into about 20 pieces. Pretty damned practical.

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ahnn said...

When you buy or sell gold jewelry, you always need to be very careful. There are a lot of good companies online but you need to do a lot of background research to avoid scams.

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Gold jewellery are always favorite of women specially urban women. I personally love gold collection.

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Lorita Littleton said...

Thank you for sharing how to properly compute the price of gold according to its karat and weight. I have been considering selling some of my old barely used gold jewelry, so that I may somehow gain profit from it, instead of it simply lying around unused at home. But, if ever, this would just be the first time that I may do so. This would be a great help in knowing the worth of my gold before I take the risk of selling them.

Lorita Littleton

Hendersonrose92 said...

Thank you for this very useful guide. I'm planning on going to a pawn shop either later today or tomorrow to sell some jewelry. I have a couple gold pieces I'd like to get rid of and I'd like to know about how much they would go for.

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