Friday, March 5, 2010

The meager returns from cash for gold

As the price of gold hovers near historic highs of more than $1,000 an ounce, consumers have faced a barrage of flashy billboards, glaring electronic signs, and high-octane television advertisements promising they can make a mint by trading in unwanted jewelry. ...

To find out just how much gold jewelry might fetch, the Globe purchased three pairs of identical 14-karat gold hoop earrings at a local department store; each pair had a retail price of $160, and a sale price of $62.

First, an independent gold coin dealer - Miles Coggan, a rare coin and precious metals specialist who co-owns JJ Teaparty in Downtown Crossing - was asked to estimate the actual value of the gold in the earrings. His finding: $14.65 a pair.

The Globe then sent a pair of earrings to each of two mail-in cash-for-gold companies, and awaited a check for their value. The third pair was taken to a jewelry shop and, later, to a mall kiosk that buys jewelry.

So what did the earrings fetch on the gold buying market? Between $3 and $7. ...

When the Globe attempted to sell its gold earrings, it was a challenge to find out how much each company would pay per gram or ounce. None advertised rates or answered direct questions about pricing structures. ...

On the day of the earrings transaction last month, Cash4Gold was paying $6.51 per pennyweight, according to a supervisor, which the Globe calculated to be about $9.75 a gram. For most of February, the fair market value of 24-karat gold - its purest form - was about $36 a gram.
--Megan Woolhouse, Boston Globe, on the steep bid-ask spread of retail gold sales

No comments: