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What to look for when buying gold

Gold is a safe buy. Unlike with gems, where you really need to be an expert to judge the quality of the stones, buying gold is straight forward. Estate jewelry will give you the best value.

Platinum or White Gold?

With gold at $1,255 an ounce and platinum at $934 an ounce gold is more expensive than platinum. This is a very rare occurence and makes platinum a real bargain. The reason for this is that gold is a monetary metal and is being bought by banks and hedge funds whereas platinum is a mainly industrial metal. In the past platinum has been at times twice as expensive as gold. There are many advantages to platinum. When white gold rings are made, they are usually coated with rhodium, to give it its silvery shine. Without rhodium, white gold rings have an off-white color that is slightly yellow in color without the shine of a yellow gold. Since the rhodium coating can wear off, white gold rings need to be serviced with new coatings periodically. By contrast platinum is used in almost its pure form (approximately 95% pure). It is extremely long wearing and  keeps its brilliance forever. It also holds stones more securely than other metals.


At $920 an ounce rhodium is even better value. Rhodium is much rarer than either gold or platinum and has historically been as much as ten times as expensive as gold.

Titanium

The demand among Asian consumers for gold with a high fineness, which can be easily transferred into money, but with improved mechanical properties such as resistance to wear, distortion and breakage is leading Thai goldsmiths to the use of titanium. Prima Gold and Gold Master for example both use a titanium and gold alloy. However this represents a very small section of the market.

Fineness

The level of fineness will depend on the country. The following table is the result of a survey by the Gold Institute of Thailand:

karat % gold Country Color
24k 100% Switzerland gold
23k 96.5% Thailand dark yellow
22k 91.7% India yellow
21K 84.5% Middle East yellow
18K 75% Italy, France, Japan yellow, white
14K 58.3% America, UK yellow, white
10K 41.6% America yellow
9K 37.5% UK green yellow
8K 33.3% Germany pale yellow

The karatage and gram weight designate how much gold is in a piece, but are not the sole determining price factors. The craftsmanship and level of detail  are also taken into account.

When to buy gold

  • Summer is the best time to buy gold. After August the price starts to rise. The reason for this is that this is the time of year that gold jewelers typically do their biggest business. The kickoff is the Muslim holy month of Ramadan, which ends with generous gift-giving in early September. After Ramadan comes India’s post-monsoon wedding season, and in November there’s Diwali, one of India’s most important festivals. During the fall, jewelry makers in the U.S. and Europe stock up in advance of the Christmas shopping season.
  • If the Dow/Gold ratio reaches a value of 49 or above you should buy as much gold as possible. The Dow is currently 21,553 so the ratio is now 17.
  • If the gold-oil ratio reaches 10 barrels/ounce or below, buy as much gold as you can afford. With oil at $107/barrel the ratio is currently 12.

There are many ways to buy gold: jewelry, coins, gold bars and ETFs are among the most popular.

Buying Gold on Ebay

It is possible to buy gold on eBay. The problem with ebay is that their fees are so high and these fees must be born by the buyer some way.  Ebay takes up to 16% of the value of each item sold. On top of this the seller will want to make a small profit. It is unlikely that you will buy gold from ebay with a markup of less than 18%. There are better ways to buy gold.

Others Auctions

Police auctions are one of the best places to buy jewelry cheaply. There is usually no reserve price as the police simply want to get rid of the items.

When old people die leaving no successors the lawyers will often auction off the possessions of the deceased and usually don't put a reserve price on the items.

When selling costume jewelry the auctioneers will put many worthless items in a box with a few valuable pieces.

Bitmit allows you to buy and sell goods, including jewelry, using bitcoins.

Rose Gold

Gold's softer, pinker incarnation is the most-wanted metal of the season . The coolest rose gold pieces around are chunky, unconventional and edgy to contrast with the pretty shade. And this trend is not limited to jewelry – some of the finest masculine watches are looking great in gold’s prettier counterpart.

Check to see if there are any gold rose pieces still on sale in our database. If you buy direct from someone selling their own jewelry you will get the best deal.

Yellow Gold

Although white gold overtook yellow gold in popularity in the 1990s, yellow gold is currently enjoying a resurgence.

Yellow is the color of happiness.  It is also the color of the sun. The Incas called gold "the sweat of the sun" and the Chinese thought of gold as the sun's yang. Ancient Egyptians reserved gold's use for pharaohs only, equating it with the sun.

Gold will never be out of fashion.

Religion and Jewelry

The Bible (1 Timothy 2:9) says "In like manner also, that women adorn themselves in modest apparel, with shamefacedness and sobriety; not with broided hair, or gold, or pearls, or costly array" which some Christians take to mean that women should not wear jewelry.

In Islam men are discouraged from wearing jewelry although it is not forbidden.

Ethical Jewelry

The only ethical way to buy jewelry is to purchase it second-hand. To produce enough gold for a ring, about 18 tons of waste ore are created. Once it’s extracted, the ore is piled into huge heaps and sprayed with cyanide and then usually just abandoned. Gold mines can reach temperatures of 130° so they are not pleasant or safe places to work in. The ongoing attempt by Gabriel Resources to start gold mining in the beautiful unspoilt village of Rosia Montana is typical the conflicts involved. The No Dirty Gold Campaign has already convinced various companies and jewelry shops to ensure that the gold they sell is either recycled or comes from sustainable sources.

Testing the purity of the gold

Testing the purity of gold is very hard. Most of the tests only show the purity of the piece being assayed. This is why it is so important to buy gold from a reputable supplier.

There are a few simple tests that you can make.

  • Rub the piece of gold across a piece of unglazed porcelain tile. It should not make a black streak. If it does then it is pyrite.If the streak is golden yellow then it is gold.
  • Try scratching glass with the piece of gold. If it scratches the glass, it is definitely not gold, or is mixed with other metals and the purity is very low.
  • Hold a magnet near the piece of gold. If the magnet attracts the gold piece, then there are other metals mixed in the gold. This is not pure gold. On the flip side just because something is not magnetic does not prove that it is gold. Brass, copper, aluminium are not magnetic. Pure nickel is magnetic, but when alloyed in jewelry it has very little magnetism.
  • Drop a very small amount of hydrochloric or sulfuric acid onto the gold. If the gold begins to dissolve, then there is some other type of metal mixed with the gold and it is not pure.
  • Check to see if there are any markings on the piece. This will give you an idea of what karatage it might be although it does not prove it. It is possible to buy a machine for stamping jewelry for as little $11 so there is little to stop someone from just stamping a piece with any hallmark they choose. You should not conclude that just because the piece has a hallmark that it is genuine. Class rings marked Jostens 10K are usually good. A class ring ring marked Jostens Duratone has almost no scrap value.
  • You can buy a test kit consisting of a series of acids, a touchstone and a needle. Different types of acid are used to test particular karats. For example an acid for testing 10-karat gold can be used for a 10-karat gold but it can not be used to test 14 or 18 karat gold. These kits can be bought for as little as $9. Nitric acid is the type of acid generally used, and you drop the acid onto a part of the piece where there is some wear. If there is no wear then make a small file cut. If it passes 10k test, it is at least 10k. If it passes 14k it is at least 14k and so on.  Some experienced testers use 14k acid only, and can judge the gold purity by the reaction.
  •  It is possible to buy electronic testers, but the cheaper one are not reliable. Industrial type electronic testers are extremely accurate, but cost thousands of dollars. Most gold shops use a standard fire assay which uses heat to test the purity of the gold. 

How to buy high quality jewelry at a reasonable price

Hard times are forcing many people to sell their unwanted jewelry and they are usually more than happy to accept the scrap value of the metal, which is a much better deal than they would get from a commercial gold buyer. Buying directly from someone selling their own jewelry will give you a much better deal than you would get from a conventional jeweler.

Jewelers will try to convince you that the price they charge is affected by the labor involved in making the item, the skill of the craftsperson, and the intricacy of the design. In reality most jewelry is made in countries such as Nepal or Thailand where labour costs of even highly skilled craftsmen are negligible. The mark up of the piece over the base metal price is almost entirely accounted for by the jewelers' profit margin and overhead.

Understanding the economics of the business will tell you why jewelers need such large profit margins. To begin with, all jewelers turn their inventory very slowly, and that ties up a lot of capital. People buy jewelry infrequently, and when they do, they are making both a major and very individual purchase. Therefore, they want to view a wide selection of pieces before zeroing in on a single item. Given that their turnover is low, a jeweler must obtain a relatively wide profit margin on sales in order to achieve even a mediocre return on their investment.

This does not apply to people selling their own jewelry.If people need to raise money in a hurry to pay off debt they will sell their jewelry for considerably less than it is worth. Our poll on the price that people would be prepared to sell a 14k gold chain for shows that 60% of respondents would be willing to sell it for 20% or less than its value and 25% of respondents would sell it for 40% or less. Buying people's unwanted jewelry is probably a better way to invest in gold than buying coins or bullion. Don't automatically believe everything you read in the mainstream media...

There are several advantages to buying gold in the form of jewelry:

Jewelry for women

  • We are conducting a poll to find out what kind of jewelry men like on women. The results so far are as follows: 22 % like earrings, 16 % like bracelets, 22 % like necklaces, 17 % like rings, 11 % like ankle bracelets, 6 % like belly button rings and 6 % like no jewelry.
  • Never wear imitation jewelry. Real gold, silver or platinum.
  • If you're wearing jewelry, make sure it's all in the same tone. Try and have at least one piece of really good, unusual jewelry as a conversation starter.
  • Wear bright gold jewelry near your face and on your wrists so that they lend a rich glow to your appearance.

Jewelry for men

  • In the past jewelry was worn primarily by women but in recent years some men have started wearing jewelry such as neck chains, bracelets, and earrings. What do women think of this fashion? The results of our survey are as follows: 60 % like no jewelry, 6 % like earings, 11 % like bracelets and 23 % like chains.
  • Sauro is one company that sees a market for men's luxury jewelry. They have designed a range of bracelets in some of the most modern and masculine materials – titanium, carbon fiber, and ceramic – as well as more typical materials such as silver, gold, copper, and diamonds. The blend of typical and not-so-typical materials gives the sauro jewelry bracelet a bold and modern look that is suitable for men.
  • Buying jewelry for your girlfriend. A present that can be easily converted into cash such as jewelry is probably not the best present to buy your date as there is always the danger that she could be a 'gold-digger' who is just stringing you along. A worthless but expensive present such as a dinner for two in a plush restaurant is probably a better bet. If you are determined to buy your lady jewelry you should probably go for a piece from a company like Tiffany, for example, which is expensive enough to impress her but which has a poor resale value.

Gold Bars

The premium over the spot price for bars is around 2%. Unfortunately it is easy to produce fake gold bars using tungsten, which has the exact same density as gold making a fake bar salted with tungsten indistinguishable from a solid gold bar by simply weighing it. Because tungsten is brittle it is hard to do this with coins.

Getting gold out of the country

At the moment there are no restrictions on getting gold out the US, but there is no guarantee that exchange controls could not be introduced in the future.

Most countries do not recognize gold as a monetary instrument, so gold can be moved freely and privately across most borders. In the United States, the law requires that an individual is required to report if s/he is leaving the country with more than $10,000, or foreign equivalent, in monetary instruments. If you leave (or enter) the United States with more than $10,000 in monetary instruments, you must fill out form FinCen 105, which you can ask for upon arrival or departure. Gold bars and coins are not included on this list. One-ounce American Eagle coins have a face value of $50, therefore theoretically 200 Eagle coins would meet the $10,000 threshold.

In Canada, the rules are essentially the same. Entering or leaving the country with more than C$10,000 or foreign equivalent in monetary instruments must be declared to Canada Border Services Agency (CBSA) on form E667.

In China it is illegal to take gold out of the country. In Thailand you cannot take 23k gold out of the country.

There are certain countries, Taiwan and Uruguay for example, that require you to declare ownership of gold upon entry. Since laws change all the time, make sure you check your departing and arrival country’s customs information before the trip.

Where to store your gold

1. Spread your holdings around. Not only is it wise to avoid keeping all your physical gold in one place, diversifying your storage arrangements allows you to buy more. Hide some at home in several locations, and then put instructions in encrypted form in a safe place. Keep some fake gold bars to confuse the burglars.

Renting a safe-deposit box at a bank is pricey. According to bankrate.com, a small deposit box (from 10"x10" to 15"x17") will cost you anywhere from $100 to $560 per year, depending on a bank. For a larger box, such as 24"x65", you might have to pay as much as $6,492 per year (Citibank, NY).

2. If you don't like the idea of keeping a lot of gold at home, you could consider using an allocated storage account such as bullion vault or goldmoney. Bullionvault seems to offer the cheapest and probably the safest way to buy gold or silver online. However it is still better to store your gold at home if you can think of a good way to hide it.

How much is 21k gold worth?

To find out how much your gold is worth use our precious metal calculator.

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