Thursday, August 23, 2012
 
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How to avoid getting cheated when you sell gold

By Jim Youngquist

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[August 23, 2012]  A couple of months ago I got snookered. I had a pretty big piece of dental gold that I paid the dentist $700 for when he installed it in my mouth. I knew at the time that he had taken a big markup on it, and I knew that when I sold it I wasn't going to get anywhere near what I paid. But, there it was, no longer in my mouth, and I needed some money to buy my wife a birthday present.

At the time there was a little shop open in Lincoln offering to buy gold at good rates. I went in and offered my dental gold sample to the girl to assay (the fancy term they use to determine the value of precious metals and gems). She weighed it and did not tell me how much it weighed. Then she made a phone call while she held my piece of gold in her hand. She got off the phone and said, "I'll give you $25 for your gold."

I must have sounded offended, as I stuck my hand out and demanded my dental gold back, firmly saying, "No!" I knew my gold was worth something, and it was certainly more than $25. What, did I have the word "sucker" emblazoned in Magic Marker on my forehead? I left in a huff.

It took three weeks to recover from that little episode of almost-being-taken-advantage-of. In the meantime I did some checking and knew that gold was worth more than $1,600 per troy ounce. A good friend told me he had been treated right at XXXX XXXXX Jewelers (name obscured to avoid phone calls and lawsuits) on his deals selling gems and gold and recommended that I go there. So, the next time I was in Bloomington, I went there.

The treatment was much different from the start. I sat in plush waiting chairs in the waiting area. I was offered coffee, tea, soda or anything else to drink and offered a piece of cake or a doughnut while waiting for the assayist. I was called forward and sat down, introduced to the assayist, given a brochure and a business card, and was even asked how I was today. All very disarming, endearing and trust-provoking. However, I kept my guard up.

I handed him the piece of gold, told him my story about the $25 offer from the last place, to which he said, "Tsk, tsk," and said he was sure he would do much better. He weighed it on his very fancy-looking scale, pushed a button, and a report came out a printer located at the right side of the desk. He studied the report for a minute and said he had very good news for me.

The report said my piece of gold was 11 pennyweights. I felt confused. I am sure I looked confused too. I was expecting to be told my piece of dental gold was some percentage of a troy ounce, and here I was being told its weight in pennyweights. He told me that of course the store had to take a markup on the gold, and his offer for my dental gold was $75. "Three times the price those charlatans offered you," he said.

I balked. I thought. I wavered. I asked if this was the best price I could expect from the sale of this dental gold, and he smiled and said, "Oh, yes."

I took the $75 with some reluctance and went to Barnes & Noble and bought my wife's birthday present, all the time thinking I probably had gotten a raw deal.

When I got home I Googled "pennyweight." Wikipedia said pennyweight was the alternative method of weighing gold and that 20 pennyweights equaled 1 troy ounce.

I was immediately furious. I had been taken advantage of in a very sly and stylish manner.

Changing the method of weighing the gold had been enough to put me on tilt, and already impatient from waiting and put into trust mode by the offer of coffee and cake, I took the measly $75 I was offered.

The real price should have been about $700-$800. They made a bunch of money on me and were probably laughing at me as I drove away. Or maybe they have duped so many people that they no longer laugh on their way to the bank.

Gold dealers make big money by giving you much less than you deserve for your gold. They sometimes operate by subterfuge or confusion. It doesn't seem to matter if you go to a hole in the wall or a fancy place.

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So, here is my revenge. I am going to give you my foolproof script to get the right value for the sale of your gold. Print it out and take it with you. Proceed step by step, and you will be more likely to get a fairer price for your gold. Ready?

1. Figure out ahead of time the places you will offer your gold for sale, and take a pocket calculator with you. The calculator will make you look smart, help you keep score and intimidate them a little.

2. When you sit down with an assayist, first ask what the value of an ounce of gold is today on the open market. (At this writing, gold had settled at $1,604 per troy ounce. It would be a good idea to know this before you go to make your little gold transaction, so you can compare it with what the assayist says. If there is too big a deviation from the current value, or the assayist says he or she doesn't know, then walk and try somewhere else.)

3. Let the assayist know that you understand they need to make money in this transaction. Ask what price they are going to give you for an ounce of gold. (If gold is $1,600 a troy ounce, they aren't going to give you $1,600. They are more likely to give you a price some 20-25 percent lower so they can make a profit. Take out your calculator and figure out the margin they're going to make on the gold. If they say they will pay $1,250 per ounce, then divide 1,250 by 1,600 and the calculator should say 0.78. This means they are taking a 22 percent markup on the gold.)

If that seems too much to you, then negotiate and tell them what percentage figure you are comfortable with. If they accept, then the deal can proceed. If not, walk and go to the next place on your list.

Repeat steps 2 and 3 until you find an assayist willing to take your deal on the markup.

4. If you come to an agreement on the markup, then hand them the sample of gold you want to sell. They will weigh it. Watch your gold sample throughout the time they have it in their possession. The worst trick they could pull would be substituting something worthless for your gold and giving it back to you in some obscured manner, like putting it in an envelope (see how low my trust is).

5. They may tell you the weight in either pennyweights or troy ounces. If it is pennyweights, then translate that into troy ounces. There are 20 pennyweights in 1 troy ounce. So, 1 pennyweight is 1/20th of an ounce. If your gold weighs 1 pennyweight, divide their offered ounce rate by 20 and that should be the wholesale value of your gold (if you settled on $1,250 per ounce, then one pennyweight should be worth $62.50).

6. Ask the assayist for the amount he or she is offering. If there is any difference between what you privately calculated in step 5 and the offer, ask why there is a difference. If you are satisfied with the price offered and the reasons for offering it, then take the deal. Remember there are different grades and purenesses of gold, and the assayist should be able to help you understand the offer. If you don't agree, go to the next gold-buyer and start again at step 2.

I got snookered. There is no reason you should too. Good luck!

[By JIM YOUNGQUIST]

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