You may have seen a bombardment of adverts on Television and in newspapers for companies buying gold. They may even be in your local shopping centre on a stall or small shop front.

The question is – is this a good deal?

A recent investigations by Which? was covered by London College of Communication, the Daily Telegraph and the Daily Mail among others concluded that no – it is not.

How do they work?

Well that silver or gold ring you are wearing goes through a series of people before it reaches you, all of whom add a bit of mark up along the way so they make money.

1. The mine where the ore comes from sell it to…
2. A refinery where the ore is smelted to become silver or gold and it is sold to..
3. Bullion dealer who sells it on to…
4. Jeweller who makes it into a ring which is…
5. Put in a shop where it is bought by a…
6. Customer who wears it.

To use crude figures the mine gets £10 of silver and sells it to a refinery for £20 who smelt it and turn into ingots to be sold to a bullion dealer for £40. The bullion dealer can then turn this into sheet or wire silver and sells it to a jeweller like me for £80. I then spend some time making it into a piece of jewellery I need to sell for at least £160 to not lose money. I go to a craft fair and sell it for £200 or put in a gallery where it may be £300.

The customer buys it

A customer really likes that silver ring and hands over the £200 to me and this covers the cost of the stall, travel and I have a wee bit left over for rent, materials for new pieces etc.

The customer is then needing money or doesn’t like the ring any more (you’ll need to pretend it was someone else’s work in this case as it makes no sense for it to to be mine!). She sees an advert on the TV for Leprachaun Gold Exchange or something. Where do they fit in the chain?

They are down at position 2 or 3. So they could buy the silver in that ring for £20-£40.

Customer bought the ring for £200 – what do you think they get offered for it? Probably £10-£30.

What other factors affect this?

Value

Well most of the people using these companies are doing it with old jewellery. You get offered £20 for a piece of jewellery that you remember paying £2 for or even £2 3s for! This seems like a sweet deal – it’s more than you paid for it. Except you have forgotten about inflation and that piece would cost £200 to buy new today.

Quality of the piece

The vast majority of jewellery sent to these places will be smelted down but it is possible it is a rare early piece by a famous designer or really high quality so it will be re-sold. If it has some nice stones these will be taken out and re-sold too.

What are the alternatives?

Well, a lot of people using these services probably do so as they need cash right now. For others who simply have loads of jewellery they don’t wear any more you can have it remade. I recently posted about a necklace of beads I refashioned into a new contemporary piece.

The same can be done for silver or gold jewellery!

Say you wanted a new ring that would normally cost £200. Remember when I explained my costs earlier? I buy the silver for £80, do lots of work and re-sell for £200.

Well what makes up that figure?

• Materials £80
• Time (labour) and costs (contribution towards studio rent, tools, hallmarking, running a website etc) £80
• Profit £40

In certain circumstances I can make a piece using your materials reducing the cost by a lot of that first amount.

Examples of commissions I have done in this way include:

• Reworking beads into a new piece
• Rollering down old gold rings into a pendant using the diamonds from the rings in the design
• Make a pendant to add someones beautiful 1 carat diamond to.

In each case the client managed to reduce the price of the piece by providing some or all of the materials needed.

The customer benefits by

• Reducing the cost of the piece.
• Re-using jewellery which may have sentimental value
• Feeling an even greater part of the design process.

I benefit by:

• Minimising the material outlay costs on the small chance a customer does not follow through wanting the piece.
• Reducing my outgoings before I get the final payment from the customer.
• Not having to spend time sourcing materials.

So next time you rummage through your jewellery box and find broken chains, odd earrings and old rings think jeweller not pawn-broker!