Molten Highlights
You’ve seen the commercials: “Gold prices are high so send us your gold jewelry and we’ll send cash.” You think to yourself, “I like my old jewelry but I like cash better. I can use the cash to buy new jewelry or something else equally shiny and pretty – I’ll do it!” But, is it a good idea? Is now the right time? And, more importantly, do you understand the underlying principals behind the price of gold.
Gold has many identities: commodity (jewelers and some manufacturers view it as raw material), currency (bankers and others actually use it instead of cash to buy things) and treasure (pirates and others just like to own it because it is shinny and pretty).
Gold is usually measured by weight in “troy” ounces and all of those ounces are uniform in their purity. Just like diamonds have different levels of quality, so does gold. Gold’s quality is measured in a few different ways: “parts fine,” “% gold”, and “karats”. Pure gold is 24 karats. The percentage of gold in a piece of jewelry is the number of karats divided by 24. 24 karat gold is 100% gold, no impurities. 14 karat gold is only 58.3% gold.
Gold is bought and sold in large amounts on commodity exchanges. Commodity exchanges are like stock and bond exchanges (remember exchange = market), but instead of stocks and bonds “real goods” are bought and sold. Other examples of “real” things bought and sold on commodity exchanges include coffee, steel, frozen orange juice, and pork bellies. You can invest in gold without actually having to buy the physical metal. You can invest in the stock of a gold producing company and the price will rise in fall (in most part) based on the price of the metal itself. You can buy a mutual find that invests in gold stocks. Or, if you are adventurous, you can buy a contract to take physical delivery of the metal itself and sell that contract to some one else before the delivery date. (Don’t forget to sell – which is called closing out your contract – or the delivery man will be bringing a very heavy albeit shiny package for you to sign for.)
It’s true, right now gold is selling for high prices. This is because in an uncertain economy – like we have here and around the world – gold is seen as a standard valued by everyone. Many people believe that because gold is a physical thing it will retain its value even if stocks, bonds and dollars lose their value.
So, should you run out and sell your jewelry? It is true, gold prices are high right now. However the firms you see on Television do not pay top dollar for your jewelry. They like to buy low and sell high. They buy your gold for less than they can sell it to someone else. Selling to these folks is no different than going to a pawn shop and selling your old jewelry for cash. If you need to pawn your jewelry, as with everything else, you need to do your homework. Jewelers may give you more money because they can resell your pieces and there are websites which can offer you additional tips on the best ways to deal with cash for gold offers. Also why are you selling it? If you are going to use the money you make to pay down high interest debt, receiving a little less than the jewelry is worth might pay off. If, however, you want the money to buy some newer shinier prettier object then you might want to hold out for a better offer.
Add comment March 23rd, 2009