Cash For Gold ‘Giveaway’ – As ‘Cash Strapped’ Europeans Sell Jewellery Amid Asian ‘Gold Rush’

Today’s AM fix was USD 1,281.25, EUR 983.08 and GBP 850.65 per ounce.
Friday’s AM fix was USD 1,275.00, EUR 976.79 and GBP 842.70 per ounce.

Gold fell $0.90 or 0.07% on Friday and closed at $1,284.40/oz. Silver fell $0.29 or 1.44% and closed at $19.89. 

Gold and silver were both up on the week at 5.14% and 5.46% respectively.

Gold inched up Monday after last week saw its largest percentage increase in over two years.  Ben Bernanke admitted last week that a highly accommodative monetary policy was needed for the foreseeable future, which boosted interest in gold as a hedge against inflation.

Cash-strapped consumers are losing almost 80% of the value of their gold jewellery when they sell it to cash for gold companies.

In a major survey of cash for gold firms, it has been found that consumers are losing approximately 15% of the value of their gold when they sell their gold to get euros.

Desperate citizens throughout the EU are getting very poor prices when they are forced to sell their gold jewellery and similar figures and worse were seen in the UK, Portugal, Italy, Spain, Cyprus and Greece. 

When the mark-up of jewellery retailers is also factored  in – which can range between 250-400% – this figure rises to approximately 80%, meaning that a ring originally bought for €1,000 will return only approximately €212.5 for a seller. 


Gold Prices/Fixes/Vols – (Bloomberg)

The survey, which was carried out by Goldcore, the precious metal specialists and gold bullion brokers, found that on average cash for gold merchants are paying approximately €10 per gramme of 9-carat gold, which is 37.5% pure.

“Consumers need to be careful when selling their gold jewellery for euros,” says Mark O’Byrne, Research Director of Goldcore. “While it may seem an attractive proposition in the short-term due to the current economic environment, when you factor in the original purchase price, you can see that  consumers are getting a very bad deal overall. There is also the fact that it is likely that gold prices will continue to rise in the long term.”

The current spot price for one troy ounce of 24-carat gold is €977 (as per July 12, 2013) and when readjusted at 37.5% for 9-carat gold, the price is €366.38 (the price for gold changes every day and to see current prices see www.gold.core.com ).  One troy ounce equals 31.1035 grammes, therefore  €10 X 31.1035 grams = €311.03 per 9-carat ounce (or €829.31 approx per 24-carat ounce).  Cash for gold merchants are therefore paying approximately 15% less than the market price for an ounce of 9-carat gold (€311.03 is 15% less than €366.38).

Most retailers of jewellery will have a 250-400% mark-up on the intrinsic gold value. For the purposes of the survey, the average mark-up taken was 300%. Therefore, if a 9 carat (9/24 or 37.5% pure) gold ring is purchased for €1,000, the value of the actual gold content contained in the ring would be close to €250, based on gold’s market value.  A cash for gold company will pay 15% less than its market value, giving the seller just €212.5 (a loss of approx 80% from €1,000).

“Our survey has shown that consumers are getting a raw deal from the cash for gold sector,” adds Mr O’Byrne.  

“Selling gold jewellery in this manner is a classic case of buying high and selling very low – akin to ‘selling the family silver’ for very poor prices.  The public is being misled that now is a good time to sell gold. At nearly $1,300 and €1,000 per ounce today, gold is well below its record high of $2,400 per ounce in 1980 in real terms when adjusted for inflation,” he continued.


Gold Support & Resistance Chart – (GoldCore)

People in the EU should try and hold onto their gold as it will protect them from bail-ins and currency crisis as physical gold has done throughout history.  

Today the smart money in the world is buying gold including people in China, India and Asia who are buying gold jewellery, coins and bars in what is being termed a modern ‘gold rush’.

Meanwhile struggling working and middle class Europeans are selling their gold and getting a very raw deal in the process. 

Gold is the last thing people should sell and should only be a very last resort as it is financial insurance which will protect from systemic and currency crises. In time, people will scratch their heads at “cash for gold” schemes and wonder why harder questions were not asked about this peculiar western phenomenon of recent years.

Figures for The Great Gold Giveaway graphic:
Loss for consumer overall:
* 80%

Market price per troy ounce:
* €977 per 24-carat oz
* €366 per 9-carat oz (37.5% purity)

Cash for gold merchant pays:
* €10 per gramme of 9-carat gold (37.5% pure)

One troy ounce = 31.1035 grammes,
* €10 X 31.1035 grams = €311.03 per 9-carat ounce (15% less than the market price).

Breakdown of ring purchased for €1,000
* 300% – jewellers mark-up.
* €250 – intrinsic value of the gold
* €212.5 – price cash for gold merchant will pay.
Prices valid as per July 12, 2013.

NEWS
Cash for Gold Is a Bad Deal, Warns Broker – The Sunday Business Post

Gold extends gains on stimulus hopes
– Reuters

Gold Extends Best Week Since 2011 as Stimulus Seen Sustained – Bloomberg

Hedge Funds Bought Gold in Biggest Rally Since 2011 – Bloomberg

COMMENTARY
Granny’s Gold Bars Are Key to Vietnam Push to Boost Dong – Bloomberg

Former US Treasury Official – The Fed Is Facing Collapse
– King World News

The Bang! Moment Shock – GoldSeek

Gold’s QE3 Anomaly – GoldSeek

For breaking news and commentary on financial markets and gold, follow us on Twitter.

Mark O'Byrne

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