Serena Cowdy explains everything you need to know about turning gold into cash.
The soaring international price of gold, combined with many people's urgent need for funds during the recession, has led to a UK gold rush. Or rather, a gold-selling rush.
All over Briton, cash-strapped consumers are trading in their old jewellery, coins and even teeth for cold hard cash. Business is booming for pawnbrokers; and many online gold buying companies - made famous by flash, celeb-fronted ads on daytime TV - are doing a roaring trade.
However, are these 'postal gold' merchants really a way to make easy money? And where can we get the best price for our scrap gold?
How postal gold companies work
Many gold buying websites have sprung up over the last year. Some of the better known players in the field include Cash4Gold, Sell My Gold, How Cash For Gold, Got Gold Get Cash, Post Gold For Cash, Best Price For Gold, Gold Traders, Cash My Gold and Postal Gold.
Do you think they might be trying to tell us something? Cash4Gold wins my 'weirdest advertising' award by picturing MC Hammer waving handfuls of notes next the phrase 'EVERYBODY'S DOING IT'. Eeek!
Anyway, here's a brief guide to how most of these companies work:
- The company sends you a pre-paid envelope, and you send them your gold. Most companies insure these envelopes (up to a certain value) against theft or loss during transit.
- Your chosen company may then call or email you, quoting the price they're willing to pay for the gold. However, they may just send you a cheque for the amount they've decided on.
- Either way, you can accept or reject their offer. If you reject it, you need to let them know (and send any cheque back to them) within a certain period of time. Specific time limits and conditions will vary, so make sure you read all of the company's small print before you get involved.
- Once you've rejected a company's offer and returned any cheque, that firm is legally obliged to return your gold within a set period of time (again, check individual websites for time limit specifics).
Poor pricing
While this might sound pretty straightforward, one major drawback is the poor value many of these companies seem to offer. Customers have complained that they've received cash equivalent to just half the market value of the gold they've sent. And several say they've received just 20% of the market price.
Many of these websites are far from transparent about their pricing. Several won't reveal what price they pay per ounce or gram for gold, instead resorting to vague, sensational marketing blurb like 'highest prices paid' or 'best rates guaranteed'.
For example, when Cash4Gold was asked by the Guardian newspaper how much it would pay for one ounce of gold, it refused to give specifics - saying it would only give consumers a price after they have posted off their items.
This all sounds a bit too cloak and dagger to me: If a site doesn't display specific prices per weight, I'd steer well clear.
A good benchmark
So how can you tell whether you're being offered a decent price? Well, it can be a good idea to deal with buyers who offer specific prices directly linked to the London Gold Fix.
In a nutshell, Gold Fixing is a process by which the price of gold is set on the London market. Although not perfect, this can be seen as a reasonable international benchmark.
As a very rough guide, 80% of the current world price is a reasonable return to expect. Several of the better-priced gold buying companies (both on and offline) pay out at around this level.
You'll obviously need to have a hunt around yourself, as prices are constantly changing. However, if you're offered much less than 80%, I recommend you take your business elsewhere.
Other pitfalls
There are other pitfalls to watch out for when you're dealing with postal gold firms.
First, you'll need to keep your eyes peeled for hidden charges you're not expecting. For example, certain companies don't offer you freepost, insured envelopes to send in our gold - but instead make you pay to send it via special delivery.
Others will charge you if and when you want your jewellery sent back to you. And some will charge you for testing your gold to establish its authenticity and quality. All good reasons to get familiar with that small print!
Finally, consumer internet forums are littered with complaints about certain companies holding on to your gold long after you've rejected their offer and returned your cheque. Surf the web and make very sure the company you're thinking of using doesn't have this sort of track record.
The alternatives
If haggling via the post doesn't appeal, here are some more traditional 'cash for gold' options:
Pawn brokers: If you're tempted to go to a pawn broker, you should do so with your wits about you. Read The lowdown on pawn broking to find out more.
High street retailers: Many major high street retailers (such as H Samuel) now buy secondhand jewellery. It's also a good idea to get some quotes in your city's jewellery quarter - such as Hatton Garden in London. Its associated website Hatton Garden Metals is one of the more reputable online gold specialists, and is also worth a look.
Take precautions
However you decide to sell your gold, make sure you take certain precautions. First and foremost, weigh the gold yourself before you hand it over. If you don't, you'll have no idea whether you've been 'had'.
It's also important to independently establish the quality of the gold you're trying to sell. Some high street jewellers will assess the quality of your gold for nothing, though others may charge a fee.
Finally, take all gemstones out of your jewellery before you hand it over. These will not usually be taken into consideration when your gold is valued - and may very well be scrapped.
Shop around
Our usual 'shop around' advice holds true when it comes to flogging your scrap gold. Do as much research as possible before you deal with a particular company. Hunt down reviews, scour internet forums and Google your heart out.
Finally - if you do think you've been ripped off by a gold merchant - contact Consumer Direct straight away. They should be able to explain exactly what your rights are, and help you fight your case.
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More: 12 ways to make money selling old junk | How to turn jewellery into cash