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WHY IS THE GOLD PRICE FOR SCRAP GOLD LESS THAN THE ORIGINAL SELLING PRICE?

Posted by Jo Wells on Mar 8, 2019 9:17:43 AM

gold scrap metal

Gold is one of the most sought after commodities in the world; however its appreciation and value has certainly varied over the years. Notably over the past decade, the jewellery industry has noticed a huge spike in gold being sold for its scrap value, and this has often raised questions from our customers about the dynamic changes in gold prices.

The most common question is: why does a gold piece of jewellery cost X amount, but when you go to sell it for scrap, the value is a lot less than originally paid?


It can certainly be a little mind-boggling at first, but this blog will help clear up any queries or concerns about gold, and it's value at both point of sale and during a sale for scrap value.

 

SO Why is there such a difference in price for the same item of jewellery?

Ultimately this is because the situation where you exchange gold for money has different definitions on how gold value is determined.

The price at the point of purchase in a jewellery shop is a lot higher due to the multitude of processes, labour and craftsmanship, that go into making a piece of gold jewellery window-shop ready. This all in turn adds to the final selling price.

When it comes to selling gold for scrap metal, the only factors being considered are the gold carat and the physical gold weight. Once gold is sold for scrap, it is only for the purpose of being melted down and reused.

It is these differences between the number of processes involved and the purpose of the sale, that cause the drastic change in gold value. To help you understand and appreciate these processes, this blog will break down the stages of getting a piece of gold out of the ground and into our shops!

It will also explain what happens to your gold after selling it for scrap, allowing you to see the difference in time and energy that this side of things takes.

 

NEW GOLD

This is defined as jewellery products purchased at retail value for the first time, such as a luxurious gold necklace chain or a beautiful wedding band ring.

gold jewellery window display

Gorgeous yellow and white gold ready to purchase

Let's start by taking a look at the processes that enable you to have your perfect piece of jewellery, to help understand the time and effort it takes for jewellery to be made:

  • Prospecting
  • Mining
  • Extracting
  • Refining
  • Goldsmith

 

Prospecting

This is where scientists known as prospectors search for gold deposits, and it is their job to identify locations where gold can be found! A deposit is an area that strongly indicates the presence of gold, and can be discovered through the collection of small pieces of gold in the sedimentary layers of the earth. These gold pieces can be as small as grains of sand, so it is vital for the prospectors to identify them accurately.  

gold ore deposit

Shimmering gold deposits ready to be mined

Once strong enough evidence to support the presence of gold has been collected, prospectors will dig deeper into the earth by drilling. This allows an insight into how much gold is expected to be mined in the selected area and can often be fruitful in the discovery of other metals such as silver. After further inspection of the area, it's time to go get that gold!

 

Mining

Mining is done differently depending on the type of deposit found.

 

Lode deposits

These are concentrations of gold found in solid rocks, where the metal has seeped through the earth and filled up any cracks or fissures it can find. Often this can resemble a vein like appearance and runs between different layers of rock. If these rocks are located on the earth's surface, then the miners drill holes into them and place explosives. This will force the rocks to shatter and expose the metal veins within for extraction.

gold rock veinIf the lode deposits are found deeper in the earth, then a more intensive strategy is required. A mine shaft is constructed to allow miners access underground, from where they will dig long vertical tunnels. It is here where explosives are placed to force a release of the precious gold metal. This is a careful operation, for a collapsed mine shaft can cause fatalities.

 

Placer deposits

These are found on the beds of rivers and streams, and the metal is found amongst sedimentary sources of sand and other minerals. As metals such as gold tend to be a lot denser than many elements found in these deposits, the metal is separated from the others by the force of gravity and thus becomes loose and accessible. The technique for retrieving gold from placer deposits is known as panning.

gold panning in river

Panning for gold in the river bed

 

EXTRACTION

This is where a little chemistry comes into effect! The collected rock is broken down into smaller pieces and then the gold is separated from other elements through chemical processes or through being heated and melted. This thermal technique is known as smelting.

Once the precious metals have been extracted, they are made into bars which can weigh up to 25kg! These bars are then put into a furnace with borax and soda ash, which will separate the pure gold from any other elements. A sample of the gold is taken and assay tested to confirm the gold content. Pure gold is confirmed at 99.9% gold content, and this is then the base for making all your gorgeous jewellery!

gold being melted down

Metal glows white hot when melted down for smelting

 

REFINING

This is where pure gold is tailored to a particular colour or carat weight. You can have different colours and purity levels of golds, and each has different attributes and stylistic qualities.

The most popular gold colours are:
  • Yellow
  • White
  • Rose

To get the desired colour, gold is then mixed with other metals to create the perfect metal blend! Metals such as palladium or silver are added to obtain the white gold colouring, and copper is added to gold to achieve the warm rose tones.

 

There are also 4 well known carats of the gold in the jewellery industry:
  • 9ct (375)
  • 14ct (585)
  • 18ct (750)
  • 22ct (916)

The carat weight (ct) represents 4 classes of gold content in the jewellery, with 9ct being the lowest and 22ct being the highest. Essentially the higher the carat, the more expensive the gold!

The number in brackets is a hallmark applied to jewellery to confirm the ct weight, and it reflects the percentage of gold present, i.e. 9ct gold has 37.5% gold content and 18ct gold has 75% gold content. The other percentage is a mix of other alloys added to the mix.

 

Goldsmith

The gold is now ready to be made into beautiful fine jewellery, so it's time for the craftsmanship and creative skill to come into the process. This is where design, casting, polishing, stone setting and many other processes take place to make a finished product.

goldsmith crafting gold

A goldsmith uses a lot of skill and technique to add finishing touches to jewellery

The item is also sent to assay for hallmark verification and any final details are added. This process can take anything from two weeks to three or more months, so you can see the time and effort this process alone adds to the journey of gold!

Essentially the accumulation of all these processes amounts to a lot of time, effort, energy and resources. This in turn adds to the high value of gold when purchased from a jeweller. 

 

OLD GOLD

Old gold is defined as the gold you already own, and are bringing into a jeweller to sell for scrap value. This gold is sold to the jewellers for the purpose of being melted down and made into new beautiful gold jewellery. The value is strictly determined by the current gold price in the market on the day of sale and can vary depending on the current demand for gold. 

The cost is determined by price per gram of the gold you are looking to sell, and does not take into consideration any stones or level of craftsmanship used in the jewellery.

Essentially the industry doesn't have to invest funds and time into digging up gold, as it's being supplied directly from old gold! 

 

WHAT IF I WANT TO TURN OLD GOLD INTO NEW GOLD?

If you are now thinking that you have gold, but you don’t want to sell it, there is another option! Have you thought about seeing our goldsmith to have it melted down and made into a new piece of jewellery for yourself?

Burrells is proud to have a masterful and creative goldsmith in Sarel Du Plessis, who can make you bespoke jewellery and remodel your existing jewellery. Especially if a piece of gold jewellery holds sentimental value, this can be the perfect way to reuse it. Find out more by watching our YouTube video below, or book a consultation here.

 

 

We hope this blog has helped answer your new gold vs old gold concerns, and allowed you an insight to the gold sourcing process! 

 

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