Dubai: While gold can be a worth investment regardless of what form it’s in, be it coins, bars or jewellery when you try to sell your gold you may neither find it to be as simple an affair nor as profitable. Here’s why.
“Investment-grade gold like bars, ingots, or coins, collectively referred to as ‘bullion’, are great when investing for the long-term but not when selling to make a quick profit,” explained Fahid Said, a gold retail and trading professional based in Dubai. “Encashing jewellery is easier than selling bullion.
“This is primarily because it takes a longer time to verify the authenticity and purchase history of gold in bullion form. When it comes to bars, your choice of buyer also gets restricted owing to the size and consequently higher price, which is also why these can be difficult to melt and reshape.”
Investment-grade gold like bars, ingots, or coins, are great when investing for the long-term but not when selling to make a quick profit
When is it hard to sell gold coins?
Moreover, a key snag when selling gold coins or biscuits is that if it is purchased from one source, they should be sold to the same source, as sometimes it might fetch lower resale value depending on the market price. This is at times the case even when you’re selling gold jewellery.
“If you were to disregard the downsides when it comes to selling gold bars or coins, the good news is that you can get 90 per cent to 95 per cent of the spot price when selling gold bars or coins, whereas with jewellery you would get only 70 per cent to 80 per cent of the melt value,” added Said.
Recently, this has been the trend. By late 2022, even though gold prices inched their way to $1,850 (Dh6,795), demand in the UAE for gold bars and coins were not as high as gold jewellery sales, meaning shoppers preferred gold jewellery to bars and coins even as prices soared.
Selling jewellery has downsides too
Unlike gold coins, biscuits or bars, jewellery carries additional charges that makes it more expensive to buy in the first place. The additional costs also mean you may not be able to recover your capital even when the prices go up.
Jewellers normally collect charges to recover the labour cost of crafting a shiny necklace, ring or bracelet out of raw gold. Then there are ‘wastage charges’ to cover for gold that is wasted when the precious metal is cut, melted, or soldered.
When it’s time to encash, your jeweller might not repurchase it based on the spot gold’s current market rate, because he will likely quote the wholesale rate or deduct the making and wastage charges from the price. The wear and tear on your jewellery can also depreciate the resale value.
It is because of the spread, the cost of buying and selling gold coins differ by 8 per cent to 10 per cent. However, the difference is significantly greater for jewellery on account of the making charges.
On the buy-side, that means the amount a dealer charges over the spot price. On the sell side, that means the amount a dealer will pay you under spot (or, if you’re lucky, a lower price that is at or above spot).
Why is gold bought at a higher market price?
Physical gold often has a higher price than the spot market price at which someone can buy gold contracts on the exchange. While it’s better if you’re owning physical gold, it isn’t possible for these so-called exchange products to be fully backed by physical gold, based on the volume traded.
“Gold in bullion form is often minted into coins or small bars weighing 1 gram up to 1 kilogram. It is an advanced process to melt, mint, and certify bullion products with high quality and precision,” added Said. “Everything from design work to manually engraving stamps is added to the cost.
“It is therefore normal that a coin costs more than the actual metal. Additionally, since the spot price for gold is multiple times higher than other metals, it is also normal that the premium for a different metal amount to a larger proportion of the price percentagewise compared to gold coin.”
Sell gold jewellery quicker? Here are 3 tips
Georgina Effel, a Dubai-based precious metals trade industry analyst, offered three tips you can factor in when looking to sell gold jewellery quicker and more in a way that’s more cost-efficient:
1. Knowing the karat affects the resale price
Pure gold is a very soft metal so, to make it more durable for jewellery-making, gold is combined with an alloy metal like silver, nickel, or copper. This ratio of pure gold to alloy metal is the gold’s karat and gold jewellery is stamped with an identify number that connotes the gold purity.
Your gold jewellery’s karat is important as it can influence the resale value of your item – the purer (or the higher the karat) the gold, the more expensive it is. Therefore, know the karat weight of your gold jewellery so you are not undervaluing it.
Your gold jewellery’s karat is important as it can influence the resale value of your item – the purer (or the higher the karat) the gold, the more expensive it is
2. Resale price changes as a piece, scrap gold
Designer, antique, or vintage gold jewellery can be sold for far more than the gold used to make the piece is worth alone. However, worn pieces or items with a low market value, may earn you more if you scrap it for gold. To know if you should resell your gold jewellery as-is, have your item evaluated.
3. Set asking price on the market value, not retail
An often-mistaken myth about reselling gold jewellery is the belief you will earn back almost what you first paid for it. However, the actuality is you will likely only receive a percentage of your gold jewellery’s original retail value. It is quite rare for gold jewellery to resell at a premium.
Bottom line?
Nevertheless, selling gold jewellery can be a profitable opportunity, especially if you have a collection of valuable pieces. However, as reiterated by multiple commodity retailers, the price you get when selling your gold depends on why you're buying gold.
“22-karat is a good option if you want ornamentation as well as an investment. When an investment is made in jewellery or ornaments, however, the manufacturing costs and waste are deducted when the item is sold,” Effel noted.
“Gold jewellery has a greater cost of production. But gold coin sellers just eye profits and current gold prices. If you're only interested in investing, 24-karat is a better option. The finest form of gold is available in the form of gold coins and gold bars.”
Gold in its purest form can be purchased, but as mentioned above, beware of how long it takes to verify the authenticity and purchase history when you seek to sell gold when it’s in the form of bars, biscuits, or coins.
