Gold scrap moves along a chain, and every link in it takes a margin. Understanding the chain explains almost everything about the prices you get quoted — including why they vary so wildly for the same metal on the same day.
The chain
At the far end is a refinery. They melt mixed scrap, assay it to establish exactly how much pure metal is present, and produce bullion that goes back into the market at close to spot. Their costs are real — furnaces, chemistry, assay, insurance, security — but they are small as a percentage, which is why they can pay 85 to 97% of melt.
Refineries do not generally want your one ring. They want kilos. So between them and you there is a layer of aggregators: gold buyers, pawn shops, jewellers, mail-in operations. They gather small quantities, hold them until there is enough to be worth sending, and sell the lot on. The spread between what they pay you and what the refinery pays them is their entire income from the transaction.
That spread has to cover the shop, the staff, the till float, the risk of buying something stolen, the risk of buying something that assays lower than it was stamped, and the fact that the gold price may move while they are holding it. It is a real business with real costs. It is also, at the bottom end, a business with a very large margin.
Why four shops give four prices
The metal is identical and the spot price is identical, so the variation is entirely in the margin — and the margin is set by competition, not by cost. Four buyers on one high street will quote within a few percent of each other, because you can walk out. One buyer in a small town has no such pressure.
Two other things move it. Quantity: 200 g gets a better percentage than 4 g, because the handling cost is nearly the same either way. And purity: higher-karat scrap is cheaper to refine per unit of gold recovered, so it often earns a better percentage as well.
What happens at the counter
The sequence is fairly standard, and knowing it removes most of the discomfort:
- They test. Usually an XRF analyser, which reads composition in seconds without marking the piece, or acid on a touchstone, which is older and marks it slightly. Both are checking whether the stamp is true.
- They sort by karat. Mixed lots are separated, because 9K and 18K cannot be paid at one rate. Watch this happen; it is your metal.
- They weigh. Most commonly in grams or pennyweight. Ask which — the difference between a gram and a pennyweight is a factor of about 1.555, and a price quoted “per unit” without the unit named is meaningless.
- They deduct non-metal. Stones, springs, clasp mechanisms, enamel. This is legitimate. It should still be visible to you.
- They quote. Usually as a single number rather than as a percentage of melt, which is precisely why working out the melt value first is worth the five minutes.
The questions that change the answer
You are allowed to ask all of these, and a buyer operating fairly will not mind any of them:
- What spot price are you working from today?
- What percentage of melt is this offer?
- Are you weighing in grams or pennyweight?
- What did the test read for purity?
- Would the percentage improve if I brought more?
The percentage question is the important one. It converts an opaque number into a comparable one, and it tells the buyer you know there is a percentage — which, on its own, tends to move the offer. Our calculator has a box for exactly this: put the offer in and it tells you where it sits against the published ranges.
Mail-in, and why it sits at the bottom
Postal cash-for-gold pays the least of any route, for a structural reason rather than a sinister one: the envelopes, the advertising, the insurance and the parcels that get returned all come out of the same margin. The genuine problem is the sequence. You post the metal, then they assess it, then they make an offer. At the point where you find out the number, your gold is in somebody else’s building. That is a bad position to negotiate from, whatever the company’s intentions.
The short version
Know the melt value before you go. Ask what percentage of it you are being offered. Get more than one quote if there is more than one buyer within reach. And check first whether the piece is worth more intact than melted — that question is covered in melt value is not what your jewellery is worth, and it is the one that costs people the most.