How the melt value is worked out
Three numbers decide it: what the piece weighs, how much of that weight is actually gold, and what gold is trading at. Weight comes off a scale. Purity comes from the stamp — 375 is 37.5% gold, 585 is 58.5%, 750 is 75%, 916 is 91.6%. The gold price is quoted per troy ounce, which is 31.1034768 grams, so the calculation divides that down to a per-gram figure and multiplies by the grams of pure gold present.
A worked example. A 14K chain weighing 20 grams contains 20 × 0.585 = 11.7 grams of pure gold. If gold is trading at $4,600 per troy ounce, that is $147.90 per gram of pure metal, so the chain holds about $1,730 of gold. That is the ceiling, and no buyer pays it.
Anything that is not metal comes off first. Stones, a steel spring in a clasp, enamel, the movement in a watch case — all of it gets deducted before purity is applied, because a stone is not low-purity gold. Getting that order wrong is the commonest way people arrive at a counter expecting too much.
Why nobody pays melt
Every buyer sits somewhere in a chain that ends at a refinery, and every link takes a margin. A refinery buying direct pays the most because its costs are the assay and the furnace — commonly 85 to 97% of melt, though most set a minimum quantity. A specialist gold buyer aggregating small lots pays 70 to 90%. A local jeweller, 60 to 85%. A pawn shop, 40 to 70%. Mail-in operations sit lowest, at 20 to 60%, and you have posted the metal before you learn the offer.
Where you land inside any of those bands depends less on your gold than on your postcode. Four buyers on one high street quote within a few percent of each other because you can walk out. One buyer in a small town has no such pressure. Quantity matters too: 200 grams earns a better percentage than 4 grams, because the handling cost is nearly identical.
The single most useful question at a counter is "what percentage of melt is this offer?" It turns an opaque number into a comparable one, and asking it tells the buyer you know there is a percentage.
Grams, pennyweight and the two different ounces
Gold is priced in troy ounces. A troy ounce is 31.10 grams. The ounce on a kitchen scale — the avoirdupois ounce — is 28.35 grams, about 9% lighter. Confusing the two overstates a valuation by roughly a tenth, and it is the most common unit error in the subject.
Many US buyers weigh in pennyweight, written dwt, which is one twentieth of a troy ounce or 1.5552 grams. A price quoted "per unit" without naming the unit is meaningless: the same number per pennyweight is worth 55% more than per gram. Across South Asia and the Gulf gold is bought by the tola, which is exactly three eighths of a troy ounce, or 11.6638 grams.