Understanding Valuations

When selling gold jewellery, it is very important to understand how the value is determined.  In order to make sense of the old buying and gold selling processes, there are three common but often misunderstood terms: cost, price, and value.

Cost

Is used to define a wholesale figure on a piece of gold jewellery, or can be used as a definition of the actual amount of money it took to produce or manufacture the gold item.

Price

is the amount of money asked for an item of gold jewellery (retail price). Jewellers set prices.

Value

In terms of a valuation report for your gold, is an estimated figure of an itemís worth when used for a particular purpose. The value attributed to a piece of gold jewellery on a valuation can vary immensely depending on what the purposeof the valuation is.

There are different types of value, each appropriate to a particular purpose and function. The most common types of values encountered are listed below.

Retailer Value or Valuation

Jewellers and retailers often provide customers with in-store valuations when they are purchasing an item of jewellery. Consumers should be cautious of relying on retailer valuations ñ these gold valuations are often grossly inflated and used as selling tools to dupe you into believing that you are receiving a good ìdealî when buying gold jewellery. A valuation should be very close to the actual price of the jewellery item, as this is the value for which it can be purchased.

Insurance Replacement Value or Valuation for insurance replacement

The function of a valuation for insurance purposes is to determine how much it would cost to replace the jewellery should something happen to it. This being the case, the insurance valuation should be very similar to the price actually paid, as this is the actual realised amount that the item could be replaced for. Over-inflated valuations for insurance purposes serve only the interests of the insurance company. You, the consumer, pay premiums based on the valuation; if the valuation is over-inflated, so are your premiums. However, should something happen to your jewellery, the insurance company is able to replace the item for much less than the value you have been paying premiums on.

Intrinsic Value or Valuation

Also known as the gold scrap value, or gold melt value. This is the monetary return on the materials and components of an item; for example, the amount of pure gold in an 18K gold ring. Scrap value is unrelated to the cost of making the jewellery and to the price paid to a jeweller for an item; it is also unrelated to retailer or insurance replacement valuation. In determining melt value, the price is calculated from the spot gold price of the day, the purity of gold in your items (ie. 18K gold is 75% pure gold), and the weight of the item. Gold refining companies purchase items based on this calculated value ñ all gold is melted and refined into its pure gold state.

Auction Value

is the price for jewellery sold to the highest bidder at an auction. When deciding where to sell your unwanted gold jewellery, special considerations should be taken into account such as: whether the item is an antique, its designer, or whether it is ìone-of-a-kindî custom gold jewellery. Often, there can be a considerable amount of value in the quality of craftsmanship or the historical significance of an item. The price of gold is at an all-time high, making this an excellent time to sell gold for refining purposes. However, you may be able to get more cash for gold jewellery that is of exceptional make or significance if you sell it as a whole piece of jewellery rather than breaking its value down into its separate components. Some other options for selling gold jewellery are:

1. The first port of call is usually the jeweller from which the item was purchased, especially if the jewellery is still in new condition. However, many jewellers will not buy back an item they have sold you because their profit margin would be exposed. In other words, rather than offer you a much lower price than you paid, they opt not to get involved with buy-backs.

2. Online Auction ñ Websites such as Ebay are most suitable for well-known, designer-branded gold jewellery, or items where buyers can externally verify what the regular retail price of the jewellery is.

3. Live Auction ñ Auction houses such as Sothebys or Christies will catalogue special pieces to sell at live auction. As the seller, you may put a minimum reserve price on the items when selling gold at auction.

4. Private Sale Selling gold jewellery privately can be done in the same manner as, for example, selling a car privately.
5. Pawnbrokers

For more information on valuations and selling gold jewellery, please contact The GoldCompany and we will be happy to assist.