DENVER -- Gold buying is hot right now, but the offers consumers are getting to sell their bling is not, with amounts running as varied as the stores looking to buy.
Selling gold jewelry for its meltdown value shouldn't be a complex procedure. The price of gold is set on the world markets, fluctuating daily, so in theory it shouldn't be tough to determine what your piece of jewelry is worth.
What you'll actually get for it, however, is complex, and too few consumers seem to understand what goes into a merchant's formula for deciding how much to pay for your gold.
"The real standard is what a store is comfortable paying and what a customer will take," said Ray Musselman, owner of Musselman Jewelers along the 16th Street Mall. "The buying should leave customers with a good taste in their mouth."
In the end, the formula is actually very simple: profit. And if not for the burgeoning price of gold and the profits that can come from it, the melting economy would have devastated more businesses now buying the precious metal.
To demystify the process, The Denver Post shopped some of its own gold to six area locations -- three pawn shops, two jewelers and a buyer who set up shop at a local hotel. What we found shocked even some of the merchants we visited.
In one instance the merchant said he was surprised to learn his price was actually a third of what he thought he had offered us. In another case, the store owner asked us how much we wanted for our gold before ever making his own offer.
And each of the six locations mislabeled the quality of at least one piece of gold we had -- five of them said it was a lower grade, thereby diminishing its value, and one deemed a piece of higher gold content.
"It's all very interesting and subjective, what a store owner will offer for gold," Musselman said. "Profit is not a four-letter word."
With gold at historic high prices over the past year and the economy causing more belt-tightening than in the past 60 years, it's the perfect commodity to turn a quick profit. Sadly, consumers wanting to sell their gold are often disappointed with the prices they're being offered. In other cases they simply believe what they're getting is the best deal.
Not necessarily true. A bit of knowledge and shopping around will land the best price.
The profit margins merchants looked to take on our gold -- that is, the price they'd pay compared with the full price of pure gold that day -- ranged from as little as 40 percent of the item's value to as much as 74 percent.
That means that in nearly every case, the merchant offering to buy our gold was looking to make more money on the item by reselling it than the consumer selling it to him in the first place.
Fair? Most told us that a fair offer is what the market will bear and what a customer will accept. After all, if you don't like one man's price you can simply walk away and find a better one.
"People should shop their gold and go to three or four places," said Steve Bewley, general manager of Crow Jewelers on the 16th Street Mall.
It's important to know, too, that gold buyers in Denver must hold used-jewelry purchases for at least 30 days and file paperwork to the police, where it's checked against stolen-property lists. That can affect the outcome of prices that are offered, according to Lenard Golyansky, owner of Atlantic Jewelry & Loan, a pawn shop at the corner of 15th and Champa streets downtown.
"I take a chance with every piece I buy," he said. "And I have bills to pay, the rent, my overhead."
But there's more to it than just that. Many parts of the formula used to determine the value of a piece of gold rely on terminology that for ages has confused sellers. They are unfamiliar terms and consumers often don't know how they fit together.
Pennyweight, grams, karats, troy ounce. All are integral parts of the gold-pricing process, yet they remain shrouded in mystery.
"The best thing a consumer can do is his research," said Michael Nedler of Sonny's Jewelry in Cherry Creek North. "Know ahead of time what you have."
It's important to know the karat of your gold. Usually it's stamped on the inside of a ring. The karat is the purity of the alloy. Pure gold is 24-karat. That means 12-karat would be 50 percent gold and 50 percent alloy, metals that are blended with the gold to keep it hard.
Daily prices of gold are based on 24 karat -- in Europe it's spelled "carat."
The first thing a merchant does is to check the karat of the item or, if unclear, do a test to help make the determination.
By law, all gold must be stamped with its karat.
Then the merchant will weigh the item. Remember, this is not the weight of the gold itself but of the whole piece, including the alloy.
The weight they check is known as the "pennyweight," which is a unit of measure used for precious metals and is based on the troy ounce, another unit of measure, made up of 31.1 grams.
Simply put, a pennyweight is 1/20th of a troy ounce, or 1.555 grams.
If you take the price of gold on a given day, multiply it by the karat of the item you're selling -- an 18-karat ring is 75 percent gold -- you will have the price of 18-karat gold for that day.
But that's based on the troy ounce. Divide the amount by 31.1 grams and you'll have the per-gram price of your gold. Multiply that number by the weight of the object and you'll have the full value of your gold piece on that day.
But no one ever gets that price. The jeweler buying from you is looking to sell it, too. He'll likely get 98 percent of that full value from a gold refiner who will melt it down and resell it yet again.
In the end, the consumer is left to decide whether the dollar amount tossed at them by a potential buyer is sufficient to part them from their gold.
In most cases it is.
"Most of the people who come to sell will take our price," said Golyansky.
Dozens of Internet Web sites trumpet their gold prices as the highest to be found. Television ads use well-known celebrities as pitchmen to demonstrate how easy -- and trustworthy -- the process really is. Drop the gold into the mail today; a check shows up by the end of the week.
But remember, not every gold buyer is reputable. In May, Aurora police arrested a suspect for allegedly buying gold with bad checks. He has been charged with felony theft and check fraud.
