From time to time, people need quite a bit of cash quickly. Whether it’s the result of unlucky or unpleasant circumstances, or a great opportunity that requires some cash, sometimes you can’t wait for a loan or that next paycheck. Selling gold or pawning items has long been a source of asset-backed short-term loans, but it really came to prominence again with the surge in prices from 2002-2011.
During that surge, cash for gold companies earned a bit of a bad name. Labelled “scams” and often derided for unsavory business practices and taking advantage of people, cash for gold companies were popping up on every corner to separate people from their gold. The industry, which had largely been fairly trustworthy and straight-forward, all of a sudden saw a deluge of shady businesses open up and take advantage of customers who didn’t fully understand the value of their gold.
In this way, the industry got a very bad reputation. A few companies advertising heavily and setting extremely high margins. Were most of these companies actually scams? No, not really. Sure, there were some that were – call it “poor customer service” if you want or poor business practices, but they made it impossible or difficult to get valuables returned once sent in. But for the most part, they were just paying consumers a fraction of the value of the gold, taking their cut, and going on their way. Were they giving consumers “fair” deals? “Fair” in this sense is of course open to interpretation, but there were certainly a number of cash for gold businesses – online and off – who tried to take advantage of unknowledgeable customers and take huge margins.
As it is with any industry filled with untrustworthy businesses, those businesses get filtered out. Prices dropped, the market dried up, the practices of the bad companies were exposed, and before you knew it the cash for gold businesses on every corner were a thing of the past, and only the more reputable businesses remained. Now we probably aren’t quite there yet – there are still too many corners with cash for gold businesses on them (the price of gold is actually still quite high), but things are moving in the right direction.
It’s important to remember that Cash for Gold businesses need to make money too. If you take the antique lamp you have that the book says is worth $1200 to an antique dealer, he might offer you $600 for it. It takes work selling it, the dealer has to make a profit, and there’s risk in holding onto it. How much under “market value” is offered depends on a number of these factors. Since gold is fairly liquid, you can get quite close to the actual “value” of gold (especially in large quantities), but just like the antique lamp, it’s unlikely you ever get to the true melt value.
Let’s take a look at the cash for gold business and how your payment might actually be determined.
The largest cash for gold companies have their own refineries, or deals with the largest refineries to give them close to the cash value for gold. But even those best deals won’t get them 100% for it. Think of the work, equipment, and technology that goes into being able to melt down gold and reform it – that isn’t going to be free. Most cash for gold shops are able to negotiate rates around 80%, so remember when you’re going to a cash for gold shop that 80% of the gold price might even be their break-even rate, so 50-60% of the value might be what they need to buy it at to cover some costs and try to make a profit.
Want to take it directly to a refiner? Think again. Unless you have tens of thousands of dollars in gold value, refiners aren’t going to bother working with you. They work in bulk; there is no gold melting factory you can visit to “skip the middleman”.
Large Cash for Gold Companies
The biggest companies have the best deals with refiners and/or retail networks where they can sell the gold at the real value themselves. That’s what gives companies like Cash for Gold Mailer the leverage to beat competitor prices by a considerable margin and offer their price match guarantee. If you can afford to hold onto the gold and have retail sales opportunities, being able to sell gold at 90-100% of real value puts them at a considerable competitive advantage to your mom and pop stores.
Those online companies also have the advantage of not having traditional retail spaces (or they have them in addition to the space they already had). That means lower overhead costs, and much lower overhead per transaction costs when you factor in that they can accept sales from all over the country.
Of course, it will take a couple days to mail your gold and get paid. So if you need the money right now it won’t help, but if you need the money in a week, working with one of these companies that can get higher payouts makes a lot of sense.
I Want 100%! What Can I Do?
People and companies are constantly looking for holes in the market where they can be bigger, faster, and more efficient. That’s what these “good” cash for gold companies are trying to do. But in the end, they’re still gold buying services. People argue they would never sell to one of those companies because they don’t pay full value – but there’s a reason for that (which we went over). No one is willing to pay more for your gold than a couple of these companies, and for good reason. There aren’t any secret places the Cash for Gold companies are keeping from you, and there is no great conspiracy. It’s just the free market, and between the costs involved and the fluctuation of gold prices, these online cash for gold companies are the best you’ve got.
And think about people saying “I’d never use one of those services” back in 2011 when gold was at its peak. The best companies aren’t paying a higher percentage now than they were back then and no other options have surfaced. If you didn’t sell your gold to a reputable cash for gold company in 2011, you made a mistake and you’ve lost 40% of your value.
Will gold prices continue to fall? It’s tough to say, and it’s all just financial analyst conjecture. They might return to historic levels in a few years, in which case if you don’t need the money you should hang on to it. But gold prices could continue to drop, in which case it’s advantageous to sell your gold as soon as possible. It’s hard to say when the “perfect time” will be, but if the shape of the industry has taught us anything, it’s that it’s unlikely better options will be developed making it more efficient to sell gold.