Consumers looking to sell their jewelry may find the latest offers aren't always worth their weight in gold.
In recent months, several gold-buying companies have landed on consumer advocates' radars. Last week, New Jersey's Division of Consumer Affairs and other state agencies wrapped up an undercover sting called "Operation Going for Gold," and accused 12 jewelers of allegedly violating state laws requiring gold buyers to weigh the items in front of the consumer and post metal prices, among other rules. And since April, more than 200 people from multiple states -- including Michigan, Illinois, Nebraska and North Dakota -- have complained to state regulators and the Better Business Bureau about bounced checks from THR & Associates, a Springfield, Ill.-based company that operates road shows under several names to purchase jewelry, coins and other items. "We've seen more problems popping up as the price of gold goes up and the economy gets tough," says Bonnie Bakin, president of the Central Illinois BBB.
Frank Ross, a spokesman for THR & Associates, declined to comment on the bounced checks, but said customers who received one can send the company a copy to receive a replacement money order, with extra to cover bank fees incurred.
These complaints come at a time when demand for such gold-selling services is still growing. With gold prices up nearly 4% just this year, to more than $1,620 per ounce, many consumers are selling now to lock in better deals. They also come on the heels of a record-breaking year of complaints for the industry. In 2011, the BBB logged 591 complaints about gold, silver and platinum deals, 3% more than in 2010 and up over 1,000% from 2007.
Making matters trickier for sellers: Many of the newer players buy gold on the move, opening temporary stalls at conventions and other events, or having reps show up at private parties, This makes them particularly hard to pin down or complain about after the transaction is made. On top of that, there are also still plenty of tried-and-true tactics that can trip up consumers, like inaccurate scales or bait-and-switch prices. To avoid getting fleeced, here are some steps experts say to follow before selling your jewelry or coins:
Appraise unusual pieces
Most gold-buying companies are offering scrap rates, meaning prices are based solely on gold content and weight with the intent that the item will get melted down. If you have a piece with gemstones (especially one from a known designer), or one that has intricate workmanship, it's worth taking the piece to an independent appraiser for assessment, says Antoinette Matlins, author of "Jewelry & Gems: The Buying Guide." "Those pieces could bring far more taking it to an antique or estate dealer than to someone buying for scrap," she says.
Assess gold rates
Companies' buying prices are based on the going rate for gold, a figure consumers can find on investing sites that follow the market, as well as industry sites such as Kitco. Don't expect to get the full market price -- the company buying your gold takes a cut, which can be anywhere from 25% to 75% of current prices. That's why it helps to both know the market rate and to get several offers, says Bakin. Compare offers from several buyers such as local jewelry stores or exchanges, pawnshops and online gold-buying sites, to see which offers the best rate. Keep in mind that market prices track pure, 24-karat gold, while most jewelry is 14-karat or 18-karat, says Matlins. That will affect the offer. With pure gold at $1,621.40 per ounce, for example, an ounce of 18-karat gold would be $1,216.05.
Review consumer protections
Most states have laws covering pawnshops and companies that buy gold, says Susan Grant, the director of consumer protection for the Consumer Federation of America, which recently noted gold-buying companies as a new area of interest on its annual list of top consumer complaints. Weights and measures departments often certify the accuracy of scales used to weigh the gold, and that certificate should be on display. "You're paid by weight, so you need to make sure the weighing is done accurately," she says. Companies generally must post the rates they pay for precious metals and offer consumers a detailed receipt explaining how the total offer was reached. Consumers should also look into any guarantees in the event of sellers' remorse, Bakin says. Some local ordinances or company policies stipulate that the company must hold on to purchased items for a set period, in the event the consumer changes his or her mind.
Check up on the buyer
Look at company ratings on the Better Business Bureau and its reviews on sites like Yelp. Advocates say it may also be smarter to stay local than to trust in a traveling show or a gold-selling party or to mail items in to a website based in another state. "If they're not permanently in the area and you have to chase them to another area, that's not something the average consumer can easily do," Grant says. "If they have a local reputation at stake, you could feel more confident."