Gold buying services make it easy to turn a handful of unloved jewellery into a fistful of cash. But, with the lack of regulation attracting some less than scrupulous dealers, it pays to understand what's involved before parting with your precious metal.
The market has already come under the scrutiny of the Office of Fair Trading after it received complaints about the way some of the postal gold companies were operating. In particular, it was concerned about misleading advertising and the way firms treated customers who weren't happy with the price they were offered.
Cleaning up the market
As a result, it brought enforcement action against five firms, of which three - CashMyGold, Cash4Gold, Postal Gold - made changes to their practices while the other two - CashYourGoldNow and Money4Gold - ceased trading.
The changes required them to be more transparent, provide clear information on the prices offered for gold and give customers the option of receiving either a quotation for their gold, which then needs to be accepted, or just a payment.
But while some action has been taken to clean up the market, there can still be a huge variation in the price you get for your gold. As an example, a recent survey by MoneySavingExpert.com found the payment received for a gold bracelet varied from £50 to just £8.
"Prices can vary significantly," says Jeremy Banks, Comparejewellery.com's business development manager. "The gold price fluctuates but it can also be affected by the level of competition and how active, or honest, the buyer is. Understanding the way the market works will help you get the best deal."
What to sell…
For starters, it's worth knowing what you can sell. As any gold you sell as scrap will be melted down and refined, most buyers don't really care what it is. Broken chains, gaudy 1980s jewellery and even gold teeth can all go into the melting pot.
But, some items definitely shouldn't be sold as scrap. Jewellery containing diamonds and other gemstones should be set aside as these can be worth more. Designer pieces by names such as Tiffany and Cartier carry a premium and could net you a higher price if you sell them as a complete item rather than scrap.
Gold coins and bars also need to be handled carefully. Sovereigns and Krugerrands are classed as investment gold and command a higher price. While some dealers will pay a higher rate, don't lump them with your scrap.
How to value your gold
Once you've collected together any unwanted gold get a rough idea of its value before you think about selling. "The value of your gold is based on the carat value and the weight, so work out exactly how much of each carat you have," says Matt Culling, director at Hatton Garden Metals.
You can then work out its market value by referring to the gold price published by the London Bullion Market Association (LBMA). While this will give you the market value, it's important to note that you won't get this when you sell. "The price of gold is volatile, so buyers need to include a margin in their price to cover this and their other costs," explains Pravin Patthi, owner of Minar LBMA jewellers in Tooting and chairman of the National Association of Goldsmiths.
With factors such as gold price volatility, competition and the amount of scrap gold they sell on affecting the price they set. Patthi says typically buyers will factor in a margin of between 10% and 20%, although some dealers have slimmer margins and the more unscrupulous sellers will have considerably wider ones.
Finding a buyer
You can sell your gold either in person in a jewellers, pawnbrokers, or by post to one of the firms operating online. There are pros and cons with each option.
If you choose to sell in person, it's a lot easier to walk away if you don't think you're getting a good deal. Angela Geller, 66, from Stevenage, decided to do it in person when she sold unwanted jewellery in 2012. "I had quite a lot of scrap pieces including earrings, broken charms and bracelets I was never going to wear, so a friend recommended Cookson Gold in London's Hatton Garden, which buys and sells gold," she explains.
"It assessed everything I'd brought, identifying the pieces that were 18 carat, and offered me more than £3,000 for the lot. I was really pleased: it was money for something that was just going to sit in a drawer at home."
With a business and reputation to protect, jewellers will usually give you an honest appraisal of your gold. "We will advise people not to sell things if they're worth more than their scrap value," says David Hughes, owner of David the Jeweller in Weymouth. "If this is the case, we would suggest other options such as selling it as a secondhand item or even remaking it so you could wear it again."
There can also be protection through initiatives such as the Gold Standard - a joint venture between bodies including the National Association of Goldsmiths, the British Jewellers' Association and the Trading Standards Institute. Selling gold to a company carrying the Gold Standard means you can have the reassurance you're dealing with someone who has signed up to a code of conduct around the purchase of gold.
If you live somewhere where jewellers are few and far between, the lack of competition may mean you don't get the best deal. In these cases, using a postal firm can be a more rewarding option.
But as it's not so easy to walk away if you're unhappy with the deal spend some time researching any postal firm you're considering. "Google these firms and checkout customer reviews. Look at their charges and the rates they offer and avoid any firms that haven't been around for long," says Banks.
Tony Par, 43, from Gosport had a great experience with the postal service he used, Hatton Garden Metals. "I did some research online and it had some really good reviews so I thought I'd try it," he says. "I was a bit nervous as I'd heard about some of the dodgy services, so I took my gold into a jewellers first to get an idea of what it was worth."
He needn't have worried. Within 24-hours of sending off the gold, his bank account had been credited with roughly the same amount as he had initially been offered by Hatton Garden Metals.
But while Tony's experience was a good one, this isn't always the case. When MoneySavingExpert.com touted its gold bracelet to different firms buying gold, some coughed up significantly less than was initially quoted. The worst – PostGoldForCash.com – quoted a price of £43.43 but only paid £8 when the bracelet was received.
Culling explains: "A commonly used tactic among unscrupulous postal companies is to offer a high price then, once your gold has been received, offer you a much lower price but with an obstructive returns process."
While you're within your rights to ask for your gold back if the offer doesn't match your expectations, make sure you're aware of the returns process and avoid any that seem too punitive.