I'll explain what the scrap gold market really is, why it's so popular, the various price levels and information for the buyer and seller.
When you hear the term "scrap" you automatically think of junk that is of no value. That is not the case with gold. Quite often, in this trade trade, it is really just another word for used.
For example, when people sell used jewelry, about 70% of these items are still in resalable condition, or at least they can be with a little refurbishing.
When previously owned bullion coins and bars are sold, they are usually in the same condition as when they were produced. Thus, they can not be considered junk.
One of the reasons for classifying any used gold item in this manner is because it gives the perception that it is worthless. Portraying it as being worthless helps the buyer to justify the low offer to buy.
But, no matter what condition the item that contains the gold in, the actual gold itself has the same value.
The reason for its popularity, from a buying standpoint, is because those who
buy scrap gold acquire it at prices below spot. Some much lower than others.
In fact, many of the cash for gold buyers make drastically low offers. The companies that urge you to send your items off to them sometimes return a payment for as little as 10% of the spot value.
These low offers are not justified and really are a rip-off.
Any buyer can offer 60% to 70% and still buy safely. At that margin they will make a good profit when they sell, and the person who they purchased it from will be very pleased.
Its popularity from a sellers standpoint is due to the "instant cash" aspect. When you sell used gold items you are basically parting with something you no longer want or need and receiving a cash payment in exchange.
The following analogy should help you understand where
scrap gold prices fall into the entire gold price structure.
Imagine, if you will, a long slanted horizontal line with a short vertical line in the middle.
The vertical line represents spot gold price, the basis for all gold pricing.
On one side, the upper side, are the price levels for new gold such as bullion and jewelry. These levels include retail and wholesale.
On the other side, the lower side, are the price levels for used, or scrap gold.
They consist of several values ranging from how much the buyer pays the individual for their scrap items, to the amount he receives when he sells to a refinery.
If the spot price of gold is $1000/oz, the range on this scale could be anywhere from $100/oz, the lowest price some buyers pay, up to $3000, what that ounce would bring if it were used for retail jewelry.
That's a big price range and, in between, there is a lot of money being made!
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