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Should you sell Grandma's gold teeth?

Selling gold jewelry and other items can be a shark tank for the uninitiated, so enter it with caution.

By doubleace Aug 11, 2011 2:33PM

This post comes from Lynn Mucken at MSN Money.

 

I have a good friend. Bright guy. Reads a lot. Can talk intelligently on just about any subject. Yet he buys gold in preparation for the apocalypse.

 

When we debate the merits of such purchases, he usually reverts to a fallback position that, in his mind, ends the argument. "An ounce of gold," he solemnly pronounces, "has always bought a good suit of clothes." My closing statement is that if the world as we know it ends, I would rather have an ounce of New York steak.

 

But if he is right -- and I hope he remembers this old friend if it turns out that way -- all those accumulating gold during the current frenzy are the smart ones. Or maybe it's the ones selling gold. 

 

The media is agog about the "record" price of gold, and true to its nature, it diligently details how this is affecting the regular folk, who apparently are kneeling on Grandma's shoulders and ripping out her gold fillings in order to make the car payment. Post continues after video.  

So, some thoughts and some facts:

 

Is gold at a record price? Not really. Yes, it bounced above $1,800 an ounce this week, but adjusted for inflation, gold was actually priced higher in 1980, when $850 gold was worth $2,400 in today's prices. Just a note of caution: By 2001 gold had lost 84% off that peak.

 

Why is the price so high? Fear, pure and simple (see my opening paragraph). In 1980, inflation was in the high teens and ripping the intestines out of many Americans. Today, we have a ton of worries: no jobs, low pay, high debt, a dysfunctional Congress. Yes, inflation is not a big factor, but Financial Trend Forecaster provides this list of things driving gold prices upward:

  • Fear of inflation.
  • Fear that paper assets will return to their intrinsic value (zero).
  • Fear that governments around the world will not be able to pay their debts.
  • Fear that markets will collapse.
  • Fear that the housing market will continue to collapse.

Does that mean this is the dreaded bubble? Of course it is a bubble -- stay in at your own risk -- but I rather like this statement that economist Tim Harford gave NPR when it asked him:

Gold is a tricky one, and here's why. ... bubbles should be defined in terms of fundamental values. For the price of corporate stock, we should be looking at future profits, and you need to make your best judgment for what that should be. But ... it's just not clear what the fundamental value of gold is. It's worth something because people have always thought it's worth something. And that's really weird, because what it tells you is gold is in a 4,000-year-old bubble. And if it's lasted 4,000 years, maybe it will last another 4,000 years. Who am I to say?

I'm not buying bullion, but my wedding ring is pure gold. No, it isn't. Pure gold, or at least the stuff that is 99.7% gold, is 24 karat. They don't make jewelry out of it because it is too soft and thus not durable. Your ring might be 18 karat, or 75% gold, with the rest being copper, silver, platinum, palladium, iron or even a bit of zinc or cadmium. Most likely the ring -- despite what your former husband told you -- is 14 karat, 58% gold.

 

The only number I care about is the selling price. Besides the gold content, there are several variables, most of which center on the buyer. In addition to the online buyers that have been advertising heavily for a decade, gold-and-coin dealers, pawnshops and jewelers might buy the ring from you. Pawnshops are looking mostly at resell value; jewelers might buff it up and sell it; and the online buyers will most certainly melt it down for the gold. Each business has its own pricing structure.

 

Last year, MSNBC put together packets of 14-karat gold jewelry appraised at $450 (at 2010 prices) and mailed them to 10 online gold buyers. The offers ranged from $393.36 (90% of value) to $38.25 (8%).

 

Some good advice

Gold buyers know what they are doing, and you almost certainly do not, so USA Today has some tips. Among them: 

  • Ask for credentials. Is the business experienced and is it licensed by your state to buy gold?
  • Check with the Better Business Bureau. Through July, the BBB had received 408 complaints about gold, silver and platinum dealers. The total for all of last year was 581. 
  • Get an appraisal. "Collectible jewelry could be worth more than the gold it's made of."
  • Get prices from several buyers before you sell.
  • Track the spot price of gold at sites like Kitco.com
  • Be realistic. "Your old class ring might provide you with some extra walking-around cash, but it won't make you rich," USA Today says.
  • Be prepared to show ID. Gold buyers are required to ask for it. 

So, how much are Grandma's gold teeth worth? Teeth feel bigger in the mouth than they do in the hand. Gold crowns weigh maybe one-10th of an ounce, and they often are made of 14-karat gold, which is only 58% pure. So perhaps $100, minus the buyer's profit margin, which can range from 10% to 92%. Fillings, of course, are much smaller. Try to convince her that every little bit helps.

 

More on MSN Money:

1Comment
Aug 13, 2011 5:01AM
avatar
That's all? I was expecting some good advice here....Eye-rolling
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