The City of Edinburgh Council’s Trading Standards is warning people to be careful of “unscrupulous” companies who "may be trying to rip you off when buying your scrap gold".
The price of gold has surged in recent years, as financial markets have been rocked by the credit crunch and fears about how governments will deal with a huge overhang of public and private debt.
Gold is seen as an inflationary indicator. As inflation goes up, gold, which is seen as a "store of value" in times of financial turmoil, also goes up.
In the last 10 years, an ounce of gold has risen in value from $288 to $1,243. If you bought a 1 ounce gold coin ten years ago you would have paid around £190. Today it costs in the region of £825.
In spite of government "austerity measures", there's widespread fear that the Bank of England is set on quietly inflating sterling in order to alleviate the debt crisis - fears that have sent investors flocking to gold. In the last 18 months, the pound has fallen to historic lows against major currencies, as overseas travellers know only too well. The latest official statistics show inflation in Britain on a tear, with the CPI at 3.4% and the RPI at 5.1%.
Unscrupulous gold merchants
With the surge in price of gold, there's also been widespread advertising campaigns telling people, who may be short on cash, to sell.
However, Trading Standards officers have found large variations between the prices offered. Officers carried out a series of tests of gold merchants, including jewellers, pawnbrokers and online postal purchasers. A gold necklace, worth in a valuer’s opinion between £270 and £300, received offers from £68.97 right up to £260 – a difference of £191.
“It is staggering to see such wide variations in the prices offered for gold," said Cllr Robert Aldridge, Environment Leader at the City of Edinburgh Council. "While you would expect gold traders to be making some profit when buying gold, certain unscrupulous individuals and companies are obviously capitalizing on the demand for gold and offering way below the market value. What is even more concerning is that these companies often use glitzy advertising campaigns to target vulnerable people needing money quickly.”
“If you do intend to sell gold, to avoid getting short changed, we would advise that you shop around. Remember that gold market prices are fixed twice daily, and you can check the web for the current gold buying price. We also found that often when we refused a company’s first offer, subsequent offers were much better - so don’t feel pressured into taking the first offer – you are entitled to try and get the best deal you can.”
Hallmark of quality
You can check on the quality of your gold by looking at the hallmark. UK Assay Offices in Edinburgh, Sheffield, Birmingham and London test the precious metal content and stamp a hallmark onto all gold, silver or platinum articles.
A hallmark comprises at least 3 parts: the sponsor’s mark, the fineness mark e.g. 375, and the Assay Office Mark. Many gold buyers use the hallmark as a guarantee that the gold is what you say it is. The hallmark is like a passport for your gold.
“For over 700 years the UK hallmark has ensured that consumers can check and verify the quality of their precious metal purchases at the point of sale," says Scott Walter, the Assay Master at The Edinburgh Assay Office, "but the importance of the hallmark does not stop there."
“Because the hallmark is stamped into the precious metal it is a permanent and enduring guarantee that stays with the article for the duration of its life. The hallmark tells an antique dealer when and by who a piece was made. It helps trace the original manufacturers in insurance replacements and it helps identify stolen recovered goods. When a piece of jewellery is resold or scrapped, second hand dealers will base their price on the gold content guaranteed by the hallmark.
“In effect the hallmark is a lifetime guarantee with continues to protect the consumer long after the initial purchase. Look for the hallmark, it’s your guarantee.”
When to sell gold?
Nobody can predict where the price of gold will go. Gold "bugs" say that the gold price has much higher to go because, in spite of austerity measures, governments are not doing enough to reduce debt and thereby control inflation. Others argue that at these historic highs, gold is in a speculative bubble that will eventually burst.
Those who sell their gold now can comfort themselves with the knowledge that they will be doing much better than Gordon Brown who as Chancellor of the Exchequer sold around half of Britain's stock of gold at a significant low point in the market. Between 1999 and 2002, Brown oversaw the sale of 395 tonnes by auction. The cost to to replace that gold today, would be billions of pounds more than it was sold for.
The ‘Golden Rules’, advice from Trading Standards
- You don't have to sell your gold to anyone
- Shop around – prices offered vary enormously
- What weight is your gold?– 1 gram could be worth almost £10
- Find out the fineness of your gold – is it 9ct or even 18ct
- Some prices given are for pure gold – that’s 24ct - and your gold is likely to be of a lesser fineness
- Check some websites if you can, to see if they display the prices they pay
- Make sure you only send your gold by an insured postal service
- If you’re sending your gold off for a price, check the terms and conditions to make sure the cost of getting it back to you will be paid by the buyer
- Keep a note of all reference numbers and name and address where you send your gold
- If you need to sell quickly, try a local firm – you can negotiate face to face
- Don’t always accept the first offer, as this will often be nowhere near what they are prepared to pay
- Haggle! This is a business transaction and it is quite normal to negotiate a fair price
If you have any concerns about selling gold or the companies you have dealt with, contact Consumer Direct for advice: tel.08454 040506 or www.consumerdirect.gov.uk.