How Do Pawn Shops Buy Gold

Recently we’ve talked about why pawn shops buy gold but let’s take a moment and discuss how pawn shops buy gold.

The first thing that we should do is establish how gold is priced as a commodity.

The price of gold is based on a ‘market price’ or a price set by an open market, the stock market for instance.

Part of this pricing is based on the ‘strength’ of your countries local currency. So here in America, when the value of the dollar falls in comparison to the value of other nation’s currency, the price of gold rises since it will cost more American dollars to buy the same troy ounce of gold.

This of course bring us to the next point. Gold is priced by the ounce, but not the typical 28 gram ounce that you may be familiar with. It is priced based on what is known as a ‘Troy Ounce.’

A troy ounce is approximately 31.3 grams. Therefore if you have a 28 gram ounce of gold, you don’t really have what is typically considered to be ‘An ounce of gold.’

But it doesn’t quite end their yet either. You see, gold items (like jewelry) are made in different purities, or percentages of actual gold.

10k is roughly 41% gold, 14k is roughly 57.5% gold, 18k is 75% and so on. 24k would be considered as close to pure gold as you could find.

So if you have 31.3 grams of 10k gold, you still don’t have ‘An ounce of gold.’ What you have is 31.3 grams times 41% purity or 12.8 grams of actual gold. In order to have ‘An ounce of gold’ made out of 10k items, you would need 76 grams of material, assuming there were no diamonds or stones in the jewelry.

how do pawn shops buy gold
Learning how pawn shops buy gold can help save you a lot of confusion and possible frustration. This article teaches you exactly how pawn shops buy gold so that you know what to expect the next time you go into a pawn shop to sell some spare gold.

How Pawn Shops Work With These Numbers

So with this in mind, you will want to determine the current market price for a troy ounce of gold. You can pretty easily do this using a site like goldprice.org.

You will then want to weight your items and of course, account for the purity of your metal.

Now you will be left with the raw market value of the scrap gold.

You might think that a pawn shop would pay you that price, but they won’t. You see, it’s not free to refine gold. In fact, it can cost up to 10% to actually refine and sell scrape gold.

So will a pawn shop buy your gold for 90% of it’s spot value? No.

Why? Well because they are a business and still need to be able to make a profit on whatever they are buying. With that in mind, you can expect a pawn shop to pay somewhere between 40-70% of the current scrap market value of your gold.

Why Would They Only Pay Based On Scrap Price

At the end of the day, a pawn shop is going to buy gold based on the scrap price of it because they will know how much they can sell it for later and therefore how much profit they can make.

If you have jewelry, they don’t know if they will be able to find a customer to buy that ring or necklace for what it is. There just aren’t that many customers out there for certain styles of jewelry at times and yours may be no exception, even if you love it.

On the other hand, they know that they will always be able to find a refiner to buy the scrap gold, giving them a sure out of the items when it comes time for them to turn around and get their money back out of the items.

Be Aware Of Your Stones

In all of this, one thing that you really need to be aware of is your stones and diamonds in the jewelry or scrap gold that you are selling to a pawn shop.

Remember that these stones have weight to them and in some cases, a significant amount of weight.

That weight has to be subtracted from the scale weight of the jewelry to determine how much gold is actually there. So if you weight your items before you take them into the pawn shop, be aware that a portion of that weight will not be gold, but will be the stones as well and the pawn shop isn’t going to pay you gold prices for those.

What About Diamonds

Diamonds are a tricky subject for a lot of people to really understand when it comes to pawn shops. You see, most diamonds do have some value to them, but like all things, there are better quality stones and lower quality stones.

Most of the diamonds in commercial jewelry is not all that desirable. This is particularly true with very tiny stones.

You may have a ring that has “10 Carats of diamonds in it” but if all of that is made up by 5 point stones, there’s going to be very little value there for the pawn shop.

That having been said, if you have a diamond that is over 1 carat, with very good color and clarity, you may find that you get a significant value for it out of a pawn shop because those types of stones are in pretty decent demand – assuming they are round or princess cut. Marquise stones have very little demand and therefore lower value, no matter how big they are.

What About Birth or Semi-Precious Stones

Forget it. They have no value to a pawn shop.

I’m serious – the ones that end up in our shop get put in the bottom of a fish tank.