Another question that I will typically see people ask are why are pawn shops buying gold. What’s the purpose for a pawn shop to buy gold to begin with?
Well, pawn shops buy a lot of things honestly. They buy tools, instruments, electronics and yes, gold as well.
The reason is that gold specifically has a value that is very easy for the pawn shop to determine with very little doubt as to what that item will be worth to them when they go to turn around and resell it.
The reason being that the value of gold is determined on a global scale on the open gold market. Gold has a ‘spot’ price that is set by the stock market in response to the strength of weakness of the local currency.
For instance, in America, when the value of the dollar falls, the price or value of gold will often go up in a nearly equal amount.
That’s the world’s way of adjusting the value of our currency when compared to other currencies in a very loose way.
But none the less, pawn shops like dealing with items that they can easily and correctly determine the value of with very little guessing or confusion and gold is about the easiest item out there to determine the value of once they pawn shop has determine that the gold is real (and not plated.)
What Do Pawn Shops Do With The Gold They Buy
Well, now that we know the appeal of gold to pawn shops, let’s talk about what they might actually do with it once they have purchased it.
Typically speaking, there are two things that they will often do with it.
The first thing that they will do is melt (or smelt) it and sell the raw gold for it’s spot or scrape value.
Approximately 95% of the gold that pawn shops buy is melted for it’s scrap value as it is a very easy way for the pawn shop to get their money back out of the items that they’ve purchased.
The second thing that pawn shops will often do with gold is refinish the items and resell them in their retail operation if they have such a store setup.
This will allow customers to come in a buy very nice, gently used jewelry at significant savings versus if they were to attempt to buy the same or similar items new from a jewelry store.
What About Any Diamonds In The Gold
Typically speaking, gold jewelry has diamonds in it that are also going to be worth some money to the pawn shop.
Depending on the size and quality of the stones, pawn shops may do a few different things with the diamonds involved.
If they have the gold smelted, they will probably have the diamonds extracted (often chemically) and then auction them off directly through the gold refiner, or a third party after the diamonds are sent back to the pawn shop.
The other thing they may do is keep the larger stones set aside to repair or replace diamonds that are missing or have fallen out of other pieces of jewelry that they are going to sell, or that their customers need.
The third thing that will happen is that pawn shops will price the entire piece of jewelry in their retail store, figuring the value of the diamond in that price and extract value from the stone(s) in that manner.
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