Ever worked in a jewelry store or pawn shop? Know anything about buying and selling scrap gold?

davidc11291

davidc11291

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Lately I've been thinking about starting a business buying scrap gold jewelry and then selling it off to a refinery. I've found a friend of a friend in the refining business, and he's shown me several refineries where I can sell scrap gold and get 92%-94% of the spot price, with a relatively small minimum amount of 1 troy ounce.

I'm wondering what price most small time, mom and pop pawn shops and jewelry stores are able to get when they sell their scrap gold?

Also, what about jewelry that has gemstones in it? If you've worked in a pawn shop or jewelry store, how did you factor in the weight of a ring if it's got a diamond/ruby/whatever in it, and how do you price and sell the gemstones?

I really don't have anywhere near the amount of money required to open up a store, but I've got a few grand I can scrape together. I've got 2 possible business ideas-

1) Figure out some way to get people to sell their scrap gold to me instead of a pawn shop. This would mean that they would have to meet me someplace like a starbucks. I could offer to pay more than a pawn shop, but getting people to meet some random stranger would be difficult.

2) I'm hoping that I could possibly find some small pawn shops out in the country who aren't well connected and they're only getting 75% of spot price when they sell their gold. I could pay them 80% and come in with cash so they get cash in hand immediately.

If you've worked in this industry before, what are your ideas/thoughts, particularly about how to handle diamonds and gemstones, and what prices shops normally get when they sell their scrap.
 
davidc11291 said:
2) I'm hoping that I could possibly find some small pawn shops out in the country who aren't well connected...
Click to expand...

This internet thing makes it pretty easy to be "connected" no matter how far out in "the country" you are.
 
A few thoughts here... Having bought and sold gold through a variety of methods including a local, reputable coin shop here in town... Meeting at a Starbucks or such is generally a bad idea. One you need a testing kit to test the carat of gold. Those testing kits consist of a set of acids of various strength and a scratch stone to remove minimal amounts of gold to test. It can be messy and the acids are strong enough that you wouldn't want to just dribble them out on a table at Starbucks. You also need a really strong magnet (helps to ferret out plated items with ferrous metal base).

It would also make it too easy to set you up as a prospective buyer to rip off your cash.

Knowing someone in the business, part of the reason why there is generally a considerable spread between the prices paid at the various local places and what's paid at the refinery is to cover their losses on those items that escape detection. No matter how well they test there will always be some things that make it past them that are either plated (and effectively worthless) or test out at the refinery at a lower standard than they did with the small test kit. Lastly gold fluctuates rapidly and it might be $1805 an ounce when you buy it but $1780 an ounce when you sell it to the refinery the next day or even hours later. As a traded commodity it changes price rather quickly.
 
Setec Astronomy said:
This internet thing makes it pretty easy to be "connected" no matter how far out in "the country" you are.
Click to expand...


Very true. With that angle, I'd be aiming at the 60 year old stereotypical good ol boy redneck pawn shop owner who is still using the same business methods he was using in 1985.... I live in the South, and a lot of people down here fit that stereotype.
 
davidc11291 said:
Very true. With that angle, I'd be aiming at the 60 year old stereotypical good ol boy redneck pawn shop owner who is still using the same business methods he was using in 1985.... I live in the South, and a lot of people down here fit that stereotype.
Click to expand...

Well ok then.
 
OP, you're looking to undercut an existing market. THAT will NOT make you friends and make you well known in a hurry. Not good for business and not good for your health.
If you're looking to play with the big boys, invest in the gold and silver markets on the commodities exchange.
It will extend your lifespan
 
Yeah, but all the fly by night cash for gold companies that are popping up in strip malls are undercutting the pawn shops, and I haven't heard of any of them getting run out of town. I'm willing to test the waters and see what happens.
 
every Tom, ####, and Harry in South Florida buys gold currently. A price expose' on the evening news shows nobody pays current fair value, but some are closer than others.

As for a business your starting at the high price side of gold, and while likely some time left in it, its not what it was when gold went from 800-1600 an ounce.
 
killrwheels@autogeek said:
As for a business your starting at the high price side of gold, and while likely some time left in it, its not what it was when gold went from 800-1600 an ounce.
Click to expand...


I'm not interested in buying gold and holding it, then cashing in when the price goes up. I want to buy gold at 50%-80% (keep in mind that pawn shops and cash for gold companies give typically 30% of it's value) of it's value, then immediately resell it for 94% of it's value.
 
As a proud double small business owner and tax paying American I support other people's business adventures. Other than some of the problems you will encounter that others already commented about, you will need a business license, State tax ID number, a Federal Tax ID number, a business bank account, a way to keep track of your purchases and sales. If you are buying at say 75% of the value and then reselling it for 94%, you will have to report your income to the good old IRS. After taxes, you will make what seems like pennies on your sales.

Not so quick example: A 24K troy ounce is selling for about $1700 right now. Multiply it by 75% for 18k gold (most common in nice rings). You end up with $1275. You purchase 18K rings that total 1 troy ounce. You are paying 75% of the gold value. $1275 X 75% = $956.25 (you pay in cash to the seller). You think you make $318.75 per troy ounce bought. However, you sell your $1275 troy ounce to the refinery at 94%. They give you $1198.50. You subtract your cash paid to the seller ($1198.50 - $956.25 = $242.25).

It could be a lot of foot work to gather a troy ounce of 18k gold. So for all the work you do you make $242.25. Minus your sales tax (you will have to pay the state sales tax) and federal income tax and you make roughly $170.25. You have to ask yourself "How valuable is my time?" If you have 14K troy ounce you make even less.

Don't even bother with gem stones or diamond rings, you can lose your shirt unless you know a certified gemologist who can valve them for you.

If you don't plan to do it the legal and legitimate way, I have no advice for you.

-Sparty
 
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