How Does Scrap Gold Work?

Collecting scrap gold or selling pieces of scrap gold that you have been storing for years can be a great way to revive an object’s dwindling value. If you’re unfamiliar with the world of scrap gold and how you can turn worthless pieces into liquid cash, read on to learn about the value and price of scrap gold and what it means for you.

What Is Scrap Gold?

The phrase ‘scrap gold’ is generally used to refer to gold that is no longer valuable in its original form. Scrap gold is anything that you can send to a refinery, which will melt it down to extract its gold. Examples of scrap gold include broken jewelry and industrial by-products.

How Is Scrap Gold Weighed, Measured, and Valued?

Scrap gold is generally weighed, measured, and valued by the company you are selling it to. However, if you’re unsure whether or not a company is trustworthy, there is a way to measure the value of your scrap gold at home so that you know you are getting a fair deal.

Follow these steps to perform your own scrap gold analysis to get a better idea of what your piece is worth:

Determine Its Purity

Gold quality is measured in karats. Pure gold is 24 karats, which means that jewelry made with 12-karat gold contains 50% pure gold. You can figure out other karat purities by dividing the number of karats by 24.

Find Current Gold Prices

Find out what today’s gold prices are. These prices are often measured in troy ounces, which are 31.1 grams each. Divide the day’s price by 31.1 to get the price per gram.

Do the Math

Weigh your gold in grams, and then multiply that number by its purity. For example, let’s pretend you have a 15-gram piece with a 12-karat ” or 50% ” purity. You would start by multiplying those two numbers, and then you would multiply the new number by the current price of scrap gold per gram to find out how much your scrap gold is worth. Your math would look like this:

  • Weight of your gold: 15 grams
  • Purity: 12 karats = 12/24 = 50% = 0.5
  • The current price of gold per troy ounce, converted to price per grams: $1,941 per troy ounce / 31.1 = $62.41 per gram
  • Calculation: 15 x 0.5 x $62.41 = 468.075

In this example, your piece of scrap gold is worth $468.07. However, you should be aware that if it’s truly accurate, this calculation is how much consumers are willing to pay for gold. This means that the company that buys your gold will give you less than the current price of scrap gold in order to make a profit.

Some free online calculators can do this math for you. A good online tool will automatically give you the current price for scrap gold and then convert your units of measurement for you. However, you will still need a scale ” preferably a digital one ” in order to weight your piece.

Keep in mind that any gems or other additional features on your jewelry will skew your calculations. If you can, only measure the portion made with gold for the most accurate estimate.

What Factors Drive the Value of Scrap Gold?

The short answer is that the value of gold drives the value of scrap gold. As countries’ demand for gold jewelry grows, so does the price of gold. Many technology companies also use gold to manufacture their products. The more companies need gold, the higher the value of gold becomes.

However, market prices for gold fall as well. That’s why it’s important to keep an eye on current gold prices to try to sell your scrap gold for the most amount of cash it can bring you. Like stock trading, waiting longer to sell your scrap gold can often get you a higher return, especially since gold has been such a steady performer for thousands of years.

Seller’s Value

On your end of the transaction, many factors can change the selling value of scrap gold. For example, where you choose to sell your gold could affect its value. One pawn shop may give you a much lower offer for your gold than a jewelry shop across the street or a mail-in service. It all depends on the business, so it’s a good idea to explore your options rather than selling to the first one you come across.

This is why it’s crucial to know how much your gold is worth before you decide to sell. As you shop around for options, keep an eye on gold prices, and adjust your calculations accordingly to make sure you’re getting the best deal possible.

What Happens With Scrap Gold?

Cash-for-gold operations, jewelers, pawnshops, and mail-in services will almost always send your piece of scrap gold to a refiner that will melt it down.

The refining process separates alloyed gold from the metals mixed with it. Refiners may use fire assaying to extract softer golds and platinum from higher-grade ores in order to assess the purity. A sample has to be removed from the test item to evaluate its purity. [1]

Once the gold has been removed from other metals and impurities, it is recycled and sold to make other products with gold in them, such as more jewelry. Recycled gold makes up a massive percentage of the gold consumed every year. In 2019, an estimated 130 tons of scrap gold was recycled, which is around 87% of reported consumption. [2]

If you’re investing in scrap gold or simply waiting until prices for scrap gold get higher before you sell your pieces, it’s important to familiarize yourself with how it works. Though there are plenty of businesses that will give you an honest price on your scrap gold, it helps to know how the system works to make sure that the business you choose treats you fairly.

Article sources:

1. SGS. ‘Fire Assay Gold,’ Accessed Sept. 3, 2020.

2. U.S. Geological Survey. ‘Mineral Commodity Summaries: Gold,’ Accessed Sept. 3, 2020.