# BUYING SCRAP GOLD - What not to do.

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Buying scrap gold at the day’s spot price is a waste of time if you’re looking for short term gain. If you’re paying the day’s gold price you’ll have to hold on to that gold for a long time before you can make a profit on it. In fact, until the market rises enough to cover the price you pay, any overheads involved, and the price you’ll get for it from your dealer.

This is how it works: Individuals are at the bottom of ‘The Golden Ladder’. Most people are only going to get somewhere around 50% to 60% of the full scrap value from a dealer when they sell. Firstly, it costs at least 8% of the value to process scrap gold. Dealers at the top of the golden ladder are likely to buy gold at around 10% to 20% less than the daily spot price, they have to process it and still make a profit from reselling. If you have a kilo or more you might be lucky to get offered somewhere between 10% & 20% below the day’s standard but you’d have to haggle for that and these transactions would normally be between those to whom you sell and those who buy from them; those on the top rung. 10% to 20% percent is unrealistic unless you are talking about a huge amount of gold.

Don’t be put off by the maths below, it's really quite simple and it’ll save you a lot of money to know, when you buy, what you’re realistically likely to get when you sell. What you must understand before you start is that you will not get 100% of your gold weight at the days spot price when you sell, SO DON’T PAY IT WHEN YOU BUY.

If you’re measuring your gold in grams, find your gold price in grams, if you’re measuring in Troy ounces, of course, use the Troy ounce price. Gold prices in either can be found at www.goldprice.org.

Here is a formula for working out what you would like to get for your gold return.

Step 1: Find out how much actual gold is in your scrap, this is done by taking the carat, turning it into a percent of gold by dividing it by 24 then multiplying it by the weight you have.

Example using 500 grams of 9ct scrap gold.

9 ÷ 24 = 0.375 X 500 = 187.5

So that means that in a parcel of 500 grams of 9ct gold you actually have 187.5 grams of pure gold.

Step 2: Find today’s gold price (I’ve used £18.50 per gram as example) and multiply it by your weight of pure gold.

187.5 X 18.5 = 3468.75

Step 3: Reduce this total by the dealer’s refining costs, usually as mentioned around 8% leaving 92% of the value.

3468.75 X .92 = 3191.25

Step 4: Set your target profit percentage, as discussed above, let’s say you’re opimistic and want 75% so take the value of your pure gold (less refining costs as calculated in step 3) and multiply it by your target profit. This will give you your asking price.

3191.25 X .75 = 2393.44

£2,393.44 is the price you want and then the haggling begins. So, even though your gold, at the day’s spot price per gram of £18,50 is £3,468.75 if you were to receive your asking price of 75% you’d only get the £2,393.44.

This process can be used for working out Grams, Ounces, or any weight, 9, 14, 18, 22, 24 or any purity of gold in-between.

Buying gold as an investment for the future is a sensible move but the watchword, as always, BE CAREFUL WHAT YOU’RE PAYING OR YOU’RE THROWING MONEY AWAY.

To make this easier for you I can send you a ready made EXCEL spreadsheet in which you'll only have to enter the variables and the maths will be calculated automatically. Kegsie12 at yahoo.com

Happy investing.

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