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Interest in the precious metals market skyrocketed during the global pandemic. Everything from buying gold coins to investing in silver ETFs was suddenly at the top of everyone’s minds. Some people looking to invest while saving money, though, turned their attention to buying scrap gold.
While this might seem like a cheap way to get a wonderful investment, there are a few things you should know before buying. Being fully informed as an investor is the only way to ensure you’re making a good financial decision. In the end, this will reduce your overall risk.
The following guide will provide everything you need to know about buying scrap gold — including whether it’s a smart investment decision. You’ll also discover the safest ways to do this. And if you decide this isn’t the right move for you, we’ll offer several alternatives for investing.
What Is Scrap Gold?
Many people think of purchasing scrap gold as an investment vehicle. Unfortunately, some don’t actually know what this form of precious metal is. Many people think that cull coins are scrap metal, and others believe it’s any form of broken jewelry.
In reality, the question of “what is scrap gold?” has a simple answer: it’s any gold that doesn’t hold the value of its original marketed form. So, the broken jewelry mentioned earlier? We could definitely consider it scrap. Gold cull coins? Not so much, since they often still maintain a face value.
There are lots of companies out there that make money from buying scrap gold. And while broken jewelry may be a popular item, it’s far from the only scrap you’ll find. Here are some of the most common gold items sold as scrap:
- Old dental work (e.g., gold teeth).
- A single earring missing its mate.
- Computer circuit boards.
- Other consumer electronics.
When gold no longer holds value in its original form, it often ends up with refiners who melt it down. From that point, the scrap typically undergoes reprocessing or repurposing to create new items. This means just about any gold item you want to melt down is scrap gold.
Just because there are countless items that could fall into this category, though, doesn’t necessarily mean buying scrap gold is a smart investment. As with most investing decisions, there are both pros and cons of scrap gold.
Benefits of Buying Scrap Gold
When looking at scrap gold as a potential investment, the following are the benefits that stand out for most people.
Potential for Great Prices
People often view scrap gold as “junk,” and this offers opportunities to get items at great prices. Of course, this is only the case when gold isn’t in high demand. At the current price of the precious metal, you may be just as well off buying gold bullion bars.
Create Unique Pieces
If you’ve ever been interested in creating your own precious metal items, buying scrap gold might be the way to go. You can typically purchase casting ingots, crucibles, and other items necessary for pouring your own gold molds for relatively cheap online.
Keep in mind, though, that you can’t easily prove an item’s precious metal content once you do this. Even if you know an item contains 24 karat gold, buyers may want something more than your word. If you’re doing this for your own pleasure, though, there’s nothing to worry about!
Demand for Gold
During the COVID-19 pandemic, there was a constant demand for gold. In fact, the U.S. Mint couldn’t even produce enough gold coinage to keep up with demand. This is beneficial for those who previously bought scrap gold since — you’ll hear us say it many times — gold is gold.
Even if buying scrap gold results in a lower potential profit than traditional bullion, the value of these items always rises with the price of gold. Unlike some precious metals ETFs, at least you know your bullion will be worth more when the value is on the rise.
Disadvantages of Buying Scrap Gold
Of course, there’s no such thing as a perfect investment. If buying scrap gold had no disadvantages, everyone would be doing it. Here’s what turns plenty of people off about this investment prospect.
Items Might Be Gold Plated
Fake gold jewelry is becoming increasingly widespread on the market. If you scroll through scrap gold listings on eBay, you’ll notice something that points to this reality. In many listings, sellers will say “selling as gold plated.” This is because they’re often unsure whether the item is authentic.
If you’re buying scrap gold, you need to always make sure it’s authentic.
Lowered Resale Value
If you got in a bidding war on eBay when buying scrap gold, you may have paid over spot price. Unfortunately, you’re likely to get much lower than this when reselling. Scrap will eventually need to make its way to a refinery. This means added costs for processing. Whoever you sell to may account for these costs.
Not What It Was Once Worth
Selling gold as scrap means it’s not worth what it once was. If you bought a necklace from a formerly popular designer who has fallen out of favor, for instance, you’re unlikely to get back the original price you paid. If you’re buying scrap gold, always look for the lowest premiums.
Can I Sell My Scrap Gold?
Many people eventually realize that buying scrap gold isn’t for them. Unfortunately, this is often after they’ve bought significant amounts of the metal. Fortunately, selling scrap gold can be just as easy as your original purchase.
While “junk gold” might have a few disadvantages, the fact remains that it’s gold. It’s important to remember, though, that you’re unlikely to get spot value for this precious metal. This is particularly the case if you’re selling to someone who plans on reselling or refining the metal.
The following places are some of the most popular for selling scrap gold:
- Pawn brokers.
- “Cash for gold” businesses.
- Consignment shops.
- Reputable online dealers.
- eCommerce platforms.
If it’s gold bullion you’re trying to sell for an immediate cash need, though, avoid these retail options if you have other choices. Bullion such as coins or bars can go for much more than scrap. Check out our Precious Metal Bullion Selling page if you want to sell more than just scrap.
How Much Is Gold Scrap Worth?
When you’re buying scrap gold, the hope is always to see a good return on investment. If you’re new to the world of scrap metal, you may now wonder how much gold scrap is worth. After all, traditional bullion obviously carries higher value. The real question is how much difference you might see.
As mentioned elsewhere in this guide, though, gold is gold. This means you may get just as close to spot as a piece of gold jewelry in perfect condition. Keep in mind that you might also have to pay extra for certain items — particularly if they’re antique or from popular designers.
Unfortunately, certain places won’t pay near spot value. “Cash for gold,” consignment shops and pawnbrokers are all looking to make a profit. This means they have to pay far below and sell above spot price. Keep this in mind whether you’re selling or buying scrap gold.
Should I Buy Scrap Gold as an Investment?
While owning scrap gold is certainly a way to store value for the future, buying it as an investment isn’t ideal. The company that eventually refines the precious metal will end up getting the most value. Unfortunately, this means these items’ resale value may not be worth much.
If you’re looking to sell scrap gold, though, you have a variety of options in front of you. From pawn brokers to consignment shops, many folks would be more than happy to take your old items off your hands.
With investing in precious metals, though, it’s best to stick with bullion from reputable companies. At Silver Gold Bull, we strive to get you the best price on precious metals out there. Visit our Gold Bullion Products page, and you’ll see buying scrap metal is subpar at best.
