A dutiful premise: the expenses included in this article, for example, the withholding that the metal bank applies, are not the same for all gold buyers. They can vary according to the area or, for example, according to the amount of gold you carry.
The most famous gold buyer in your city, which collects a lot of gold, is more likely to get smaller commissions than the deep-rooted gold buyer in the suburbs.
The Cost of Buying Gold
You must know that a gold buyer has many expenses.
Some common to the rest of the activities, the classic management expenses (rent, bills, employees, accountant, etc.); and others typical of our company. Now we will see them in detail.
To do this, let’s take a practical example:
Suppose I bought 1000 g of 750 (18 kt) gold. As you well know, they are equivalent to 750gr of pure gold.
Let’s say pure gold is quoted on the stock exchange at €35/gr, and if I bought this gold at around €32/gr, my profit would be €3/gr.
So I expect a potential profit of €2,250:
750gr x 3€/gr = 2250€
But will it be like this? To be paid you need to bring the purchased metal to a metal counter.
Most gold buyers rely on armored and insured couriers to transport the metal.
The cost varies according to the agreements you have with the foundries; transport is often free for large quantities, but in general, we can say that the cost of transport is around €50.
Once you arrive at the foundry there are several other expenses to consider:
When you smelt gold, the resulting ingot decreases in weight compared to before.
The decrease is physiological since some jewels are dirty, others are lacquered, or some stones had not been removed.
On average the decrease is around 1% of the weight.
The Decline In The Title
The vast majority of objects purchased in the gold shop are jewels that contain small mechanisms in steel (or other alloys). Think of the closures of necklaces and bracelets, for example, which contain small springs to make them work. This means that gold's fineness will never be precisely 750, but it will probably be 740 or 745 if you're lucky.
Purity of Gold
Going back to our example, bringing 1000gr of 750 gold, we will probably come out with a 990gr ingot (1% drop in weight) of 743 gold (reduction in fineness), i.e. about 743gr of pure gold. In practice, about 7 grams of pure gold are lost "on the road".
The Metal Banks
The profit that derives from the final ingot is not entirely ours, but the retention of the foundry must also be taken into account. Well yes, even the metal banks apply a deduction from the stock market price.
How much is the withholding? This too can vary between the various metal banks and according to the amount of gold you carry. Let's say that in general, it ranges from €0.30/gr up to €1.00/gr.
Royalties (Only For Franchised Gold Buyers)
As if all these expenses were not enough, the gold buyers in franchises must pay a share (ranging from 1% to 5%) of their turnover to the parent company.
What Is The Use of Knowing All This?
You have to understand that a gold buyer is a shop like any other. The owner has to earn otherwise he closes (did you notice how many closed right?).
To earn, you MUST apply a commission to the stock market price.
If a gold shop advertises a quotation that is too close to the stock exchange price (sometimes even HIGHER ) there is something wrong.