So You Think Gold is an Investment, Eh?

So the economy takes a shit and everyone starts panicking except you. Why? Because you have gold. More specifically, you have solid gold jewellery which you collected over the years. Now, everyone knows that when markets go down the value of gold goes up. You're certain you will make a profit.

So you take your 18kt gold and diamond ring, the one you bought at a high end jewellery store for around $5,000.00 CAD to your local pawn shop.

Since I’m writing this in the land of Timbits and maple syrup, whenever you see ($) we're using Canadian currency.

You’re confident you can sell it for $5,500.00. The shop owner tests it for gold, weighs it and offers to buy it from you at the full market value of...

$261.49.

What the heck happened?

Well, you may have bought the ring for $5,000.00 but that was at retail price, not at real gold value. The high end jewellery stores made a profit. You, unfortunately, did not.

So how can we tell the real value of gold jewellery? Well, we’re gonna need to know a few key things and we’re gonna need a little math.

Step 1: Figure out the fineness of your jewellery. This is determined by karat fineness (kt). This is not to be confused with carat weight (ct), which determines the weight of gemstones and, sometimes, gold. For the sake of this article we'll stick with karats.

The purest form of gold comes in 24kt (99.9%-100% gold). From there you’ll find the following popular grades:

22kt (mainly middle east and asian countries)

18kt

14kt

10kt

You may find gold stamped with 15kt or 12kt, but that was discontinued in the USA sometime before 1935 (and since Canada is tight with the USA we pretty much followed suit). If you have gold with those karat grades, you might have an antique piece (hint, Victorian era). Just make sure it isn't fake.

You may also find 9kt or 8kt gold, but those are the lowest karat fineness of gold and they tarnish very quickly. They are not recognized as gold in the USA and are not sold by Canadian retailers either.

Step 2: Make sure that the piece you have is solid gold. It can’t be gold plated, silver or other metals made to look like gold. To find out, you need to look really closely at the markings on your jewellery. If you see letters that read “18kt GP,” that means the piece is made of a different metal that was plated with 18kt gold. It’s not solid gold and is considered fairly worthless from a resale standpoint.

If you see the following numbers stamped on your jewellery, chances are you’re holding silver since these are common silver markings:

800

925

950

There are other things to look out for, but the key takeaway is that solid gold only has the karat fineness stamped on the piece. I'll link a video below that will go into detail of what else to look out for.

Step 3: Pull out your calculator because now you need to do some math. Specifically, you need to calculate the percentage of gold for the karat of gold you have. This is done by taking the the karat fineness of the gold jewellery (let’s say it's 14kt) and dividing it by 24kt.

14/24 = 0.5833333 or 58.3%

This means that 14kt gold is 58.3% gold. The other 41.7% is composed of other alloys that make the gold piece more durable (like nickel and zinc). That's because gold in its purest form is very soft and malleable. The inclusion of these other alloys increases the strength and durability of gold while allowing jewellers to create timeless pieces that can withstand daily (or regular) wear.

Step 4: Get yourself a jewellery scale (your bathroom or kitchen scale won't cut it) because you'll need to know the weight of your gold jewellery in troy ounces. Unlike standard ounces, troy ounces are used to weigh precious metals and gems. Each troy ounce weighs 31.1 grams, which makes troy ounces around 10% heavier than standard ounces. Make note of the bolded number because we're coming back to it later.

Step 5: Find out the spot price of gold. As of the time of writing, Google tells me that gold is worth $2,464.45 per troy ounce, which works out to around $79.23 per gram.

For those of you who think that number is a little high, remember, we’re using Canadian funny money. 🇨🇦

Step 6: Pull out your calculator because it's finally time to figure out how much your gold jewellery is actually worth. Let’s take the 18kt gold and diamond ring from the beginning of this article. This time, instead of going straight to the pawnshop you make your own calculations.

First, calculate the percentage of gold in your jewellery. In the case of our example:

18kt/24kt = 0.75 or 75%. This means 18kt gold is 75% gold and 25% other alloys.

Second, calculate of the spot price of the karat fineness of your gold per gram. In the case of our example, we would multiply 75% with $2,464.45, which is the spot price of gold per troy ounce (at the time of writing).

0.75 x $2,464.45 = $1,848.34 per troy ounce

Then divide this value by 31.1 grams (I told you we're coming back to it) to determine the value of 1 gram of that karat fineness of gold.

$1,848.34/31.1gm = $59.43 per gram

According to these calculations, 1 gram of 18kt gold is worth $59.43.

Third, weigh your jewellery. In the case of our example, we plopped the ring onto the jewellery scale and found that it weighed 4.40 grams (because I said so).

Finally, multiply the jewellery’s weight in grams with the value of 1 gram of that jewellery's karat fineness of gold. This will determine the value of your gold jewellery. In the case of our 18kt gold and diamond ring, that works out to:

4.40gm x $59.43 = $261.49

Well, would you look at that.

The pawn shop owner didn’t rip you off after all.

But wait, what about the diamond? That has to be worth something!

Short answer, what about it?

Gold/pawn shop owners only give you the value of your solid gold jewellery by weight. They do not include the value of the gemstones. Now, they may be nice and throw in a few extra dollars, but that’s because they know they can pop the stones out and sell them at a profit. In the end, you'll find that you won't be able to resell your gold jewellery at the same price you paid for. In fact, you'll be selling at a steep loss.

Not much of an investment, is it?

But it’s not all terrible. Knowing how to value gold gives you an edge every time you walk into a jewellery shop. As a buyer you’ll be able to determine the best place to purchase your fine gold jewellery without getting ripped off (ie, by avoiding Cartier and heading to estate and garage sales). As a seller, you’ll know if a gold/pawn shop owner is trying to fleece you by lowballing your piece. Either way, you’ll be able to make a more informed decision as opposed to blindly trusting a luxury brand or the first offered price.

If you want to learn more, check out this video from RK Treasure Center. He goes into more detail about valuing gold jewellery and touches on European markings, which I did not get into here. Everything I shared with you I learned from him.

I hope you found this article useful and mildly entertaining.

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Thank you for lingering.

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Sources:

RK Treasure Center. "GOLD - What Pawn Shops & Jewelry Stores DON'T Want You To Know - Real Worth and Value." Youtube, uploaded by RK Treasure Center, 8 Apr. 2020, https://www.youtube.com/watch?v=hxthMM8xIJE

Chen, James. "Troy Ounce: Definition, History, and Conversion Table." Investopedia, 5 Feb. 2023, https://www.investopedia.com/terms/t/troyounce.asp#:~:text=Troy%20ounces%20are%20used%20to,as%20480%20grains%20of%20barley.

"Gold Price in Canadian Dollar - Canada." Goldbroker.com, 24 Feb. 2023, https://goldbroker.com/charts/gold-price/cad