When is the Best Time to Sell My Old Gold Jewelry?

In the midst of the current economic crisis, a lot of people are selling off old gold and gold jewelry as a way to receive some extra cash in their pocket. But with the gold market reaching all time highs, is it better to sell now or wait until the price goes even higher? In the midst of this wild market, how much should your timing depend on the current price?

These can be challenging questions. The gold market is a lot like the stock market in that it fluctuates from minute to minute, so trying to time a sale can be a real exercise in frustration. As a recent example, on October 8, 2008, the price for an ounce of gold was $913 per ounce, but by mid-November the price had dropped below $710 per ounce. As of November 2009, it's back up again, to almost $1100 per ounce. To get a visual picture, a website that I often use to check the current price can be found at Kitco.com. They also have a wealth of other information as well as historical charts.

As an even more telling example, we can view the historical charts for 1979 and 1980. On January 2, 1979, the price for gold was $218.60. On January 21, 1980 the price topped out at $850.00 per ounce. That is a 389% increase in little over a year! However, by the next day it had dropped to $737.50, or a 13% drop in 24 hours, and by March 18, 1980 it was back down to $481.50. That's a 43% drop in two months from its high point. In the following years, it fluctuated up and down. So, just like the stock market, timing is everything.

But there are two factors that really need to be taken into consideration when we look at the question of timing as it relates to selling gold. The real value of a dollar and our own financial circumstances.

First, the value of gold tends to fluctuate in the opposite direction of the value of the U.S. dollar. What that means is, generally speaking, when an ounce of gold has more value, the dollar is worth less. So, while waiting for the price of gold to go up means more dollars in your pocket, each dollar you receive is going to buy less. All we have to do is look at our bills to see that our money doesn't go as far as it used to. So, much of the gains we receive by waiting for gold to go up are offset by our loss in buying power.

As just one example, the average cost of rent in 1979 was $280.00 per month. In 2009, it was $800 per month. Although the number of dollars received per ounce of gold is higher, it doesn't really buy any more than it did. Another way to look at this is that the cumulative average for an ounce of gold in 1979 was $307, so far in 2009 it is $946. According to the US Department of Labor's Consumer Price Index Calculator, $307 in 1979 dollars is worth $913 today (as of last month). So, in 30 years, we are $30 ahead. Not a stellar performance.

Second, most of us don't have enough old, scrap gold for a few dollars one way or another to make much of a difference in the price we are going to receive. Since most of us don't have pure gold laying around in large quantities, a few cents or even dollars either way doesn't really make much difference to our bottom line. Unless you are investing or speculating in gold, you won't see as much effect when prices vary.

To illustrate: Let's say we are going to sell a few pieces of old gold jewelry - a couple of mismatched earrings, some rings received from old boyfriends and a bracelet or chain or two. For simplicity's sake, we'll also figure that it is equally split (weight-wise) between 10 karat and 14 karat pieces. So our little pile roughly equals 12 karats, which translates to 50% gold and 50% other metals. And since we have a nice little pile, we'll say that altogether it weighs an ounce, which means we have about half an ounce of actual gold tied up in our little stash of jewelry.

In order to sell our gold, we need to find someone to buy it. It would be nice if we could receive the full value of the gold in our pile, but we can't. With refinery costs, commissions and other costs (all a necessary part of the business of reclaiming gold) many people are lucky to receive 50% of the value, so we'll use that as an average case. With some buyers the price offered can be substantially less than that! So now we are down to 1/2 the value (our 50% offer) of 1/2 of an ounce (because we don't have pure gold), or 25% of the price of an ounce of gold for our ounce of jewelry.

So if the price of gold is around $1000 per ounce, we will receive $250. If the price of gold goes up $20 to $1020, we will be offered $255, and if it goes down $20 to $980 we will be offered $245. Even if gold moves $100 in either direction, it only affects the value of our gold by $25 (which is still a significant bit of money to many of us, but you get the point).

As we can see, waiting for higher prices is not always the best move. Waiting reduces the value of each dollar we receive, and since we aren't selling huge quantities of pure gold, even relatively large fluctuations have only a fractional effect on the price we will receive.

The bottom line is this: The best time to sell old gold is any time you need the money for another purpose. If you have old, broken, unwanted or unused gold sitting around collecting dust, you can sell it and put the money to work for you. If you don't particularly need the money right now, wait if you want and see what happens.

Rather than finding the right time to sell, the real key to getting the most out of your old gold is finding the right buyer. For more information on this factor, please see my article Where Should I Sell Unwanted Gold?

Disclaimer: In the interest of full disclosure, it should be stated that the author is the owner of South Kansas City Gold Buyer, a local scrap gold buyer based in Kansas City. For more information about this business you can visit sokcgoldbuyer.com.