Are you getting value for money for your gold?

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By Luke Jovetic
Know Your Money Editor

In the current economic climate, many people may be looking to sell on items such as old or unused jewellery in order to bring in some extra cash.

Many companies are offering to buy your old gold for money with a number advertising their services on TV.

The idea often sounds a simple and potentially attractive way of selling on your gold -simply send it off to the company and receive money in return.

In recent times you may have considered using the service to boost your own finances, but reports suggest that consumers should avoid being too hasty to accept the offer of money.

Is the service value for money?

In recent months, a number of companies have made themselves known in magazines, newspapers and TV offering to buy gold jewellery and other items in exchange for cash.

Some homeowners have enjoyed the gold rush and heldgold parties, where the host -a representative from a company - buys from guests and receives a percentage of the overall takings.

However, consumers have been warned that selling their gold through these methods may not prove to be value for money and there are concerns that some companies are under-valuing the gold that they receive.

Now the Office of Fair Trading (OFT) has become involved to investigate whether companies - currently offering unregulated services - are breaking the law.

The OFT is asking five businesses to provide them with information and to prove the validity of claims which are made in their advertising and on their websites.

The companies are yet to be named but the investigation follows complaints from disappointed consumers.

One of the OFT's concerns is whether consumers are being given the right to reject an offer for their gold and receive it back.

Juliet Young, of the OFT, said that buying gold by post was a farily new business model and that while innovation could potentially brings benefits for a number of people: "We want to check that the market and businesses operating in it are developing in a way that treats customers fairly."

Which? has already drawn its own conclusions on the value for money offered by cash for gold businesses and decided that they are offering "shockingly low rates" for jewellery.

The body found that consumers are paid approximately six per cent of the retail value for new gold jewellery, while high street businesses pay an average of four times this percentage.

Three identical items of 9ct gold jewellery - costing £115, £215 and £399 - were sent from the consumer group to four gold buyers that advertise heavily on TV. These were CashMyGold, Postal Gold, Money4Gold and Cash4Gold.

Each piece of jewellery also received a valuation from three independent jewellers and three pawnbrokers.

It was revealed that the high-street shops and the pawnbrokers offered a better cash return for each item than all of the cash for gold sites.

The poorest quote came from CashMyGold which offered £6.43 for the £115 gold bracelet, £9.64 for the £215 gold bangle and £22.50 for the £399 gold necklace.

The pawnbrokers quoted £26 for the £115 bracelet, £32 for the £215 bangle and £80 for the necklace.

Meanwhile, the high street jewellers offered the best prices - £33, £46 and £102 on average for the three pieces.

Which? chief executive Peter Vicary-Smith said: "The cash for gold market is unregulated and Which? believes that this investigation has raised some serious concerns about the fair treatment of consumers.

"People should be wary of buyers' adverts, as our research shows that they certainly could get more money for their gold elsewhere."

However, a gold buying company defended itself to the Guardian and suggested that it provided a service for people who would rather not be seen in a pawn shop.

Krista Waddell, the founder of Ounces2Pounds - a company which offers to host gold parties in your home, similar to a Tupperware party - said: "Our target market are the women who would never feel comfortable walking into a pawn shop and are smart enough not be taken advantage of. We offer high prices, the chance to offload items that are just sitting there anyway and a great night out with their friends."

It seems that savvy consumers may be better off selling their jewellery by more traditional methods. The OFT investigation is keen to hear from people who have experience of companies that buy gold through the post.

They can be contacted at oft.gov.uk/goldpost

Important Notice
This guide is intended for general information only and is not intended as, and does not constitute, any form of advice, recommendation or endorsement by us of any particular product(s) or services and you should rely on your own further research and professional advice in relation to your specific requirements and circumstances before purchasing any products or services. Use of this guide is subject to the Terms of Use of the KnowYourMoney site.