‘How They Get You’ Report
Converting physical gold into a dollar currency has been taking place for thousands of years. It is truly the original financial transaction. Unfortunately, in the last couple of decades something changed, and a stigma grew around this transaction. The purpose of this paper is to explore what has contributed to the transformation of this once well respected transaction.
First, an historical review will help give us some needed perspective on the subject. Let’s consider the transaction from the financial point of view. Long before the Canadian dollar or American greenback, goods and services were paid for in gold. From those early transactions dating back thousands of years, gold has always been widely considered the world’s oldest and most stable currency. Today the price of gold is near record highs, having increased in value more than 400% in the past decade alone.
Let’s now consider the environmental benefits associated with recycling gold versus mining it. Long gone are the days of California Gold Rush, today nearly all of the world’s easily accessible gold has been mined and what’s left is microscopic and being dug from the earth at a huge environmental cost. Earthworks / Oxfam America estimates to produce a single gold wedding band generates 20 tons of mine waste. Though gold is highly recyclable, sadly less than 25% of global demand is being met by recycled sources.
Based solely on the strong financial and environmental benefits, most would agree it makes sense to recycle their unworn or broken gold jewellery. Unfortunately there is one significant factor that is deterring many from choosing to recycle their unwanted jewellery, the questionable integrity of many companies offering this service. There is one core element that many of these companies share – they confuse and mislead the consumer in their attempt to pay them as little as possible.
The following, in no particular order, are 9 things consumers should know before choosing a gold recycler:
1. Refusing to Post Payout Rates:
Companies that don’t post their payout rates give numerous reasons as to why not, including: “it’s a sliding scale”, “the formula’s are too complex”, etc. Let it be said, there is but one reason why companies don’t post their payout rates and that is because their rates are very low. If they had nothing to hide, they would publish their rates.
2. Weight Minimums:
In order to appear as though they have competitive payout rates, some companies will post their rates but in the fine print there is a minimum weight requirement. For example, a company may post an attractive payout rate chart but rates are for 1 ounce or more. Conveniently their payout rates for under 1 ounce, which would likely include 95% of their target consumers, is nowhere to be found. In fact, their payout rate for anything less than 1 ounce is more than likely significantly less than their stated rate.
3. Different Weight Measurements:
Using a different weight measurement can give the impression, at first glance, that a company has attractive payout rates. For example, a company can use pennyweights instead of grams and if you don’t notice, their payout rates will likely seem high. This practice can mislead consumers into believing they are going to get more money than the company ends up paying out in the end. This not only hurts the consumer, it negatively impacts the overall perception of the industry itself.
4. Offering Meaningless Incentives and / or Guarantees:
Some companies offer incentives such as the infamous “act now and receive an extra 20% on your payout” or “refer a friend and you and they will receive an extra 5%”. Ironically, these promotions are being offered by companies who don’t have published rates. So they are essentially offering customers an extra 10% off of whatever number they decide. These ‘smoke and mirrors’ tactics are tempting by their design but deceptive in their application. In the end, consumers are not coming out ahead, but in all likelihood, well behind.
5. Claiming to Have Dozens of Locations from Coast-to-Coast:
Having numerous locations is a benefit to consumers only if they provide on-the-spot evaluations and payouts. If they don’t provide this service, then they are simply mailing your material to a central location to be evaluated. If that’s the case, wouldn’t it make sense to mail your material directly and cut out this needless intermediary? You can be sure that a portion of your payout is going to a company that does nothing more than mail your material.
6. Mailing Out Customer Cheques Without Gaining the Customers Acceptance:
The vast majority of direct mail gold buying companies send their customers a cheque without the customer ever receiving or accepting their offer. If the customer doesn’t agree with the payout amount, they have to try and return the cheque, usually within 10 days, and request their material returned. If that sounds like a hassle, it is. It is designed to be a very deliberate hassle. These companies count on the fact that most customer can’t be bothered going through this process, even if they are unhappy with their payouts. They are trying to pay as little as possible by making it inconvenient for you to dispute their offer and have your material returned.
7. Holding Gold for 10 days:
Companies who deal with large volumes of precious metals must hedge their positions. What this means is if ABC Gold buys two kilograms of gold today, there is a risk that the price of gold will fall and they won’t be able to sell it at the same rates they paid for it. To reduce or eliminate this market risk, precious metals companies try to match their buy and sell transactions as closely as possible to minimize their exposure to market fluctuations. Otherwise they could end up on the short end of an expensive transaction, losing significant sums of money in the process.
When a company sends a cheque to purchase material and allows 10 days for the customer to return the cheque, they are exposed to market swings for a full two weeks! So, how do they protect themselves? Simple, they pay their customers significantly less to compensate for this market risk.
8. Claiming to be a Refinery and Cut Out the Middle Man.
Sometimes companies claim to be refineries. Usually this means that they have the ability to melt and test gold. So, by this definition, anyone with a furnace and a few chemicals can call themselves a refinery.
But if you were to define a refinery as a refining operation that processes recycled items and upgrades gold to a purity and form from which it is tradable on the world market, none of the companies claiming to be refineries would qualify.
9. Independent Evaluations
Some companies claim you will receive an independent evaluation. The question you should ask is independent of whom? Does the company doing the evaluation stand to benefit from paying out a low rate? Independent material evaluations are, for all intents and purposes, just smoke and mirrors.
The Bottom Line
Recycling unwanted, unused and broken gold jewellery is a financially rewarding exercise with a considerable positive impact on our environment. Unfortunately, in recent years, many ethically questionable companies have emerged claiming to ‘top cash paid for your gold’. They confuse consumers with hidden fees, small print and mysterious payouts, just to name a few deceptive practices.
The good news is that there are some ethical, honest companies out there that are bringing integrity and transparency back to the industry. This will, we hope, over time, encourage more people to consider this important transcation and Rethink Recycle.
Footnote: This report is intended to shed light on some of the deceptive practices that are misleading consumers and tarnishing a once respected industry. We are not making any references to specific organizations, merely those companies that engage in unethical practices that take advantage of unknowing consumers.