How Is Gold Sold? What You Need to Know Before Selling

Selling gold can be straightforward. Many individuals possess gold in various forms, from inherited jewelry to investment-grade bullion, and might consider selling it for financial purposes or to declutter. Navigating the market requires knowing what you own, where to sell it, and what to expect. This guide explains the process of selling gold.

Understanding Your Gold’s Value

Before selling gold, understanding its value is important. Gold comes in several forms, including jewelry, coins, bullion bars, and scrap gold. While some items might have additional value due to craftsmanship or rarity, most gold sold by individuals is valued primarily for its metal content.

The purity of gold is measured in karats (K) or fineness. Pure gold is 24K, indicating 100% gold content. Common jewelry items are 18K (75% pure gold) or 14K (58.3% pure gold), with the remaining percentage being other metals that add durability or alter color. Fineness, used for bullion, represents purity as parts per thousand; for example, .999 fineness means 99.9% pure gold. To determine value, gold’s weight is measured in grams, pennyweights (dwt), or troy ounces, where one troy ounce equals approximately 31.1035 grams.

The current market price for gold, known as the “spot price,” serves as the baseline for valuation and fluctuates based on global economic conditions. This price is quoted per troy ounce for 24K gold and can be found on various financial websites. While the spot price represents the theoretical value of pure gold, what a seller receives is the “scrap value” or “melt value,” which accounts for the buyer’s costs, such as refining expenses, business overhead, and profit margins. Sellers should expect to receive a percentage of the melt value, ranging from 70% to 90% of the pure gold content’s current market price.

Choosing a Buyer

Selecting the right buyer for your gold can significantly impact your return. Various types of buyers operate in the market, each with distinct characteristics regarding convenience, pricing, and payment methods.

Local jewelers purchase gold, providing a convenient option. They may offer competitive prices, in the range of 70% to 85% of the melt value for jewelry, especially if they can repurpose items. Pawn shops offer immediate cash for gold, a quick solution for urgent financial needs. However, they offer a lower percentage of the gold’s market value, ranging from 30% to 60% of its scrap value, due to their business model which includes offering loans. Online gold buyers provide another avenue, boasting competitive prices, with some offering up to 98.5% of the market price for bullion and scrap gold, though this involves shipping items.

Coin dealers specialize in rare or collectible coins and may pay more than melt value for items with numismatic appeal. Checking buyer reputation through online reviews or local business associations is a prudent step before committing to a sale.

Preparing for the Sale

Before engaging with a buyer, a few preparatory steps can streamline the selling process. Basic physical preparation involves cleaning and sorting your gold items. Sorting items by karat stamp (e.g., 10K, 14K, 18K) helps assess their collective value.

Providing proper identification is required for selling gold. Across the United States, dealers purchasing precious metals are mandated by law to verify the seller’s identity. This requires a valid government-issued photo ID, such as a driver’s license or passport.

Many states also require buyers to maintain detailed records of transactions, which may include obtaining a thumbprint from the seller and holding purchased items for a specific period, between 7 to 30 days, before they can be resold or melted. These regulations deter the sale of stolen property and align with anti-money laundering efforts. Having these documents ready helps manage expectations during the sale.

Executing the Sale Transaction

The sale transaction involves several steps after choosing a buyer and preparing your gold. Upon presenting your gold, the buyer will verify your identity using the government-issued photo identification you provide. This is a standard procedure to comply with legal requirements.

Next, the buyer will assess your gold to determine its purity and weight. They use methods like acid tests, which involve applying specific acids to a small scratch on the gold, or X-ray fluorescence (XRF) machines. XRF technology provides a precise, non-destructive analysis of the metal’s composition. The gold will then be weighed on calibrated scales to ensure accuracy, fundamental to calculating its value.

Following their assessment, the buyer will present an offer based on the gold’s determined purity, weight, and the current market spot price, adjusted to reflect their scrap value payout percentage. Payment methods include cash, check, or bank transfer. If a business receives over $10,000 in cash in a single transaction or related transactions, they are required by the Internal Revenue Service (IRS) to file Form 8300 with the Financial Crimes Enforcement Network (FinCEN). This reporting obligation rests with the business, not the individual seller.

From a tax perspective, the IRS classifies physical gold as a “collectible.” Any profit realized from selling gold is subject to capital gains tax. If you held the gold for more than one year, it is considered a long-term capital gain and is taxed at a maximum rate of 28%. For gold held one year or less, any gain is considered a short-term capital gain and is taxed at your ordinary income tax rate. It is advisable to obtain a detailed receipt from the buyer and retain records of your purchase cost to accurately calculate any taxable gain.