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Your Money > Alternative Investments Articles > Before you join...
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By Sarah Modlock
Britain's gold rush is officially on. The adverts for companies which buy gold jewellery have crept beyond the satellite channels and onto terrestrial TV. They're also cropping up in national newspapers and magazines as all around are the sounds of drawers being emptied and jewellery boxes being plundered for a bob or two. But is this money-making opportunity really glittering or just for fools? It helps to consider why gold plays such an important role in the economy, particularly when times are tough. Gold is seen as a 'safe' investment because - unlike currency - it has an intrinsic value. This encourages speculative buying of gold as investors diversify out of other riskier investments, particularly in a recession or banking crisis. It was a big favourite during the Second World War and also in the Great Depression because it held its value. These days, gold is still giving many investors the Midas touch as it has risen in value for the past seven consecutive years and has broken the $1,000 per ounce barrier again more than one in the last year and remains at historically high levels. But it's worth noting that even if gold prices continue to rise, UK investors can still lose money if the currency markets don't move in their favour because gold is priced in dollars. As ever, it pays not to put all your eggs in one basket and to include gold in a diverse investment portfolio. More on that later. Gold websites It's not just serious buyers who are interested in gold. There are a growing number of companies encouraging us to sell gold jewellery and coins we already earn to make money. Most of them operate remotely and will send you a 'secure pouch' or pre-paid Royal Mail Special Delivery envelope so that you can send your gold to them. Postal strike aside, this is not the most risky element. The problems can arise if you do not know how the firm operates. Some will value your gold and come back with a quote but most will just send you a cheque or pay the money straight into your bank account if you have given the details. This makes it harder to turn down a bad offer and retrieve your jewellery. You may even feel that you cannot face the hassle of getting it back, which is something they rely on to some extent, I am sure. The other risk is that you will not get the true value of your gold. Weight is not a useful guide in itself as 9ct gold does not have the purity of 24ct gold. One thing you won't see on all the annoying adverts is the price or 'flat rate' these firms pay for gold. This allows them to keep sellers in the dark. Just because the advert promises 'guaranteed sale'; 'best prices' or 'best rates' it does not mean you will get what you deserve. Postal gold buying services are relatively new here but in the US where they have been around for longer, there are noises from consumer groups about rip-offs, where customers have discovered they received around a fifth of the market value of their gold. When Radio Four's Money Box programme approached seven of these companies recently, it was offered between £4 to £6.65 per gram of 9ct gold; a wide range. It's not just the websites which vary though. When Trading Standards officers took a bracelet around six jewellery shops in London and were offered between £17 and £36 for it. Their advice is to get as many prices as you can before you sell. If you do send off your gold to a website then make sure you use one which will send a quote first. Gold parties Forget Ann Summers and Tupperware; the latest trend is hosting 'gold parties' at home. Another idea imported from the USA, these are run by companies like 'Ounces to Pounds' which pay hostesses commission. The idea is that you gather around a dozen pals with gold to sell - it may be unwanted or old jewellery - and you all have a few drinks while taking turns to get the items valued. if you decide to sell you get paid then and there. Ounces to Pounds says it is holding 80 parties a month, and its hostesses, who pick up 10% commission, "typically might earn £350 per party". The company also provides 'up to' £35 to cover the cost of wine and nibbles as an added incentive. The Ounces to Pounds staff bring paraphernalia including scales, a gold testing machine (if it's magnetic it is not gold) and a carat-reader. Value is then calculated according to weight, using that day's fixed London gold price, which is £616 per troy ounce (31g) at the time of writing. If you're heading to one of these parties, just make sure you don't get so squiffy on the free wine that you accept any old price for your trinkets. Buying gold If you're keen to buy rather than sell there are several different approaches.
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