Difference Between Pawnbroker Buying and Selling Gold Prices

Everybody knows that pawn shops deal with a lot of gold jewellery almost on a daily basis. The fact is pawn shops have been dealing with buying and selling gold from the beginning. It is just something that they love because its intrinsic value has is not related to its condition or age.

With that in mind you could ask yourself what kind of spread do pawn shops build into their business with regards to the difference in price when they are buying as compared to when they sell the gold.

There is no universal answer to that question. Jewellery that pawn brokers buy may have diamonds that could affect the spread. Some pawn brokers give a price according to their preferences. Overall, pawnbroker’s offer reasonable prices for gold and it’s always cheaper to buy jewellery from a pawnshop than from a jeweller.

There is a difference in set prices for gold that is bought and sold at pawn shops. If you know and understand the maths you will realise that the price is actually really reasonable.

How do they pay for gold?

Pawnbrokers Melbourne typically pay between 50 and 70 percent of the spot price for the gold that is sold to them. They cannot afford to pay more because in order to get a healthy return they need to buy the gold with a margin. Pawnbrokers who take gold in any condition or deal with what many classify as scrap gold, they have to work in the refinery fees and the taxes that are associated with that service.

When a pawnbroker offers a loan on an item any period that goes by with the interest unpaid is an extra cost associated with the gold item when the borrower forfeits. This means that when you get an item worth $100 pawned for $100 (effectively @ 100%), after 4 months of accrued interest, it would have an actual cost of about $136 so the gold is essentially $136 more than it’s actually worth. This is why pawn shop cannot pay 100% of the spot price, however if the pawnbroker paid you close to 50 percent (or $50) and it forfeits after 4 months then it would have cost the broker $86. They may get $90-$95 out of that gold item after refining the gold.

This means, then than the pawnbroker would make a profit of about $4-$10. It may not sound like much, but this is why they cannot pay 100% of the spot price of the gold.

How do pawnbrokers Sell their Gold?

If the gold item is in good condition and beautiful, it may be easier to put up a higher mark-up for the gold item. Typically, pawnbrokers may add a markup of 20 -30 percent over the spot price as their retail price of the gold item when it gets to the sales floor. So that $100 piece of gold jewellery may end up being put up for sale for about $120 to $130.  

This is good news for buyers who are on the market for something new because at those sales prices, the pawn broker has some room to negotiate. As long as the offer to buy is reasonable and not under the spot or melt price, pawnbrokers Melbourne will allow you to talk them down.

So what is reasonable?

Let’s take the same $100 jewellery item as an example. Anything between $105 and $114 will be considered reasonable. That is a little bit over the spot price, but that is bound to be the case regardless of where you buy – however if you buy from those big-box jewellery, you might end up paying 2 to 3 times the spot price.

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