The two best ways to turn gold into cash

Many people are taking advantage of the sky-high price of gold and trading in their old jewellery for cash. But how do you go about it, and what are the pitfalls?

When money gets tight, selling off household clutter can be a great way of making some cash. Car boot sales and eBay for example have been doing a roaring trade in recent months.

Now you can cash in on unwanted jewellery too - adverts from companies wanting to buy your gold are springing up everywhere and gold parties are becoming increasingly popular. But what are the best ways of going about it?

Throw a party

In the 1980s, Tupperware parties were all the rage. Then, in the 1990s, Ann Summers parties took over. And now it's the turn of gold parties. Up and down the country people are gathering around kitchen tables with their unwanted jewellery to weigh and sell it. Their popularity has increased as the gold price has risen it broke through the $1,000 an ounce mark in September for the first time in seven months. Sadly you won't get that much for your jewellery at a gold party but you'll still get a reasonable sum. Ounces to Pounds, a gold party organiser, says it typically pays 75% of bullion rates. How much you actually get depends on the weight and purity of your gold.

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So how do these parties work? A gold expert comes to your house with machines that check the jewellery you and your friends bring along for gold purity and weight. The value of the gold is then calculated and anyone who decides to sell their jewellery is given a cheque on the spot. Ounces to Pounds gives the party host a 10% commission on all the gold bought, plus 3% commission for any further parties booked at an event, and £35 towards food and drink for the evening if more than £700 is paid out on the night. They claim that hosts earn £350 per party on average.

But before you rush to start selling off the family gold, bear in mind that these companies are not buying your jewellery to resell it more likely they will melt it down. Valuations don't therefore take into account any other features such as precious stones or an item's antique value. So although a party is an easy, and even fun, way to make money selling unwanted plain gold or broken items, don't hand over family heirlooms or your favourite Cartier watch. You'd be far better off selling these items through a specialist jewellery auction.

Visit your local jeweller

If you don't want to host a party, or just want to get an independent second opinion on the value of your jewellery, visit your local jeweller. They will be able to value it for you, taking into account decorative value as well as the weight and quality of the gold it contains. They can also advise you on the best way to sell it. Some second-hand and antique stores may well offer to buy items themselves.

Never post gold

Another way to sell gold is via firms that ask you to post your gold to them. They then value it, offer you a price and, if you accept the price, they send you a cheque. If you don't like the valuation, they'll return your items.

This option is, however, fraught with problems. Firstly, you have to put your gold in the hands of the Royal Mail so make sure you get insurance to cover the gold should it go missing. This leads on to the second problem - you will only know the value of your gold for insurance purposes after you've sent it off.

Most of the firms that offer gold postage deals don't publish their prices, so unless you already know the value of your gold you won't know whether you are getting a good deal. Cash4Gold for example recently admitted that it sometimes pays customers only 20% of their gold's market value. They are currently offering customers the opportunity to win afternoon tea with ageing former rap star MC Hammer. I'd rather just get a better price and enjoy a cuppa at home.

Know what you are selling

If you are thinking of selling your gold, it helps to have an idea of what it's worth. Ebay has a helpful guide to hallmarks which will help you work out your gold's carat rating. For example, a hallmarked number 375 means the gold is nine carat, whereas a 990 stamp means it is more valuable 24 carat. Confusing the two could cost you.

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Ruth Jackson-Kirby

Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings and credit cards to pensions, property and pet insurance. 

Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.

Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping among many other titles both online and offline.