Our Affiliate Policy

All contents © 1998 - 2006 Mrs. Gottrocks Fine Jewelry and Gifts. Please honor our copyright.

WHY DOES GOLD JEWELRY COST MORE THAN THE GOLD IT CONTAINS?

Recently I was asked to explain why a piece of gold jewelry (with no stones) would cost so much more than the value of the gold it contained. This question often comes up when customers want to sell gold jewelry or trade in a piece of old gold jewelry towards a new piece. When they bought the old piece, they paid retail value for it, but now that it is unusable, it is only worth a fraction of that price - worth only the gold that it contains.

There is more to the value of new gold jewelry than the gold it was made from. But when it is old, and ready to be scrapped, those additional values are lost and the only value that remains is that of the salvaged gold, which is usually much less than the original sales price. There are two exceptions: one, if the price of gold has risen substantially since you purchased the jewelry; and two, if you are trading a piece of jewelry which can still be used and resold by your jeweler as estate jewelry. In the latter case, then you should seek advice about what it is worth by having the piece appraised.

Jewelry Pricing Overview: Basically, in addition to the gold and other metals, jewelry manufacturers have to pay for many overhead items when producing a line of jewelry - things like parts, tools, lights, workbenches, labor, and sales and promotional items. Even a small jewelry shop has to pay for this kind of overhead - every business does. So like any other business making a product, overhead is always a factor when jewelers or jewelry manufacturers price the products they have made.

Production, Numbers and Jewelry Costing: Most mass produced jewelry is carved in wax first, then molds are made from that wax and more waxes are produced, which are then used in actually casting the jewelry. After it's cast, jewelry must be sanded and polished, and sometimes assembled from several pieces. Stones may have to be set. Many pieces of jewelry may look simple, but they actually came from several different molds and were soldered together to make the one piece. In addition, rings are generally produced in only a few sizes per design, so unless the ring is a "standard" size, there are additional costs involved with sizing the ring.

Spreading the Costs: Since most of the costs of production are up front, the price per piece will be higher for small production runs. In other words, a piece of jewelry may cost you $10 to set it up, but only $1 to actually make each piece - 35 cents of which is the gold, and 65 cents for the labor. If you are only making one piece, you would have to charge at least $11 for the product to make back your costs, more if you want to make any profit. But if you are making and selling thousands, you might only charge $1.01 for each one, figuring you will eventually make back your $10 set up fee and your profits over time. Either way, manufacturers sell to wholesalers, who sell to retailers, who sell to the public, so by the time that product is sold to the consumer, it might cost two to ten times more, depending on what it is. Bottom line: if the amount of gold going into the product originally cost 35 cents, the consumer who wants to trade it in later for gold value is in for a big shock unless the price of gold has risen significantly.

Industry is Industry, No Matter What the Product: There are many other overhead variables, but it works the same in the jewelry industry as it does in any other industry. I'm sure if you melted down a car you'd find that its value as a lump of metal, glass and plastic is far less than it cost on the showroom floor. That's just the way industry works. Somebody has to pay for all the ideas, parts and labor involved, and those costs are passed on to the consumer. And like cars, where you would pay more for a Cadillac, factors like brand name recognition, elegance, prestige, workmanship and durability can affect the price of jewelry as well. The trick is to find the best model at the best price in your price range. The seller's trick is to sell you the piece at a fair price for you - but which will also cover his overhead and keep him in business. But when it is old and ready for scrap, Cadillac or not, its not going to fetch anywhere near the value it once had, unless the price of the metals which make it up rise dramatically, or you've owned it so long and its condition is so good its considered an antique.

Timing and The Price Of Gold: Over time, the price of gold can fluctuate dramatically, making the value of the gold in your jewelry change as well. In the 80's, people were lining up to sell their scrap gold, as the price of gold skyrocketed. In the year 2000, however, gold is worth barely a third of what it was in the 80's. Gold investors will be the first to tell you that if you want to get rich quick, gold is not the investment for you. So if you have some jewelry you want to scrap for cash, you might want to watch the price of gold and time your sale accordingly. But if you want to trade it for new jewelry, you might as well go ahead and do it, as most jewelers will give you a fair deal for your scrap, and the gold you are buying is worth close to the gold you are selling anyway.

If you are interested in the jewelry manufacturing processes, check your local library for books on the subject. It is fascinating, and far more involved than most people think. Please email us here at Mrs. Gottrocks if you have any questions on jewelry and jewelry manufacturing. We'd be happy to help you in any way we can.