Precious Pieces Lost in Cash-for-Gold Rush March 25, 2011 – Posted in: Press

by Lucie Greene
Published March, 25, 2011
Financial Times

Tobina Kahn, Vice President, wears and displays a selection of important Estate Jewelry from The House of Kahn Estate Jewelers in Chicago, Illinois and Palm Beach, Florida.

“You don’t take a piece of Van Cleef and melt it. That’s like taking a Picasso for the frame,” laments Tobina Kahn, vice-president of House of Kahn, the US estate jewellery group, of the recent trend for cashing in on fine jewellery by melting it to extract the high gold value.

Cash-for-gold companies have exploded in recent years as the value of gold has continued to rise. However, estate (pre-owned and vintage) jewellers say many people are ill-informed or have consulted the wrong dealers and are disposing of precious vintage jewellery pieces that would be more left intact.

“There are huge commercials all day long: ‘Cash for gold, cash for gold’. Ever since gold went up [in value]. At least three times a day, we have customers asking about melting pieces. We try to save them from the melting pot. We explain to people, if it’s a great design piece like a 1950s brooch it can be worth five times, its weight in gold,” says Ms Kahn. “There are collectors who want these pieces. You just need to know where to go.”

“They’re bringing in everything [to melt down]. There’s so much good antique jewellery being lost,” says Claude Morady, estate jewellery boutique owner in Beverly Hills, Los Angeles. “They don’t understand what it is. Lots of nice things are being melted down by people who don’t know or don’t care.”

Gold has seen a huge increase in value over the past three years, as economic turmoil, doubts over oil and unrest in the Middle East, prompt many to invest in alternative commodities. This month, gold hit a peak of $1,444.40 per troy ounce (compared with $1,050 in January 2010.) Silver has also risen, hitting a peak of $36.70 a troy ounce – the highest price in 31 years in nominal terms.

As a result, cash-for-gold businesses, offering instant money for melted down jewellery, have boomed.

Phillip Klapwijk, chairman of GMFS, a London-based independent precious metals consultancy, says: “There’s been a significant lift in scrapping of jewellery by the public over the past two to three years, driven by the increased price of gold. People are finding it quite an incentive to go through old jewellery and cash in.” He says it has been embraced by people from every part of the economic spectrum. “It’s tripled in volume over the past four years.” One of the fastest-growing areas, according to Gold Fellow, a US gold and jewellery buying company, is the higher end of the market. Michael Gusky, founder and chief executive, says: “Two weeks ago, we brought a diamond for $55,000. That’s not someone who needed grocery money. We opened a division in 2009 for buying large diamonds. It’s become a significant part of our annual turnover.”

“We hardly used to separate estate fine jewellery from the rest. Now, we have five people dedicated specifically to managing it, including qualified gemologists. Every piece is scrutinized. If it’s a signed piece, it’s offered for auction. There are half a dozen recognized brands worldwide. Not all pieces by them are worth more than the value of the material. If it’s a 1920s Cartier piece, then it’s of significant value as it is.”

Ms Kahn says many important pieces are being overlooked by less knowledgeable traders. “They [cash-for-gold companies] say they will flag something if it’s rare. But they don’t really know,” says Ms Kahn. “People [also] think if they melt it, they will get what gold is selling for per ounce. A 14-carat gold chain is only 58 per cent gold though. An 18-carat gold one is 75 per cent. Twenty-four carat is 99.9 per cent gold, but you don’t see lots of jewellery made of that as it’s not collectable in the US. Plus there are melting fees.”

Ms Kahn says a high quality signed estate piece, such as a David Webb bracelet, can sell for between $6,000 and $8,000 to an estate jeweler, roughly 30 per cent more than the same piece would receive if melted for its gold content.

Pieces achieved by estate jewellery are continuing to rise, by “As much as 30 per cent in the past year, especially for great pieces from the 1920s 1930s and 1940s”, says Ms Kahn. “They don’t make the pieces any more. There are wars over great designs. Money is no object.”

Chris Del Gatto, chief executive of Circa Jewels, a New York-based jewellery buying company, says “There are huge misconceptions. If you bring [jewellery] to the right people, they understand it’s worth more as a design piece.” He says one of the fastest-growing areas of his business is consulting on accurate valuations of estate jewellery.

He adds: “We have lots of retailers coming to us saying they know a piece shouldn’t be melted but don’t know what it is. They don’t want to give inaccurate valuations to clients.”

Cash-for-gold companies have come under fire on both sides of the Atlantic. Anthony D Weiner, a congressman representing New York, has called for legislation to regulate companies as Cash4Gold for only paying customers 11 to 29 per cent of the value of the jewellery sent in and refusing to send jewellery back with the 12-day appraisal period.

In the UK, the office of Fair Trading (OFT) last September ordered cash for gold businesses to improve their working practices, alleging a failure to be transparent about their valuation processes and not giving people enough time to refuse the appraisal offer on the value of pieces.

However, as David Schraeder, a spokesman for the World Gold Council points out, there is also a general misconception of gold value from pieces.

“People expect to be paid a spot price, but they’re selling at wholesale, not the full retail value. Gold buyers have a build in a mark-up to make a reasonable profit.”

He adds, however, that many of the less reputable companies in the headlines had not been offering fair value for pieces.

Mr Klapwijk and Mr Gusky note that rare pieces are still a relative minority. Recent 14-18 carat gold jewellery by big brands are still worth more for the material than the design.

Mr. Schrader’s tip for vintage owners? “Know who you’re selling to. If you have a beautiful piece of jewellery, find a specialist who will know its value.”