As I am writing this the gold Spot Market, in US dollars, is down by about $10.00 but the equivalent price in Canadian dollars is actually up by about $2.40.  The  variable is the exchange rate. Although gold has dropped in value, the Canadian dollar has dropped even more. For the Canadian dollar gold price this is a GOOD thing because each US dollar of gold value translates to MORE than a dollar of value in Canadian dollars

This happens because the rest of the world thinks of the Canadian dollar as a resource based currency. If gold, oil and other resources go down in cost, the Canadian dollar also goes down to compensate. Here in Canada this acts like a kind of shock absorber to level out the prices of the commodities we sell, and sometimes it even works to pay Canadians more money even as the US dollar value of commodities is dropping

Today is one of those days

The second problem is that diamonds are the most profitable component of jewellery sold to the public. The difference between the wholesale value which dealers will pay for loose stones and the retail value charged for a diamond set in a finished piece of jewellery is greater than any other component.

The third problem is that grading of diamonds is a skilled and subjective process. One stone with few to no inclusions, well cut and a top colour may be worth $600.00 per karat at wholesale while a stone the same size but with several inclusions, a chip and yellow color may be worth virtually nothing

Our typical advice on diamonds is that they are invariably worth more to the current owner than they are to anyone else. Most sellers are best served to have the stone removed and reset into a new piece of jewellery.  We are generally able to perform this service on the spot at one of our parties and, unlike most jewellers, we do not charge for this service

If a seller does wish to sell their diamonds we use an electronic tester to confirm that the stone is a diamond. We then examine the stone under 10x loupe to assess the cut, clarity, color and to estimate the carat weight.  Carat in diamonds is in fact a measure of weight, not of size, so it is impossible to get an accurate carat weight of a set stone but we can, from experience, make a reasonable estimate of the weight

We then make an offer based on the wholesale value per carat for the type of stone we are buying. For larger stones we also offer a service in which we will actually “shop” the stone to several reputable wholesales to obtain the best price for our customer.

When an estate needs to be liquidated to fulfill the terms of a will, or a trustee needs to obtain best value for assets, jewellery, coins and other precious metal items frequently form a part of the mix.  The GoldSmart Network specializes in the evaluation and purchase of the following:

• Karat gold and sterling silver jewellery
• Sterling silver flatware and hollow ware
• Platinum and palladium
• Gold and silver bullion bars and coins
• Canadian and US silver circulating coinage

The principals at GoldSmart have over 30 years experience in the precious metals business, including the management of one of Canada’s leading refiners and at The Royal Canadian Mint.  Learn more about the people behind GoldSmart and our business standards at the following links:

• About GoldSmart and the people who founded the company
• The GoldSmart Code of Conduct
• Things you should know before you sell

The GoldSmart Knowledgebase provides a wealth of information for clients who may need to learn quickly about precious metals, what they have, what it is worth and why.  At GoldSmart we strive to constantly build this Knowledgebase as a resource for people who may only need to sell precious metals once in a lifetime and need to do the research to know they are getting fair value.  There are dozens of entries in the Knowledgebase but the following links may be particularly helpful:

• The Jewellers Vigilance Canada Guide to Selling Your Gold
• The Estate and Trustee Service home page
• Market Prices for Jewellery
• Market Prices for Silver Coins
• Market Prices for Gold Coins

You can contact The GoldSmart Network Toll Free at 877-599-6533 or by email at info@goldsmart.ca

• Should I sell my old gold?
• Is my jewellery “estate quality”?
• How will the value of my gold be determined
• What happens to gemstones?
• Who can I trust?

The guide also contains a seller’s checklist and some useful conversion charts.

Jewellers Vigilance Canada is the ethics watchdog and consumer protection agency in Canada for the jewellery and precious metals industries.  This guide, as published by the JVC, and the other articles here in the GoldSmart Knowledgebase are designed to make you a fully informed seller before you decide if and where to sell your old gold.

But, as is so often the case, it pays to remember that we are not in the United States and we care about the Canadian dollar price of gold which is often quite different, as it is today.  Using our same example the CDN price of gold back on September 16 was about $1764.00 per troy ounce while the CDN price today opened at $1799.00.  That’s right.  The Canadian gold price has risen $35.00 CDN while the USD price has fallen $55.00 USD.

So, what’s going on?

Well the first, and most obvious, answer is the exchange rate between the Canadian dollar and the US dollar.  The Canadian dollar has been tremendously strong for the last few months, so much so that we have become used to the Canadian dollar buying as much as $1.05 US.  All that changed in the last few days.  The value of the Canadian dollar dropped by almost 2.5 cents this morning alone.  Since the Canadian value of gold is basically the US value converted to Canadian, the weaker the Canadian dollar the more gold appears to be worth when the price is converted from US to Canadian.

But there is more to the story.

Canada is viewed as a resource rich country, and our dollar is thought of as a resource dollar.  When commodities, like gold, drop in price around the world, the perception is that Canadian GDP will be reduced and therefore it is fair to discount the Canadian dollar.  It’s either a self fulfilling prophecy or a balancing mechanism depending how you look at it, but the fact is that big changes in the price of commodities tend to be offset by big, or sometimes bigger, changes in the value of Canadian dollar.  The effect is that the Canadian price for commodities stays more constant, or sometimes even moves in the opposite direction, as it has done this week.

In addition, investors around the world are fleeing anything with a risk profile: the Euro, equity markets, commodities.  When money leaves these investments where does it go?  You guessed it: the US dollar, bolstering the greenback against other currencies.  This raises another timeless question on which we have another article in this Knowledgebase: “Is gold a safe haven investment?“  In fact the US dollar is still the world’s reference currency and is still the safe harbour money rushes to when things get too rough out there.

Here in Canada, sellers of gold are getting more this week than they did last week, despite the drop in the USD price!

What does it mean?

Gold and platinum prices are driven by radically different fundamentals.  Gold is primarily an investment while platinum is primarily an industrial commodity.  Only about 10% of gold production is consumed by industry while almost all platinum goes into things like catalytic convertors for cars.

The gold price responds mostly to “fear factors” such as sovereign debt, inflation, increases in the money supply, deteriorating confidence in currencies such as the Euro.  The platinum price responds mostly to the industrial outlook, automobile production, chemical industry demand for catalysts.

In the current world scenario it isn’t hard to see why the PGR might drop below 1 and the prices become uncoupled.  In the past such anomalies have not lasted long.  Most technical analysts seem to feel the same rule will apply this time, but as long as the world struggles with debt and flat industrial demand it will be interesting to watch the PGR.

At GoldSmart we set the bar high for our own standards in buying your gold. We created a Code of Conduct for our own company so everyone at GoldSmart is clear on the ethics and practices we follow. We know there are a lot of gold buyers out there, and it is tempting to choose the one with the most memorable ads or the best web site, but we think you owe it to yourself to measure them against the GoldSmart Code and see if they measure up.

Here is the GoldSmart Code of Conduct:

1. We publish our prices on our web site and update them daily to reflect the London 2nd Fixing for gold and silver and the noon exchange rate for conversion of the US dollar to CDN.  Not only do we publish what we pay, we pay what we publish.  There is no fine print specifying “in office prices” or any other out-clause to our price list
2. In addition to looking for karat marks and maker’s trade marks with a 10 power jewellers loupe, we have available at least two testing techniques, chemical and electronic, to verify the karat of the customer’s jewellery.
3. We use accurate scales and we verify the scale in front of the customer using standard weights.  Our scales are calibrated in grams to at least 1/10 of a gram to ensure an accurate weight
4. We weigh and evaluate the customer’s jewellery in the customer’s presence.  There is no back room at a GoldSmart Gold Party.  The customer witnesses and participates in the entire evaluation process of their jewellery so they understand and agree with the evaluation before making a decision
5. We calculate the value of the customer’s jewellery on a form with the daily prices printed on it.  No GoldSmart consultant can use anything other than the pre-printed price sheet and settlement form to calculate the value of the customer’s jewellery
6. We explain in advance that coloured stones and diamonds can be removed and returned to the customer if they wish.  We do this at no charge and in the customer’s presence.
7. Sometimes an estimated value is required, if there is a large non-precious component such as a watch movement.  If the customer accepts the value, we remove the non-precious component and weigh the item again.  If the final weight results in a higher value, the customer gets the higher value.  If the final weight is lower than expected, the customer gets the original estimate.  The customer never gets a lower price than our original estimate.
8. We explain in advance that we buy precious metals to be melted and refined.  We make it clear that we are not jewellers.  There is no chance of their jewellery being resold, but there is equally no chance of them buying it back if they change their mind.  We always ask that the customer remove any item to which there is sentimental value or about which they are unsure.  If in any doubt, we refuse the customer’s items until they are certain they no longer want them.
9. We have vigorous Know Your Customer, Anti Money Laundering and Anti Crime protocols.  We obtain valid name, address and phone number from every customer.  We photograph every customer’s jewellery and catalogue the photographs by date

If your gold buyer doesn’t score 100% on each of these points, you need to reconsider.  A high price means nothing if the scales are inaccurate.  An accurate weight means nothing if 18 karat gold has been categorized as 14 karat.  The buyer needs to comply with the whole Code of Conduct and you need to be able to witness the whole process so you can see that you are getting a fair deal.

May 30, 2011

5:30-8:30 pm

Come and learn about Gold and Silver.  Find out how Gold buyers figure out the value of old gold and silver.  It’s an evening of learning, fun and profit.  GoldSmart will assess old silver and gold items and offer to buy that evening.  We will also serve light refreshments in this historic building.  Space is limited, so please be sure to let us know if you are coming and if you plan on bringing a friend.

Got a ring you’d like to have sparkled up?  Bring it along too and we will clean it in a professional ultrasonic cleaner so it shines like new.  Donations accepted for the Weekend to End Women’s Cancers.

Sandi LaFlamme from the National Women’s Show in Ottawa with a winning guess of $101,241.00

Congratulations Sandi! Contact GoldSmart at info@goldsmart.ca to collect your Kobo eReader.

SELL your gold and silver on the spot at GoldSmart’s highest SHOW SPECIAL rates

LEARN how to get the most for your old gold and silver through the group selling power of your network by holding a GoldSmart Gold Party

WIN a Kobo eReader by guessing the value of our “Jar of Jewellery”

FREE ultrasonic cleaning of all your jewellery on the spot