Top 5 Cash for Gold Scams in Canada, and how to avoid them
The reason we decided to start 401Gold in Canada was several members of our family got ripped off by unscrupulous gold buyers practicing various Cash for Gold Scams.
This not only included our Great Grandmother who got stuck with some large unexpected bills, but it also happened to me and my wife in the early part of our marriage.
When we sold our old jewellery and we worried about cash for gold scams, we thought that there were only two factors to consider:
- The weight of your metal, and
- Its Purity (e.g. 14Kt Gold)
We also searched for information on cash for gold scams and came across articles like this RCMP warns of fake gold for cash scam in Richmond
But this information is just the starting point in your path through the litany of scams that await you in the “Cash for Gold” market.
Cash for Gold Scams in Canada
We have created this “Top 5 Scams” list to help you truly understand this perilous mission you are about to embark upon.
Scam # 1 - Hoping you need the money urgently
The first thing a well-trained buyer of jewellery does when you walk into their shop is to determine how much duress you might be under before they give you a quote. The more they determine you need money fast, the lower the payout percentage will be.
Have you noticed how all precious metals buyers say things like “Top Dollar” or “Highest Payouts”, but they never actually show their payouts?
This is why this is the number 1 cash for gold scam of all time.
If they did ever advertise their payouts as we do at 401Gold, then they could never abuse your circumstances and take advantage of you.
Click here to see how much we pay for jewellery, and click here to see how much we pay for coins, and here to see our payouts for bars made from precious metals
Scam # 2 - When 80% payout for your Gold isn’t 80%
When it comes to cash for gold scams, this one is incredibly effective, as it’s both hard to identify and hard to explain.
Let’s use Gold as our example, and let’s also look into how Gold is calculated. Pure gold is 24 Karats. That means it is 24 parts gold of 24 parts.
18 Karat Gold is 18 parts gold, of 24 parts. Or in other words, 6 parts of this piece are made up of other metals (mostly non-valuable)
So many websites say they pay 80% (or thereabouts) for 24 Karat Gold. That’s great, and it matches what we advertise on 401Gold on our Payouts page. What many folks don’t know is that it’s very rare (if at all) for any jewellery to be made of 24 Karat gold, as it's too soft and unsuitable for daily use.
The most common form of jewellery is 14 Karat Gold (14 parts gold and 10 parts other metals), and the actual payout percentage applied to this is very commonly much lower in a very sneaky way.
Demonstration and Calculations
For ease of calculation for this demonstration, let’s do the calculations on a 10 gram, 14 Karat Gold ring.
Also for further ease of calculation, let’s make the spot price for 1 gram of gold in Canada at $100 CAD
Here is the math:
Purity = 14/24 (or 58.34%)
Weight = 10 (grams)
Spot = $100
Therefore the full value in gold for your ring is, 10 x $100 x 58.34% = $583.40
$583.40 represents the full value of the gold calculated at the spot rate of $100 per gram. (spot prices per gram change all the time, and we use this number as an example only)
Scam # 3 - The Scales
First, let’s be very clear about a very touchy topic. All the major and well-known precious metals buyers in Canada use certified scales, as do we in our lab in Toronto.
Now we have that out of the way, let’s get to the scale scam and this one won’t take much of your time.
You have seen them around. Cash for Gold operations that pop up in hotel lobbies, or at local flea markets. This is where you should be very wary of the accuracy of their scales, as it's ridiculously simple to make many types of scales report lower measurements for weights. These are cash for gold scams on steroids.
If you don’t want to be caught being scammed by a bad scale, then we recommend one of the following options:
- weigh your items yourself at home if you can.
- And if you’re determined to use the services of a pop-up gold buyer, why not get them to weigh a Loonie (6.27 grams) or a Toonie (6.92 grams) in front of you. And keep an eye on them, and make sure they’re putting your Loonie in the exact same spot on their scales that they put your gold items onto.
Having your metals weighed accurately helps limit the cash for gold scams
Scam # 4 - The “Bait & Switch” game
So you’ve decided that you want to send your items to the gold buyer, as you’ve been promised a higher payout. Everything sounds good. This is one of the nastiest cash for gold scams.
Then you get told that your Gold isn’t as valuable as it’s plated or has a lower Karat purity.
Now you’re stuck, and not sure what you can do as you have no way of disproving their claim.
Here is how we at 401Gold make sure that this could never happen to you:
- You can watch our appraisal as we do it in front of you, and see the results for yourself on our equipment that has been tested and certified by Measurements Canada
- If you do not like our offer, then you take your items and have them appraised elsewhere with no obligation to sell to us. All our appraisals are FREE of CHARGE
Scam # 5 - Spot Prices not advertised
And the final scam is the easiest and most commonly used by the pop-up guys. Why use the current spot price, when you can use a lower number in your calculations?
Remember in Scam # 1 - we went in thinking this was all about the purity of the metal, and its weight was how we were going to avoid any cash for gold scams. Well, now you know that the Spot Price” is also super important.
Spot Prices Example
As shown earlier in this article, to get your precious metal price we do this calculation:
Spot price x weight x purity % = value
Then we offer an amount lower than the value, which we call the payout percentage
But what if at the start the buyer puts in a lower spot price without your knowledge.
Again, if you’re determined to use a pop-up guy, do not trust the data he or she is showing you on their cell phone. Look it up yourself online by doing a quick search, and let them know that you know the spot rate
It's an easy scam, and it's actually hard to see unless you know this calculation in advance and you have all your numbers ready such as weight, purity, and spot price.
You can click this link to see the price of gold in Canada
401Gold Cash for Gold Scams solutions
We at 401Gold, have three solutions to solve this problem for you:
- Your appraisal for your items are always completed right in front of you, with equipment checked by Measurements Canada
- Like every major precious metals buyer in Canada, we provide a 24 hour/7 day week data feed for the current and accurate spot price for each precious metal which can be seen on our payouts page
