High gold prices, tight economy have consumers cashing in old jewelry, coins
Squeezed: One in an occasional series on the impact of the economic slowdown
May 14, 2008 8:00 AM
Eddie Lowy examines a piece of jewelry in his store, Banner Coin Exchange.
By Tim Grant Pittsburgh Post-Gazette
The gold fever that swept through Wall Street in recent months has produced a hot market for coin dealers here and across the country who trade precious metals with everyday people.
With gold coins and bars near record prices, many consumers are buying high with hopes of selling higher while others -- squeezed by the rising cost of living -- are cashing in their gold and silver jewelry to buy gasoline, pay bills or bulk up their savings accounts.
"Sometimes they tell us they've lost a job and selling the jewelry will tide them over and pay the rent," said Blaine Shiff, co-owner of Cybercoins.net in Dormont. "Some people want to buy gold, silver and platinum because they see prices going up and they want to get into this.
"They want to buy something to get on the train. And a lot of time they'll chose silver (coins and bars) because they can get in for not a lot of money."
Coin dealers buy and sell rare coins as well as investment grade bullion coins in gold, silver, platinum and palladium. But a big portion of their business comes from buying scrap jewelry from walk-in customers based on the weight of its precious metal content. Dealers sell the metals for a profit to a smelter who melts it, refines it and puts it back on the market.
Considering that gold is in the neighborhood of $900 an ounce, platinum has topped $2,000 an ounce and silver is around triple the $6 per troy ounce it was two years ago, even old scrap jewelry could amount to serious dough.
"Lots of dental gold gets thrown out in this country by elderly people who don't even think about the fact that it might be worth something and it's sitting in landfills buried among all the garbage," said Eddie Lowy, owner of Banner Coin Exchange, Downtown.
Mr. Lowy said he meets customers all the time who think their damaged jewelry is worthless.
"I'm in the melting business," he said. "Old broken up gold, an old high school ring, or half an earring or a ring where a stone fell out, I buy all that stuff."
Kitty Litman, owner of Coin Exchange on 6th Street, Downtown, said she was selling far more silver but buying more gold.
"Most of the people who are selling gold are doing it to pay crucial bills, and this rise in the gold price has come in handy for them," Ms. Litman said. "People are bringing in their whole jewelry box.
"I'm not used to seeing this little bundle of things be worth so much. … But it's always a pleasant surprise for me and the sellers."
While gold and other precious metals grab most of the headlines, the value of all metals are continuing to rise.
The U.S. Mint recently concluded that the metal content in the penny and the nickel is higher than the coins' face value and is considering using cheaper materials in the future. Rising commodity prices have affected dimes and quarters as well, but so far they still cost less to make than they are worth.
Trevor Spence of McKeesport said he's always on the lookout for metals such as copper, lead and aluminum while he's at work demolishing houses. He'll sell that stuff to the junkyard. The gold, silver and platinum he comes across in his everyday travels will get sold to Mr. Lowy.
"You always keep your eyes open," Mr. Spence said. "There's money all over the place right in front of you sometimes. People lose things. … Even at the junk yards where you dump stuff you've got people there digging through it. There's all types of metal that's just everywhere. People are not really aware of it and they throw it away."
But there are challenges for people trying to buy or sell gold directly to dealers, said Michael D. Kresh, president and Chief Investment Officer of M.D. Kresh Financial Services, Inc., in Islandia, N.Y.
"With coins, you often pay a large markup and gold has to rise substantially for you to break even," he said. "You also have to be careful about who you go to as far as reputation when you sell jewelry."
Although gold set a record of $1,038 an ounce on March 17, the recent bull market bears little similarity to the previous gold rush in 1980 when gold rose more than 20 times over a ten year period from $35 an ounce to $800 an ounce.
Gold experts say the current surge in precious metals values is not due to a speculative bubble but a fundamental concern by investors about the falling value of the dollar, uncertainty about the financial markets and the threat of inflation.
The growth in business for coin dealers may be a different story entirely.
"My conclusion is the increased activity [at coin shops] is not because of high gold and silver prices, but rather because of the bad economy," said James Turk, founder of GoldMoney.com, based in the British Channel Islands, and author of "The Collapse of the Dollar."
"People are selling jewelry and other household goods to meet their expenses," Mr. Turk said.
Ted Shiff, founder of Cybercoins.net in Dormont, sadly recalls a woman coming into his shop saying she needed cash to buy milk to feed her children. She wanted to sell her diamond and gold engagement ring.
"I had to tell her that her boyfriend gave her a bogus ring," Ted Shiff said. "It was gold plated with a glass stone. It had absolutely no value."
On the other hand, Brad Shiff, his son, said he recently had a man come into the shop thinking he had $15 worth of coins. But one of them was a rare quarter worth $1,000.
"It's way more fun to tell people they have much more than they think than to tell them they have less than they think," Brad Shiff said. "The man was very surprised. He got a tear in his eye."