Every day someone walks into the shop wanting to sell old gold: a bracelet that broke, a ring no longer worn, or pieces they inherited. Buying scrap is an important source of gold, but it is also the most sensitive thing a shop does: cash goes out, and the gold comes with a history you do not know. This guide explains how to identify the seller, how to weigh and test the karat, how to calculate the price, and what happens to the gold after you buy it.
Why identify the seller before you weigh?
Used gold may be stolen, and it may be used to launder money. That is why many regulations require gold dealers to know the seller and keep a record of every transaction, and some set limits on cash payments or require suspicious transactions to be reported. The details differ from country to country, so check with the competent authority in yours. The general rule, though, is clear:
- Valid ID: a copy of both sides of the card, with its number and the holder's name as they appear on it.
- A contact number: a mobile number you can go back to if you are asked about the piece later.
- A description of the pieces: what they are, how many, and any distinguishing mark.
- The seller's signature: on a printed voucher showing the weight, the price and the amount.
- Watch for warning signs: a seller who refuses to show ID, large quantities again and again, or new pieces still carrying their labels.
Weighing and testing the karat
The price rests on two numbers: the weight and the karat. Any mistake in either is a direct loss.
- Remove the stones first: stones and beads are not gold. Weigh the gold on its own, and value the stones separately if they are worth anything.
- A calibrated scale in front of the seller: they see the number for themselves, so there is no dispute afterwards.
- Read the hallmark, but do not rely on it alone: a hallmark is a first indication, but it can be forged or worn away.
- Test the karat: with a touchstone and acids, or with an electronic tester. Plated and filled pieces need a more careful test.
- Keep karats apart: each karat is a separate line with its own weight and price.
How is the price of scrap gold calculated?
Scrap is bought for the value of its metal. The making charge its owner paid when buying the piece does not come back, because the piece will most likely be melted. Making charges are explained in Making charges in gold shops: how do you know your real profit? and pricing a new piece in How to calculate the price of gold with the making charge: formula and example.
Price per gram of the karat = 24K price per gram × karat ÷ 24
Buying price = price per gram of the karat − shop deduction
Amount = weight × buying price + value of any stones
The shop's deduction covers the cost of refining, the loss on melting, and the shop's margin. It varies from market to market and from karat to karat, so it should be published and the same for every member of staff, not decided by each cashier alone.
Because karats differ, each weight is converted to its 24K equivalent, to know how much pure gold has actually come into the shop:
Weight in 24K = weight × karat ÷ 24
Example: a seller with two pieces
Today's 24K price per gram is 32.000 (illustrative figures), so a gram of 21K is 28.000 and a gram of 18K is 24.000. The shop deducts 0.800 per gram for every karat. The seller has a broken 21K bracelet weighing 12.400 grams, and an 18K ring with a stone; once the stone is removed the gold weighs 5.100 grams, and the stone is agreed at 4.000.
| Item | Karat | Weight | Buying price/gram | Amount | In 24K |
|---|---|---|---|---|---|
| Broken bracelet | 21 | 12.400 | 27.200 | 337.280 | 10.850 |
| Ring, stone removed | 18 | 5.100 | 23.200 | 118.320 | 3.825 |
| Stone (agreed value) | — | — | — | 4.000 | — |
| Total | 17.500 | 459.600 | 14.675 |
The shop pays the seller 459.600, and 14.675 grams of pure gold enter its balance, plus the stone at its value.
The purchase voucher: a document that protects you
Every scrap purchase needs a printed voucher with a serial number, showing: the date, the seller's name, ID number and mobile number, a line for each karat with its weight and price, the amount paid and the payment method, and then the signatures of the seller and the member of staff. This voucher is your evidence if you are asked about the piece, and it is what the accountant matches the cash box against at the end of the day.
Trade-in: old gold for a new piece
Many customers do not sell for cash; they want to buy a new piece and pay the difference. The safest way is to treat it as two clear transactions: buying the old gold at the scrap price, and selling the new piece at its price with its making charge. That way each keeps its own price and record, and the selling margin does not get mixed up with the buying deduction.
What happens to the gold after you buy it?
- It enters the branch's gold balance by weight: it is not put on sale as pieces, but held as weight in 24K.
- It is moved to the company treasury: sent from the branch, weighed on receipt, and approved at the weight actually found. Any shortfall has its reason written down and is not hidden. Details in Transferring gold between branches: how to prevent weight differences.
- It is handed to the refiner or manufacturer: as a consignment by weight, closed by what comes back as bullion or pieces, with any loss or surplus recorded.
The shop may also melt slow-moving pieces from its own stock. These leave stock on a scrapping voucher, turning from pieces into weight, and join the bought scrap on the same path.
Questions to ask any vendor
- Does the software require the seller to be registered, or does it accept a free-typed name?
- Does it read the seller's details from the ID card, and keep a copy of it?
- Does it calculate the 24K weight for each line, and suggest today's price for each karat?
- How are removed stones handled: as gold, or valued separately?
- Does it block the payment if the cash box balance is not enough?
- Who can cancel a purchase voucher, and is a written reason required?
- How is the scrap moved to the company treasury and the refiner, and how is a weight shortfall recorded?
How ZMZMGold handles buying used gold
| Area | In ZMZMGold |
|---|---|
| Seller | No free-typed names: a registered customer is chosen by searching by name, mobile or ID number, or added from the same screen. And an ID number cannot be registered to two customers. |
| ID | When enabled, the civil ID card reader fills in the name, ID number, address and the holder's photo, and images of the front and back of the card are uploaded from a file or from the scanner. |
| Lines | For each line: the karat, the number of pieces, their description, the weight per piece, and the buying price per gram. The software calculates the 24K weight and the amount for each line and for the whole voucher. |
| Price | The price per gram is filled in automatically with today's price for the karat, and the cashier adjusts it to the shop's approved buying price. |
| Stones | Removed stones are recorded separately with their type, count, weight in carats and agreed value, and go into the stones register. |
| Payment | In cash from the branch cash box, and the voucher is not saved if its balance is not enough; or by bank transfer, with the transaction reference required. |
| Voucher | A serial number per branch, a date stamped at the time of the transaction and not typed by hand, and a printed voucher signed by the accountant, the seller and the approver. |
| Shift | Every purchase is recorded in the branch shift, and appears on its dashboard with its count and weight. |
| Cancellation | For a manager or above, with a written reason, and refused if the gold has already left the branch balance or the stones have left their register. |
| Trade-in | Recorded as two documents in the same shift: a purchase voucher for the old gold and a sales invoice for the new piece, and the difference is what the customer pays. |
| After the purchase | The weight enters the branch's gold balance in 24K, then is transferred to the company's gold treasury with finance approval and at the weight actually received, then handed to the refiner on a consignment voucher. |
Details on the gold and jewellery shop management software page. The cashier's daily work is covered in Cashier software for gold shops, and managing gold by weight and karat in How to manage gold inventory by weight and karat in your shop.
In short
Buying scrap starts with the seller, before the scale: documented ID and a signed voucher. Then weighing in front of the seller after the stones are removed, testing the karat, and a price calculated by karat with a published deduction. After the purchase, the gold is followed by weight from the branch to the company treasury and on to the refiner, so not a gram goes missing without a reason.