The buy-back counter pays on the gold inside

When a piece is sold back, the buyer is a buy-back counter, not a retail shop. The counter pays on the gold content of the piece, not on the karat mark as a badge, and not on the making charge that was paid at purchase. No published price states what any counter pays. The seller must ask, and must weigh the piece before handing it over.

What the counter actually buys

A buy-back counter buys gold, not jewellery. It weighs the piece, reads the karat mark, and calculates the weight of fine gold in the piece. That weight is multiplied by the counter's rate for fine gold on that day. The result is the offer.

The counter does not pay for the design, the brand, the workmanship or the sentiment. Those were part of the retail price, but they have no value in the melt. The counter is buying raw material, and it pays accordingly.

The mark's role in the offer

The karat mark is used to determine how much fine gold is in the piece. A piece stamped 18 karat is assumed to contain 750 parts of gold per thousand. The counter may test the piece to confirm the mark, but the mark is the starting point.

The mark does not add a premium. A 22 karat piece will contain more gold than an 18 karat piece of the same weight, so it will fetch more. But the rate per gram of fine gold is the same for all marks at a given counter. There is no better rate for a higher mark; there is only more gold.

The making charge is lost

The making charge is the amount added to the gold value at retail, for workmanship and shop margin. It is published nowhere and varies by piece. On resale, it is lost entirely. The counter pays only for the gold.

That loss is the largest part of the gap between purchase and resale price. A buyer who pays a high making charge will see a large loss on the way back out. A buyer who pays close to the gold value will see a smaller loss. The karat mark does not affect this; the making charge does.

No published price states what any counter pays

Buy-back rates are set by each counter, based on the international gold price and the counter's margin. They are not published in any daily list. A seller cannot know the rate before asking, and the rate may change during the day.

The suggested retail price from Dubai Jewellery Group is not a buy-back price. It is a suggested selling price, and it is always higher than any buy-back rate. The gap is the retail margin, and it is the seller's loss.

What a seller should ask before handing a piece over

Before selling, the seller should ask the counter for its rate per gram of fine gold, and for the weight the counter will use. The piece should be weighed in the seller's presence, on a scale the seller can see. The counter's rate should be compared to the international gold price, which is published by many sources.

The seller should also ask if there are any deductions, such as for stones or for testing. Stones are not gold and are usually removed before weighing. The seller should know the net weight of gold before agreeing to a price.

The arithmetic of the loss

The loss on resale is the difference between the purchase price and the buy-back offer. That difference is made of three parts: the making charge, the retail margin, and the buy-back margin. The making charge is the largest and is lost entirely.

The karat mark does not change the arithmetic. A higher mark piece has more gold, so it fetches more on resale, but the percentage loss is similar if the making charge was similar. The only way to minimise the loss is to buy close to the gold value, which means a high karat mark and a low making charge.