Testing Gold: Electronic, Acid or Touchstone?

Any time you’re serious about buying gold, even if it’s from a trusted friend or family member, it’s important to determine three things. First, is it real gold? Second, is it pure gold or gold-plated? Third, what Karat gold is it? Testing is important because it determines the value of the piece. People may misremember where they got the item, or it may have been a gift the recipient assumed was real gold but isn’t. There’s also a possibility the person doesn’t think it’s as high quality as it actually is. To be fair to both yourself and the seller, always test every gold piece before buying. Here are your options.

Electronic Gold Testing

Electronic Gold Test

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Testing gold electronically is the newest method for determining purity. You’ll need an electronic circuit, testing plate and a bottle of testing acid, which are available in all-inclusive kits. Put a small scratch in the item before testing. The reason for scratching is to determine if the piece is solid gold, not just gold-plated.

Put an entire bottle of testing acid on the plate. Dip the gold item into the solution without touching the test plate. The advantage of the electronic method is you only need a single bottle of acid to test for Karats 9k to 24k. The disadvantage is you have to use a new bottle for every item you test.

Acid Gold Testing

Gold Acid Test

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Acid testing is the most common method, but its name is misleading because all methods require acid. You’ll need a bottle of test acid for each Karat (9k, 10k, 12k, 14k, 18k, 22k and 24k), a color matching chart (which usually comes with your acid) and something to scratch the gold item with, such as a pocket knife or file.

Scratch the gold (to make sure you’re testing underneath any possible plating) and begin with the lowest Karat acid. Apply the acid and compare the color it turns to the colors on your chart until you spot a match. Normally, real gold stains brown and imitation pieces turn green or bubble. After testing, wash the acid off with water and use a pencil eraser to buff off the stain.

Touchstone Gold Testing

Touchstone Gold Test

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Touchstones are usually made of finely textured glass, fieldstone or slate. You’ll need gold testing acid and actual gold sample pieces of each Karat, to compare the test item to.

Rub the test item across the touchstone and do the same with one of the sample pieces to make side by side marks. Apply testing acid to each mark until you get a match. Touchstone testing is best reserved for cases where you’re already sure the item is gold, but aren’t sure of the exact Karat.

A Word About Magnet Testing

Magnet Gold Testing

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Many websites and amateur testers recommend testing gold pieces with a magnet before you buy. However, this is a bad business practice if you’re serious about investing in gold. Magnets are drawn to fake gold and not to real gold, so it’s fine to use a magnet before performing a touchstone test. But never depend on a magnet test alone to price gold. Because you can’t be sure of its purity, there’s no way to offer a fair price. Test Karats using electronic, acid or touchstone methods.

Scam Alert: Fake Gold Bars, Phony Investments, and Shrinking Portfolios–Oh My!

Scams are everywhere. From late-night commercials selling you products that don’t live up to the hype, telemarketers toting the next best thing and then disappearing, to criminals hawking fake jewelry and knock-offs, who can say what’s true and what’s a scam? The most recent wave of scams involve imitation gold bars. They look real and the promise of money is alluring, but buyer beware—this may not be a genuine purchase. Here is background information you need to make sure you aren’t a victim of such a scam.

How it Works

Gold Bars

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Counterfeit gold bars are being created. They look legit, even weighing the proper amount. They can pass through all the necessary tests, including X-ray and weight assessments. They are created from real gold bars—from the outside, they appear in perfect condition. But they are filled with tungsten—a compound that costs merely $1 an ounce and feels just like gold.

Even serial numbers and the paper from the original gold bar come with it, fooling even the most discerning eyes. They are polished and sealed to perfection. Such gold bars have appeared in America and the U.K., which means buyers need to take notice.

Look for These Warning Signs

Authentic Gold

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Buyers should heed this advice prior to making any gold bar purchases:

  • Companies that promise large returns on your gold bar investment are not to be trusted. No investments are guarantees.
  • If you deal with a high-pressure salesperson that wants cash immediately, say no. They may take your money and run.
  • Telemarketers from offshore companies are a red flag. It’s best to garner as much information about the company and contact the Better Business Bureau. If you are still unsure, it is always a sound idea to stick with companies that have already earned a good reputation.
  • You must ask about fees and commissions—know where your money is going. If you don’t, you may be charged an excessive amount of dollars off the original quote.

Look for an Alternative

Gold Alternative

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Rather than buy physical gold and risk purchasing a fake–exposing you to a loss of potentially thousands of dollars–you can invest in gold funds instead. Such funds include Market Vectors TR Gold Miners (NYSE Arca: GDX), RBS Gold Trendpilot ETN (NYSE Arca: TBAR) and PowerShares DB Gold Fund (NYSE Arca:DGL).

Buyers should always be armed with as much knowledge as possible when making major purchases. You are putting your own financial future at risk if you don’t know the warning signs. It is always good advice to follow your instincts when it comes to decisions like these—if you feel any doubt, it’s best not to invest. Following this mantra may save you from losing thousands of dollars, which would take years to re-coop.

Protecting Yourself When Making a Gold Buy

Before you head off to meet someone to buy gold, it is critical to follow a few important steps. After all, you may be walking around with a few hundred dollars of cash in your pocket to buy gold, and if you have a successful buy, then your purchase will be on you afterwards. You need to be safe.

Tell People Where You Are Going

Going to Buy Gold

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Before you leave to meet your seller, tell someone you trust where you are going. Give this person specifics about where you plan to go, what time you plan to meet someone and what time you’ll be home. This way, if you don’t come home on time, they know exactly where you were last. Never leave home to meet with a stranger if you haven’t shared the destination location with someone. Let them know what you are doing, too.

Meet in a Public Place

Public Place

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Your transaction is legal. There’s no reason to meet in an alley someplace. Choose a coffee shop or a diner. Be sure it is busy enough that there is someone else there when you plan to meet someone. Choose a busy time of the day, if possible, to ensure there are enough people there to notice you. Keep in mind, someone may ask you what you are doing. Be honest. Tell them you buy gold. They may want to sell to you, too.

Be Discreet When Handling Cash

Discreet Cash

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Instead of pulling out a stack of $100 bills, it is a better idea to keep them in separate pockets. Take out just what you need. For example, if you plan to pay $500 for the purchase, count out five, $100 bills in your pocket before pulling it out. As long as you have the same denomination in bills, you don’t have to remove them from your pocket to know how much you are taking out. Though you may trust the person sitting across from you, the chance someone else will see you with a stack of cash is high.

Avoid Confrontations

Confrontation

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When you test the gold for authenticity, the person selling to you may question your methods. Instead of allowing a confrontation to occur, tell the individual what you are doing and how the system works. Keep the dialogue during the conversation positive and upbeat. You do not want the other person to think you are taking advantage of the situation. If they ask what you do with the gold, tell them you hand it over to your boss or try to find a buyer. Don’t brag about the money you are making.

At the end of the day, you just want to make the transaction a smooth one. Be quick about it. Get in and get out without making too much of a scene about the process. Both parties will appreciate this.

Making a Profit from Buying Gold Jewelry

Gold is a symbol of wealth throughout the world, but many people don’t realize how easy it is to make big profits by simply buying and selling gold jewelry. The process is easier than most people believe.

Buying Gold to Resell

Buying Gold

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When you think about buying gold, expensive jewelry stores and gold dealers are probably the first sources that come to mind. When you buy gold at these places, there’s no way to make a profit by reselling it. Even dealers that offer gold pieces at wholesale cost charge too much for the average person to make money. The trick is to buy used gold or even scrap pieces from people who need the cash more than the items they’re selling.

There are several places to look. Some of the best sources include:

  • Estate sales
  • Garage sales
  • Craigslist
  • Private auctions

Jewelry and gold sold through these places is typically well below market value, so you can make a pretty profit when it’s done correctly.

How to Resell Gold

Resell Gold

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Buying gold at a low price is the first step to making a profit from this lucrative business. Many people consider that the easy part. Reselling gold jewelry isn’t difficult either when you know what you’re doing. There are lots of places that buy gold and accept scrap metals, ranging from pawn shops to internet businesses, but these are not the locations to sell to if you want the greatest returns. In fact, most of these buyers are simply middlemen making their own profit on your jewelry. Metal refineries are the key to making a real income from buying gold.

What Is a Gold Refinery?

Gold Refinery

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Refineries work with a variety of metals, including gold, silver, palladium, and alloy mixtures. The purpose of a refinery is to transform scrap metal, impure bars of metal, and other useless objects into pure bars for reuse. These establishments pay for the metals needed to complete the process based on the current market value and weight of the metals involved. The amount of profit made depends primarily on the weight and purity of the metal you sell.

How Gold Refining Works

Refining Gold

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The refining process removes impurities from metal to increase its value. To do this, refineries melt scrap gold and unwanted jewelry pieces in a large furnace. The refinery adds borax and soda ash to the hot mixture. This combination causes the pure gold to separate from less valuable types of metal, typically resulting in gold that is 99.9% pure. Silver, copper, and any other valuable metal derived from the refining process will add to your profits.

Determining Profits from Gold

Gold Profit

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Each refinery has their own payment system, but the basic process is generally the same. In most cases, the current market value of each metal, along with the weight and purity after refining, determines the amount. Of course, the refinery is also in business to make a profit so a percentage is typically deducted to cover the refining process. Purer gold tends to bring the best profits, as well as metals like platinum and palladium.

Making a profit from buying gold jewelry is much easier and lucrative than many people imagine, especially when you know a little more about the process.

Ways to Keep Up With Gold Prices

Once you enter the business of buying and selling gold, it’s your job to monitor gold prices. While the price of gold is more stable than other investments, the prices still fluctuate to a degree. Every time the prices change, either up or down, that changes your profit margin significantly. Keeping up with the current value isn’t a challenge with the right tools, but it is necessary if you plan to make any money off of your buying and selling.

Know the Terminology First

Gold Terminology

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A common problem many people have is simply not knowing the difference in gold terminology. The spot price is not the same as the retail price, in other words. The spot price of gold is based on the futures value, a type of investment. If you were selling on the commodity market, rather than physically, this would be the value you need to know. The amount people buy and sell at is the retail price. Unless you are buying and trading gold futures, you’ll want to monitor the retail price of the precious metal.

Use News Sources

Gold News

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The value of gold fluctuates throughout the trading day. The best way to know the most up to date value is to use news sources. Yahoo Finance may be a good option. The Wall Street Journal also publishes gold prices on its website. Forbes, CNN, and USA Today post the current values of gold online and in print. Additionally, these sites have experts who predict the value changes likely to happen in the short and long term. Using these sources, you can track the value of gold with any Internet connection.

Use a Smartphone App

Gold App

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If you have a smartphone, visit the app store to find a gold price app. Both iPhone and Android applications are available. Some also offer the international value of gold based on real-time stats from markets throughout the world including the United Kingdom, China, and Australia. For Android phones, Gold Live! is one application option to consider. For Apple users, Gold Price Live may be a good option to consider.

Monitor Your Investments

Monitor Gold

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Like any business owner, it is critical to monitor the purchases and sales you make. Use a business tracking software program to help you to monitor these purchases. When you make a purchase, enter it into the system. When you sell the gold, enter the amount earned from the sale. Calculate your profit. A simple Excel spreadsheet can help you with this. You can also look into QuickBooks or other accounting software to help.

Keeping up with gold prices is part of managing your business. Knowing what’s going out and coming in can help you to make better investment decisions down the road. You’ll also like to see your profits rise, especially as the value of this precious metal keeps climbing.