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Continuing rise in gold prices confounds local experts

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ANN MARIE AMES
August 22, 2011
— Ken Corey didn’t think it would last this long. Corey in 2008 started buying gold from customers at Dubes, his jewelry store at 21 W. Milwaukee St. in downtown Janesville.

The demand has continued. On Friday alone, he bought a couple thousand dollars of gold from walk-in customers. They brought gold rings and gold teeth. They brought gold nuggets probably bought on vacations in California, Montana and Alaska.


“I thought it would be over, but the economy just has not gotten better,” Corey said about the stream of customers coming in to sell gold.


Gold has broken records this summer. On Friday, it traded as high as $1,881.40 an ounce, the Associated Press reported. Gold prices rose more than 15 percent this summer, and last week gold logged its biggest weekly gain since February 2009.


As an investment, the metal has climbed because of investors’ concerns about the uncertainty of global markets, sinking stock markets and central banks’ moves to weaken their currencies around the world, the AP reported Friday.


As jewelry, gold’s rising value means a couple things.


First, the manufacturing prices make retail prices daunting for some customers.


“Gold chains are so expensive,” Corey said.


Some manufacturers are using less expensive precious metals in some pieces. Silver is becoming more popular, Corey said.


When Corey got into the jewelry business more than 50 years ago, platinum was more than five times as expensive as gold, he said. Platinum last week was trading for only $13 more than gold, said Dubes gemologist Leon Maerz.


“That’s kind of an amazing thing,” Maerz said.


Rising gold prices also mean that in some cases, the value of the gold is worth more than the value of the jewelry, said Joni Bozart, owner of Carousel Consignments, 31 S. Main St., Janesville.


“Some things you would get more for the weight of the gold than you would ever get for it as a piece of art,” Bozart said.


Unlike Corey, Bozart doesn’t ship gold to a refinery for remanufacturing. She sells it on consignment like everything else in her store. Some people buy it for jewelry and some buy to sell to refineries.


The prices surprise some sellers, she said.


“When it shows up in an estate sale, people are going to be shocked at how much they get,” she said.


The market volatility poses a challenge for buyers such as Dubes. Buyers must hold on to the gold for two weeks before sending it to manufacturers.


“That gold value is changing every day, every hour,” Maerz said.


Bozart sees the silver lining in the way the market instability has pushed up the price of gold.


“In a world where everything is selling pretty cheap,” Bozart said. “It’s great fun to see something sell for an outrageous price.”


FORMULA TO CALCULATE GOLD VALUE

It’s best to take your gold to a reputable jeweler or buyer rather than trying to figure out its worth on your own, said Joni Bozart, owner of Carousel Consignments in downtown Janesville. Professionals can tell how pure your gold is, which affects the price.


Here’s the formula buyers use to pay you for your gold, as explained by Bozart:


-- Weigh the piece using a gram scale.


-- Multiply the weight by .032 to convert it to ounces.


-- Multiply that by the number of karats. Your piece likely will be stamped as 10- or 14-karat gold or, rarely, 18-karat. The stamps are tiny and can be falsified, which is why this is best left to professionals.


-- Divide that number by 24, which is the karat value of pure gold.


-- Multiply that by the current gold price, which you can find online. Try cme.com or gold.org. This is the sale price of your gold.


-- Multiply that by 85 percent. The top value you can expect to get from a local retailer is 85 percent of market value.


Here’s an example:


-- A 10-karat gold chain weighs 3 grams.


-- 3 grams x .032 = .096 ounces.


-- .096 ounces x 10 karats = 0.96.


-- 0.96 divided by 24 karats = 0.04.


-- 0.04 x $1,848 (Friday’s closing price) = $73.92.


-- $73.92 x 85 percent = $62.83



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